Nasdaq’s corporate governance review 2023: the main points

Nasdaq’s corporate governance assessment for 2023 is out, giving a thorough picture of the trends, opportunities and challenges for boards as they stand. 

The 2023 Global Governance Pulse report collected responses from over 730 individuals from a cross-section of organisational types (public, non-profit, private), continents, and positions (including board members, corporate secretaries and CEOs). 

• Over half (54%) of surveyed companies have no formal board succession plan. This breaks down to 36% who have no written or codified succession plan – merely informal practices discussed during vacancies – and 18% who have no plans at all. 
• Specific action plans to identify critical opportunities and risks are commonly identified as crucial to board evaluations. Despite that, only 7% of companies use this method. 
• 25% of boards want to deepen their understanding of business conditions, industry trends, competitive landscape and legal/regulatory environments.

Let’s break it down amongst the key conclusions above:

It’s worrying, though not unexpected, that nearly a fifth of companies have no succession plans in place at all. Succession planning is one of those issues that is never a problem until it is. In the meantime, it can disappear from the list of board priorities. 

The 36% with an informal plan will benefit from more structure for filling crucial board seats. Still, the informal nature means that vital decisions could be decided by precedent, simply using a “this is the way we’ve done it before” approach. 

Formal processes are more likely to establish current needs and how they align with strategy in a structured format. This is what boards should strive for.

Because of the high-stakes nature of modern board roles. 

Boards aren’t just rubber-stamp bodies anymore. Regulators, employees and investors expect far more than that. They expect an engaged, experienced team that collectively identifies the best corporate journey for a company. 

In this environment, putting a lot of hope in specific individuals is easy. But no individual will stick around forever, and when they depart, the company needs a replacement ready to go.

7% of companies use risk/opportunity action plans to conduct their board evaluations, even though not doing so is a common gripe among critics. 

Overall, the survey uncovered eight different evaluation methods, and none even came close to enjoying dominant popularity – the most common method (a questionnaire to collect feedback from board members) was used by 23% of respondents. 

Still, 7% using what many critics deem a crucial evaluation tool is a worry. 

They connect boards with core elements of corporate strategy, namely, where they can find the most success and where they might run into the most significant pitfalls. 

If boards aren’t aware of these, they’re not doing their job properly. That’s why it makes sense to evaluate them based on their grasp of these crucial elements.

Boards were asked about where they wanted to see more focus, and this was the top answer. Other popular choices covered internal board communications, increased debate, new board members, and clarity on decision-making.

In some ways, this shows that directors are at least partly acknowledging that risk and opportunity (as above) are essential, as these will predominantly come from external factors like industry trends, competition and laws. 

The bottom line is that these factors have significantly impacted governance in most businesses over the past twenty years and will continue to in the future. As a result, the 25% who see this as the driver of more value definitely have this reality in mind.