Corporate boards have major “blind spots”

According to the PwC annual board survey, corporate directors may feel too confident about their ability to handle 21st-century challenges, such as climate change, ESG and cybersecurity.

In the 2022 survey, there is a section on director blind spots to illustrate how companies are not engaging shareholders and consumers as much as they should.

• PwC surveyed 700 directors, and only 11 per cent thought environmental expertise was an important skill set. According to PwC, this is problematic in light of the SEC’s and global regulators’ demands for more disclosure of the environment.
• Only 45 per cent of survey participants believe that environmental, social, and governance principles are linked to company performance – a relatively low number, since ESG has become an increasingly important issue for stakeholders and shareholders.

Only 39% of directors say their board has discussed the company’s stance on social issues in the past 12 months.

With such high levels of confidence in the boardroom, companies risk paying insufficient attention, leaving themselves vulnerable.

• Two-thirds of female directors say reducing the impact of climate change is a priority, even if it impacts short-term performance — compared to less than half of male directors.
• 48% of directors would replace at least one member of their board. Nineteen per cent (19%) would replace two or more.
• Directors see board diversity benefits but question the candidates. While 86% agree that diversity enhances the board, many think the new candidates are unneeded (34%) or even unqualified (31%).
• Directors don’t think environmental/ sustainability expertise is important. Only 11% of directors say it is very important for their board.
• Shareholder engagement reaches a new high. 60% of directors say a member of their board other than their CEO met with shareholders during the year. Nearly 90% say it was productive.
• More than 90% of directors are comfortable that their company is staying current on cyber defences. With such high levels of confidence in the boardroom, companies risk paying insufficient attention, leaving themselves vulnerable.
• Only 39% of directors say their board has discussed the company’s stance on social issues in the past 12 months. Even fewer—30%—say they have discussed corporate political activity.
• Less than two-thirds (65%) of directors say their board understands the internal processes and controls around ESG. With new SEC disclosure regulations expected, it will be imperative that companies can offer accurate, reliable information in this area. The processes around how that data is gathered and disclosed will be a critical piece of board oversight, and is not one that can be implemented overnight.
• Almost one-third of directors (31%) think that sitting CEOs should not serve on a board outside their own company.

Download PwC’s 2022 Annual Corporate Directors Survey.