NACD’s Flagship Annual Survey Shows Boards See Power of Artificial Intelligence, Have Improved Understanding of Cyber Risks and Oversight of Corporate Culture
WASHINGTON, Dec. 06, 2018 (GLOBE NEWSWIRE) — The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 20,000 board members, today released its 2018–2019 NACD Public Company Governance Survey, an annual survey that reveals trends and insights for board governance of public companies across the country. Changes in the regulatory climate, the prospect of an economic slowdown, and worsening geopolitical volatility topped the list of concerns for 2019 in this survey of more than 500 public-company directors. Artificial intelligence is ranked as the biggest technology disruptor but also the biggest business enabler.
“Directors are watching for shifts in the regulatory and economic climate that could impact their companies over the next year,” said Peter Gleason, president and CEO of NACD. “These often interconnected risks lead to increased business uncertainty as management finds their likelihood difficult to anticipate and their impact challenging to mitigate.”
Outlined below are highlights from the report’s key findings.
Economic and Political Uncertainty, Intensifying Trade Conflicts Among Chief Concerns:
- Asked what five trends directors foresee having the greatest effect on their company over the next 12 months, nearly half of directors rank changes in the regulatory climate (49%) and the threat of an economic slowdown (48%) as the top issues with the greatest impact on their organization.
- Also of great concern are cybersecurity threats (42%), business-model disruptions (40%), geopolitical volatility (39%), pace of technology disruption (39%), key talent deficits (39%), and increased industry consolidation (37%).
- When asked how concerned they are that intensifying global trade conflicts will impact their organization, 67 percent of directors said “concerned” or “very concerned.”
- Despite growing investor concern, only 6 percent of boards view climate change as a top trend impacting their organization over the next 12 months.
Disruptive Risks Growing, Artificial Intelligence Biggest Disruptor:
- Eighty-two percent of directors surveyed report that disruptive risks are much or moderately more important than they were just five years ago.
- Directors rate artificial intelligence as the biggest technology disruptor (47%) but also regard it as the biggest business enabler (49%) likely to benefit their organizations.
Monitoring of Strategy and Understanding of Risks Top Improvement Priorities for Boards:
- Directors point to monitoring of strategy execution (68%) and understanding of risks and opportunities (68%) affecting company performance as the top-two areas for board improvement in the next 12 months.
Boards Have Improved Their Understanding of Cyber Risks:
- The vast majority of directors (81%) believe that their boards’ understanding of cyber risks has improved over the last two years, perhaps because 50 percent of directors indicate that cyber-risk reporting from management is of much higher quality than it was two years ago.
- More than half of directors (52%) are confident that they sufficiently understand cyber risks to provide effective cyber-risk oversight.
- Nearly 60 percent (58%) believe their boards collectively know enough about cyber risk to provide effective oversight.
Board Oversight of Corporate Culture More Robust Than Last Year:
- Nearly 9 in 10 directors (88%) report a solid understanding of the “tone at the top” of their organization. Their understanding of the “mood in the middle” rose 10 percentage points to 45 percent. And 27 percent now clearly understand the “buzz at the bottom” levels of their organization, a nine percentage-point increase compared to 2017.
ESG Remains Low Priority, but Boards Considering Action:
- Environmental, social, and governance (ESG) issues are currently a relatively low priority for many boards, with just 28 percent of directors reporting that it is important or very important to improve board oversight in this area.
- However, a majority of directors (54%) would like their boards to improve their understanding of current ESG performance levels in the next 12 months.
Direct Board-Investor Engagement Now Common:
- Fifty-eight percent of boards report that a board representative met with institutional investors over the past 12 months, an eight percentage-point increase over last year.
- Overall, 45 percent of public-company board respondents discuss their oversight of long-term strategy with institutional investors.
Larger Company Boards Are More Gender Diverse; Boards Have Diversity Goals, Yet Face Barriers:
- Gender diversity on boards of companies in the Russell 3000 index is strongly correlated with company size. On average, only 16.5 percent of directors of companies in the Russell 3000 index are women. (Data from Main Data Group)
- Larger public companies tend to have larger boards and more seats occupied by women. Notwithstanding their size, these organizations also give a larger percentage of board seats to women. An organization with $10 billion or more in revenue is likely to have 12 or more board seats, 2 or 3 of which will be occupied by women. Contrast this with organizations under $2 billion in market capitalization, which on average have a board size of nine individuals with one seat occupied by a woman. (Data from Main Data Group)
- More than half of directors (53%) report that their organizations have board diversity goals. Of those boards, 70 percent report that their diversity mandate is driven by the need to enhance the cognitive diversity of boards, while 49 percent indicate that it is a moral imperative.
- Directors cite the lack of an open board seat (54%) and difficulty finding diverse candidates that meet the board’s skill needs (53%) as top barriers.
“The trends and insights highlighted with this survey can help boards assess priorities, explore emerging business themes, and evaluate the effectiveness of their governance,” said Gleason.
The 2018–2019 NACD Public Company Governance Survey details responses from more than 500 public-company directors and was conducted June through August 2018 by NACD, with additional board-governance analysis of the Russell 3000 from Main Data Group, a provider of executive-compensation benchmarking and corporate governance data and analytics.
To download your copy of the report, visit www.nacdonline.org/survey.
The National Association of Corporate Directors (NACD) empowers more than 20,000 directors to lead with confidence in the boardroom. As the recognized authority on leading boardroom practices, NACD helps boards strengthen investor trust and public confidence by ensuring that today’s directors are well prepared for tomorrow’s challenges. World-class boards join NACD to elevate performance, gain foresight, and instill confidence. Fostering collaboration among directors, investors, and corporate governance stakeholders, NACD has been setting the standard for responsible board leadership for 40 years. To learn more about NACD, visit www.NACDonline.org.
Contact: Susan Oliver