Being a board director today requires more time and more effort. The responsibilities, liabilities and overall time commitment will remain at this heightened level - or increase - in the future.
This increase in commitment means board directors may have to limit the number of board roles they take on, and companies may need to rethink how they attract and retain their board directors in a more competitive environment. However, empirical evidence suggests that this hasn’t necessarily translated into higher compensation.
To understand the environment and landscape board directors are operating in today - and will be operating in in the near future - this global study sheds lights on the motivation, dedication, and compensation of board directors across a range of public companies through a series of interviews and a survey that uncovers important trends to watch.
While our study indicates an average board size of 12 across all markets, our interviews with board practitioners suggest a much smaller board size of 8 to 9 members. A smaller board is more likely to have targeted discussions and encourage diverse perspectives leading to improved dynamics and performance.
Our interviews suggest that most effective boards have empowered committees. Effective delegation to committees brings in increased accountability, better quality of discussions and awareness in the boardroom. This fosters better dialogue and allows the executives to have meaningful touchpoints with the board.
Board Performance-Now and in the Future
In light of the increased pressure on chairs to ensure engagement and contribution of board directors, our survey participants suggest a variety of forms and tools focused at measuring board effectiveness and the individual contributions of directors. These include individual feedback sessions with the chair, 360 reviews, peer reviews, surveys (directly following each meeting), self-assessments and third-party assessments. It was suggested that these reviews should not only focus on individual contributions but on director development. While board members are facing more demanding tasks and challenges, their collective and individual development appears to be strongly underinvested in. This is a missed opportunity for boards to fully capitalize on their potential to have impact and contribute to a broader change agenda. Read more
Conclusion
Board directors' aspirations to increase influence and societal impact are intersecting with rising levels of responsibility, time commitment, and stakeholder expectations – a reality that holds true both for public and private companies. To shed light on the landscape board directors are operating in today, and how boards can respond, this study identifies significant trends in directors’ motivations, board composition, committee work, time commitment, and average director compensation within and across various markets worldwide.
We believe that board members are increasingly more careful and thorough in how they select their future directorship roles. This means that in order for boards to remain competitive in attracting board talent, they will need to recognize the evolving nature of board commitment as well as design comprehensive development plans for their directors.
Fortunately, organizations can successfully navigate the landscape of modern governance dynamics while considering all implications for current and future board members. In order to attract board talent, we recommend asking yourself the following questions:
- Does your boardroom allow a director to make meaningful impact?
- Does your board size allow diverse perspectives while remaining agile?
- Is your board compensation aligned with commitment and contribution?
- Are your committees empowered enough to enhance effective governance?
- Do board dynamics drive engagement and contribution, supported by continuous development?
Board service has never been as demanding as it is today. Applying a holistic lens to how boards are approaching their internal dynamics as well as their recruiting strategy will be paramount to not only prepare organizations for current challenges but also to embrace future prospects.
Demography
This study comprises data from 100 listed companies across industries and geographies, analyzing various compensation components and additional structural board data.
Companies analyzed are in the revenue range of €1 billion to €253 billion with market cap in the range of €9 billion to €422 billion. They have been selected to ensure uniform distribution across sectors with appropriate global coverage.
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Contributors
Digital Leads
Amadeu Porto, Joanna Scheffel
Design Team
Aditya Gupta, Arnab Kar, Kamaljit Marwaha, Dapinder Pal Singh Bahl, Ginlian Guite and Richard Khuptong
The authors would like to thank the Chair/Board members who participated in the survey, Egon Zehnder consultants for their internal/external insight and EZ colleagues who contributed to this study: Amit Kumar, Devyanee Kaushal, Johanna Prasch, Luis Fuhrer, Sonika Ganjoo and Svenja Weitzel.