A 2022-2023 survey by the Global Network of Director Institutes (GNDI) shows long-term strategy is perceived as the most critical priority for organisational success by 66 percent of directors worldwide.
Kirsten Patterson, CEO of the Institute of Directors New Zealand (IoD) and newly appointed chair of the GNDI, says directors increasingly see a need for long-term, robust strategy in an environment dominated by short-term pressures.
“From the global survey, directors know they need to be paying attention to the longer term. That’s really evident to me and it is the right instinct to have,” Patterson says.
“But there is also something in here that means the long-term view is crowded out by what’s happening because of short-term pressures.”
She speculates that this may have been exacerbated by Covid-19 where an existential threat to businesses and organisations means that revenue can come to a halt, but is being reinforced by inflationary pressures, geopolitical instability and supply chain constraints.
The international biennial survey was conducted this year by the Malaysia Alliance of Corporate Directors in conjunction with the IoD, with a majority of international participants on boards of small-to-medium businesses.
Diversity and inclusion emerged as one of the key global themes with 37 percent of directors feeling it is likely to enhance board practices within the next three to five years. Although only 25 percent of directors view it as a top priority in the short term, 42 percent of directors acknowledge that a lack of diversity is becoming increasingly unacceptable.
“Increasingly, the focus needs to be on inclusion,” says Patterson. “Having diversity around the board table is a start, but the chair needs to lead an inclusive culture to support the realisation of diversity of thought.”
Patterson suggests that younger directors may want to operate in the boardroom in a completely different way to what has gone before them, and that boards need to be open to change.
Boards seem to be gearing up for change with 50 percent saying that enhancing board evaluation processes is their top priority for improving board performance.
“The needs of boards are changing, so along with regular evaluations, boards should also be using the opportunity to identify gaps in skills, experience, background and diversity in composition.”
One of the bigger surprises from the report is that, despite much of the world continuing to be taken off guard by unpredictable, cataclysmic weather events, climate change was considered an immediate priority by only five percent of directors.
So, what do these low numbers really mean?
Patterson says the climate statistics are aligned with the IoD’s annual Director Sentiment Survey results.
”With so many immediate pressures, I appreciate that some things have to be prioritised over others, but the focus on long-term strategy should illuminate that climate change response can’t be relegated.”
The other key concern that emerged from the survey was digital governance. Technological transformation is regarded as an issue that can be left to boards of the future, with only 21 percent of directors considering digital transformation a priority for business success.
That doesn’t mean they aren’t thinking about it in the short-term, with data revealing that 83 percent of directors are considering expanding board committees to include technology and sustainability.
Also of note, cyber-risk and digital innovation were identified, by 55 and 54 percent of directors respectively, as the two key areas where boards have insufficient expertise or skills to govern over the short term.
Patterson says the statistics reveal the competing priorities for directors, illuminating the key concern of a lack of skill in this area. “Boards are increasingly relying on external expertise and advisory boards to supplement staff and board expertise, as the number of critical issues for boards to be across continues to increase.
This is the third biennial survey of GNDI members and had 1,071 responses.
ABOUT THE GLOBAL NETWORK OF DIRECTOR INSTITUTES
The Global Network of Director Institutes (GNDI) was established in 2012 to complement the work of its member organisations by fostering close cooperation between national corporate director organisations and providing a global forum to share experiences, case studies, leading practices and current or emerging corporate governance issues impacting the boardroom and its stakeholders.
The GNDI brings together the leading associations serving corporate directors from around the world to provide a global voice and sharpen leading practices for boardroom leaders on relevant governance matters that cut across national boundaries. Launched by nine director institutes, including the Institute of Directors in New Zealand as a founding member, the GNDI now comprises 24 institutes representing more than 150,000 directors and other governance professionals around the globe.
The GNDI members collaborate to:
· Foster closer cooperation between its members and help to unlock access to director resources around the world;
· Anticipate and explore emerging issues having global impacts on corporate governance;
· Develop and promote leading practices and programs that enhance the ability of corporate directors to ensure long-term, sustainable performance for the benefit of shareholders and other stakeholders;
· Educate key influencers regarding the benefits and values of exemplary leadership in the boardroom; and
· Amplify the voices and perspectives of corporate directors on matters related to boardroom leadership.
Reference websites:
www.iod.org.nz
