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Fresh Perspectives: Increasing the Diversity of Experience, Expertise and Ideas in the Boardroom

Fresh Perspectives: Increasing the Diversity of Experience, Expertise and Ideas in the Boardroom

In this era of rapid technological change and market disruption, boards have their work cut out to keep pace with what is happening in their own companies, let alone in the broader, converging business environment. To remain an asset to the company — and prepared to make a meaningful contribution to strategy and challenge management effectively — boards need to continually consider refreshment and seek out directors who can bring in much-needed knowledge and experience from the front line.

Responding to the evolving demands on boards and increased investor focus on board composition, many are diversifying perspectives in the boardroom. As a result, the profile and skill set of directors continues to shift.

Drawing on data from the 2019 U.S. Spencer Stuart Board Index, we identified the following key board trends that we believe will continue or accelerate in 2020, and how they are likely to shape board priorities in 2020 and beyond.

Boards will continue to prioritize diversity when recruiting new directors

Amid pressure from investors, proxy advisers and, in some states new regulations, boards will continue to accelerate the addition of women and minority directors.

The focus on increasing gender and ethnic diversity will inject a broader set of functional, industry and generational perspectives into the boardroom

For years investors have been urging boards to look beyond CEOs and experienced directors to find boardroom talent. Boards are now listening. In addition to the increasing gender, racial and ethnic diversity of new directors the professional backgrounds, areas of expertise and ages of directors joining S&P 500 boards will continue to shift.

Low turnover and long tenures will continue to impede meaningful change in overall composition, absent changes in refreshment practices

While women and minority men represent more than half of the new S&P 500 directors, continued low boardroom turnover remains a persistent impediment to meaningful year-over-year change in the overall composition of S&P 500 boards.

The implications for your board

Business demands and investor pressure are influencing boards’ composition and refreshment strategies. Boards should do the following to enhance short- and long-term approaches to their composition:

  • Assess skills and incorporate results from performance assessments into board succession planning
  • Set expectations around tenure
  • Embrace a continuous improvement mindset

In this era of rapid technological change and market disruption, boards have their work cut out to keep pace with what is happening in their own companies, let alone in the broader, converging business environment. To remain an asset to the company — and prepared to make a meaningful contribution to strategy and challenge management effectively — boards need to continually consider refreshment and seek out directors who can bring in much-needed knowledge and experience from the front line.

Responding to the evolving demands on boards and increased investor focus on board composition, many are diversifying perspectives in the boardroom. As a result, the profile and skill set of directors continues to shift.

Drawing on data from the 2019 U.S. Spencer Stuart Board Index, we identified the following key board trends that we believe will continue or accelerate in 2020, and how they are likely to shape board priorities in 2020 and beyond.

Boards will continue to prioritize diversity when recruiting new directors

Amid pressure from investors, proxy advisers and, in some states new regulations, boards will continue to accelerate the addition of women and minority directors.

The focus on increasing gender and ethnic diversity will inject a broader set of functional, industry and generational perspectives into the boardroom

For years investors have been urging boards to look beyond CEOs and experienced directors to find boardroom talent. Boards are now listening. In addition to the increasing gender, racial and ethnic diversity of new directors the professional backgrounds, areas of expertise and ages of directors joining S&P 500 boards will continue to shift.

Low turnover and long tenures will continue to impede meaningful change in overall composition, absent changes in refreshment practices

While women and minority men represent more than half of the new S&P 500 directors, continued low boardroom turnover remains a persistent impediment to meaningful year-over-year change in the overall composition of S&P 500 boards.

The implications for your board

Business demands and investor pressure are influencing boards’ composition and refreshment strategies. Boards should do the following to enhance short- and long-term approaches to their composition:

  • Assess skills and incorporate results from performance assessments into board succession planning
  • Set expectations around tenure
  • Embrace a continuous improvement mindset