Boards are at odds over topics ranging from diversity to pay

board
There is a maelstrom of disagreement going on in boards today.

Boards of directors are a fractious group in many cases, at odds with each other and over issues such as diversity, the environment, pay and cybersecurity.

That is the finding of a PwC study of nearly 900 board members at large, medium and small publicly traded companies.

“There is still a gap between board members and what they must do,” said Paula Loop, leader of PwC’s Governance Insights Center. “In a divisive time, our survey shows that even boardrooms aren’t immune.”

Topics addressed in the survey include director discontent with peers on the rise. Almost half (46%) of directors say at least one colleague should be replaced, for reasons that include age and overstepped boundaries. And yet, only 15% said that a member of their board was provided with counsel or was not renominated because of the board assessment process.

Directors split on diversity

Directors grapple with achieving—and even defining—diversity. While directors say that board diversity is valuable and the majority say their boards are taking steps to increase diversity, they don’t all see benefits beyond the boardroom. More than 40% say board diversity does not improve company performance and more than half of directors say their boards are already sufficiently diverse. Almost 1 in 6 of respondents (16%) think diversity on their board has had no benefit.

  • Race: Despite dialogues surrounding race taking place nationally, nearly a quarter (24%) of respondents say racial diversity is “not at all important” in achieving diversity of thought. And while it represents the minority, just under 10% of directors say their boards have no racial diversity—and do not need it.
  • Rate of progress: Women and men view gender diversity in the boardroom differently. Women are more than twice as likely to say it is happening too slowly, but men are six times more likely to say there is too much of a focus on gender diversity.
  • Tenure: Newer directors are significantly more likely to value both racial and gender diversity on the board than colleagues who have served on board for 10 or more years. Eighty-four percent of board members with shorter tenure (five years or less) say that racial diversity is important compared to 65% of board members with tenures of 10 years or more.

Additional points of contention

Environmental issues struggle to break through in the boardroom. Almost one-third of directors (30%) indicate they do not have and do not need expertise in this area. Additionally, 40% say environmental issues should not be considered in forming company strategy. 

Executive pay remains a pain point. Most directors (70%) at least somewhat agree that executives are overpaid. Two-thirds at least somewhat agree that executive compensation exacerbates income inequality.  

Shareholder engagement is creating returns—but are enough directors on board? Directors have adopted more positive attitudes on shareholder engagement and are now significantly more likely to think direct engagement positively impacts proxy voting (77%, up from 59%). However, 23% still say that directors should not be engaging with shareholders. 

Boards recognize IT and cybersecurity gaps. Directors overwhelmingly agree (72%) that their boards need more expertise in addressing these critical issues. Less than one-fifth of directors are satisfied with the current levels of expertise on their boards.

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