Directors had a lot to navigate in 2016, from activist campaigns to new regulations to shocking geopolitical developments. I'm not making predictions for 2017, but I would like to provide a word of caution for boards: it's not going to get any easier.
While boards face a plethora of issues and risks they need to effectively manage, I'd argue that the greatest risk they face in the new year is much less obvious: remaining relevant.
Boards are not as well-positioned for the uncertain future due to the confluence of emerging business issues coupled with board composition that remain largely unchanged and often unreflective of today's complex business environment. As oversight responsibilities shouldered by boards increase in scope and complexity, are they ready to bring on new directors with new areas of expertise? Are they willing to add new committees to address the evolving business landscape? Can they effectively grasp and aggregate the new business risks their companies will face? Can they navigate all of these while under the increasingly watchful eye of the institutional investor?
It's never been a more complex time to be on a multinational board, for example. Directors have to manage increasing economic and geopolitical risks the world over, complex decisions about how to allocate capital or structure their operations, and the continual blurring of sectors and business models. Having the necessary diversity of perspectives, skills and knowledge to effectively manage and strategize around these issues is paramount.
Unfortunately, diversity is in short supply on boards and is a key reason why boards are losing their relevance. First off, boards are not getting any younger, with 20% of the S&P 1500 directorships held by members who are 68 or older and have served on the same board for more than a decade. Given that 83% of Fortune 100 boards have some type of retirement policy in place, boards will need to find candidates with the experiences and perspectives necessary to navigate the challenging, competitive landscape.
In addition, gender diversity continues to lag. Yes, there has been a slight uptick--a rather troubling statistic we revealed in 2015 about there being more men on corporate boards named John, Robert, William or James than there are women on boards altogether is no longer true today--but it's still far from where it should be. The average S&P 1500 board has less than 20% female representation and a disappointing 15% of S&P...