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2020 Ireland Spencer Stuart Board Index

Even before the 2020 pandemic arrived, boards of Irish companies had a multitude of issues to deal with – the stakes have only increased in recent months. Here we identify six topics that have assumed particular importance in the boardroom over the past year.

Succession planning

Research by Spencer Stuart shows that CEO transitions decline during a crisis or a recession by up to 32%. Many boards stalled on CEO succession plans during the initial phase of the Covid-19 pandemic. Boards tend to seek stability in volatile times and in Europe CEO transitions fell by nearly 50% in April and May 2020. However, as strategies and operating models have started to be recalibrated to a “living with Covid world”, CEO succession has risen to the top of the agenda as boards seek to ensure that their companies emerge from the pandemic with the right leadership and strategy in place.  Despite the benefits of stability, postponing succession can create risks if the changed environment demands a different kind of leadership.

Boards are preparing their top teams and stakeholders for the new reality that is emerging from this unprecedented crisis, a time when visionary leadership is required more than ever. They are also adapting to a new standard of virtual assessment of CEO and board succession candidates. Increasingly, we have seen boards being unafraid to use a virtual assessment process as “leading from a distance” has become the modus operandi.

Nomination committees are operating under a sharper spotlight as a result of these developments and the expansion of their succession planning role to include executive appointments under the revised 2018 Corporate Governance Code. Given the Code’s provisions on chair tenure, they need to avoid changing chairs and CEOs at the same time. Nevertheless, nomination committees should not use timing concerns and the crisis as reasons for not planning ahead to ensure their companies have the right leadership in place for the unprecedented challenges ahead.

Increased environmental, social and governance (ESG) transparency

There is a growing consensus amongst investors about the financial implications of ESG matters as markets seek to apply a financial value or price to companies’ ESG information. The Covid-19 pandemic has amplified market focus on company disclosures in this area, highlighting the divide between the sustainability of well-run companies with strong ESG practices and those with weaker credentials in this area.

The market is insisting on more transparent ESG reporting and disclosures and increasingly looking for a statement from chairs on how a company is run, what its long-term ambitions are and that the company has thought about its impact on the wider society. Some regulatory regimes insist that this overview is included in board and management commentaries.

At a deeper level, a better explanation of the company’s purpose is required, as is a closer explanation of adherence to corporate governance precepts and best practice.

Although the European Commission’s original intention of making corporate governance statements “regulated information” is in abeyance, there is still a possibility that regulators, rather than shareholders, might take on the task of deciding whether an explanation for non-compliance is sufficiently complete.

The investor community has stepped up engagement with policy makers as they strive for stronger regulations in relation to ESG reporting and disclosures. We are starting to see investors, for example, insisting on disclosures being in line with the Sustainable Accounting Board’s guidelines and the Global Reporting Initiative standards.

Companies should avoid producing generic off-the-shelf ESG statements; explanations and reporting should be tailored to a company’s specific circumstances and should be clearly linked to its vision and strategy.


The 2018 Code highlights the importance of how a company communicates and articulates its purpose, values and culture. The pandemic has driven an ever-increasing focus on purpose, culture and engagement together with growing pressure on executive teams and boards to increase shareholder value while at the same time ensuring a more equitable, inclusive and resilient organisation. Companies are now expected to present not just data and metrics, but informative narratives supported by examples in their annual reports and/or websites which illustrate how strategy and culture are aligned. A question on the agenda of many boards at the moment is, did our company culture support or hinder our response to the crisis?

There is an increasing focus on board culture as a component of board performance. Unlike other elements of board governance, it is less understood and more difficult to define. Boards now need to move beyond superficial generalisations such as “collegiate”, “collaborative” or “engaging” when describing their culture to developing deeper insights on their culture or target culture and its impact on board performance.

Two trends in particular are driving the increased attention on board culture. The first is growing stakeholder scrutiny as many investors seek deeper engagement with boards and influence over governance. The second is the increasing diversity of boards. With a broader set of perspectives around board tables, including gender, nationality, age and functional backgrounds, the homogenous set of implicit assumptions that underpinned how boards interacted and made decisions in the past has been considerably diluted.

Shareholder activism

Shareholder activism has been gaining momentum globally since the last financial crisis and the Covid-19 pandemic will accelerate this development. As they look for stronger investment returns, both traditional investors and activists are seeking to deepen their influence on boards on a range of issues including strategy, performance, board composition, ESG matters and CEO compensation.

Sometimes boards can retreat from engagement with what they perceive to be opportunistic short-term activist investors. This is a mistake, since activists build relationships with other investors as they seek to gain their support to apply pressure regarding specific issues or concerns. It is important for boards to have a proactive investor relations strategy with all shareholders. Internationally and in Ireland we are seeing boards increasingly taking the concerns of activist investors very seriously, as they tend to highlight critical performance or governance issues that are more than likely also of concern to long-term shareholders.

Earlier this year, Europe’s largest activist investor, Cevian Capital, increased its stake in CRH to 3.5% on the back of its concerns that margins were lagging behind peers and that the company was undervalued by the stock market. We also saw the board of Swiss baked goods group, Aryzta, coming under considerable pressure from shareholders. Swiss activist investor, Veraison, joined forces with Aryzta’s largest shareholder, Cobas Asset Management, to find ways to drive better returns for investors. At the company’s EGM in mid-September, this activist shareholder group succeeded in their efforts in bringing about significant board changes.

It is becoming increasingly important for boards to understand where they are vulnerable to attack, to listen to all shareholder concerns, have a robust and open shareholder engagement strategy in place and to communicate a compelling vision for their company.

Stakeholders in the boardroom

The shift from shorter-term to longer-term sustainable growth objectives, means that boards have to take a broader group of stakeholders into account. From a corporate governance perspective there is a trend in policy making towards a recognition of a company’s responsibilities and accountabilities to stakeholders, including customers, the community, management, employees and financiers.

As investors continue to give considerable attention to topline revenue growth, particularly organic growth, we are increasingly seeing boards looking to bring a customer perspective into the boardroom. 

Giving stakeholders a voice in the boardroom is increasingly important, whether it is customers, suppliers or the community. The spotlight is on how boards uphold the company’s licence to operate, reflect their customers concerns, articulate social purpose and generally engage with stakeholders over critical issues.

Impact of Covid-19 in the boardroom

A recent survey by Spencer Stuart of 70 nominating/governance (nom/gov) committee chairs of S&P 500 and Fortune 500 companies found that despite the crisis the vast majority felt that their boards had the skillsets and experience needed and didn’t anticipate the need for any longer-term changes in structure or refreshment practices.

However, the pandemic has highlighted potential weaknesses in succession planning with barely half of respondents having succession plans in place for board chair or lead director. There is likely to be more scrutiny of boards’ own succession plans in the new era.

In a virtual world, boards will need to become more pragmatic about appointing a director without meeting in person and more deliberate about building personal relationships to address board needs during an era of little or no travel.

Chairs do not anticipate much change to committee structures, with the notable exception of the emergence of ESG committees as the pandemic has driven the oversight of ESG up the board agenda.

40% of respondents increased the frequency of meetings in March and April of this year to every other week and most are expecting increased formal communications from the CEO and management in the future.

The survey also found that with the increase in virtual board meetings, fewer informal interactions with CEOs and shorter meeting agendas for the foreseeable future, boards will need to find creative ways to deepen their interactions with CEOs and executive teams to stay well informed and connected.