As demands on boards grow, how are directors responding?

• Author: Stautberg, Susan
• Position: Survey

According to a recent survey that WomenCorporateDirectors (WCD) Foundation conducted with Spencer Stuart and researchers from Harvard Business School, 60% of corporate directors say that there is a gap between the expectations placed on boards and the reality of the board's ability to oversee a company *. While 64% believe expectations moderately exceed reality, a striking 25% believe that expectations far exceed reality.

What's the story behind these numbers? And how are boards responding to this high bar being set for them?

Stakeholder Pressures

As WCD member and head of Spencer Stuart's North American Board Practice Julie Hembrock Daum says, "Directors themselves may be more qualified than ever, but they are facing higher expectations than ever. These expectations are coming from multiple stakeholders--investors, consumers, regulatory bodies, the media--in a climate of unprecedented demands for transparency and accountability."

The rise in shareholder engagement with board decision-making, catalyzed by Dodd-Frank and Say on Pay six and a half years ago, has made investors an increasingly vocal voice in the boardroom, whether they are physically there or not. And it's not just activist shareholders expressing unease; mainstream asset managers, shaken by the financial crisis and corporate risk mismanagement, have become more assertive. Both activists and traditional investor groups--from CalPERS to BlackRock to State Street--are demanding fresh blood on boards, and many are calling for more rigorous director evaluations and for explanations of board candidates' qualifications.

Recruiting for Skills, Grading for Results

With boards being put on the defensive, many are adjusting their nominating policies and procedures, as well as how director performance is being measured. Boards are certainly being more intentional about seeking out the needed skills and backgrounds for new director candidates. For the most part, according to our survey, boards appear to be adequately matching the skills that they consider most important for board service to the skills that they aimed to acquire in their most recent board appointment. Industry knowledge and financial/audit skills were 2 of the top 3 skills cited as "most important for board service today" and were also sought after in recent board candidates.

But there was one notable exception to this survey finding that shows that there's still room for improvement. While 67% of respondents in the survey...