Boardroom Trends 2024

With this kickoff 2024 edition of The Savvy Director, we’re highlighting boardroom trends that governance experts have been writing about lately.

If you’re like me, you’ll find that some resonate, others not so much. Hopefully, this will give you a running start as you consider which trends apply to your board, and which can be set aside for the time being.

I have a hunch you’ll find some interesting trends that could be tweaked to adapt to your board’s reality. In my view, that’s a good thing. It’s our job as directors to think critically about the material we read – whether the information is in a blog post, a magazine article, or a board meeting package.

Consider these Boardroom Trends

Here’s a nice simple definition of trend: “A general direction in which something is developing or changing.”

Of course, sometimes the experts prefer the complicated to the simple. In my research, I came across this wordy description of what good governance should look like in 2024:

“Within our strategic foresight role in the boardroom, we always have the opportunity to negate the negative effects of poor decision-making by sharply adapting to required transformation and the capability to foresee essential matters.”

What might be a more straightforward, practical way of saying the same thing - something simple that improves communication and enhances our common understanding? Consider this Savvy Director version:

“We’ll do our due diligence to make the best decisions possible, and we’ll look ahead for opportunities to update our planning when it makes strategic sense to do so.”

To tell you the truth, that might be the description of a boardroom trend, but to me it sounds more like the job description for my role as a board director.

You may know that, at DirectorPrep, we advise directors to focus their time and energy on four key areas: people, strategy, finance, and risk. So, to follow our own advice, we’ve organized the following list of boardroom trends accordingly. That said, many trends fit into more than one focus area. Of course, your individual perspective matters – what’s a risk for you is an opportunity for someone else.

Let’s get started.

Focus on People Trends

Succession planning for the board chair role

Okay, this one is my personal soapbox. I’ve said it repeatedly:

If you want to find a good board, find a great chair.

Building a boardroom culture of inclusion that’s welcoming to new directors from diverse backgrounds requires the board chair to use their so-called soft skills to model behavior and set the tone at the top.

Many governance experts take the board chair role for granted, but in my view, succession planning for the board chair role should always be a key boardroom trend. Too often, I’ve seen positive gains made during a board chair’s term squandered by a successor with little regard for what a board with positive impact looks like.

So if you only have a few dollars to invest in director training, gain all the leverage you can by investing in your board chair. Great chairs transfer what they’ve learned to the rest of the board and collaborate with management to keep the board future-oriented and forward-thinking.

Board composition, refreshment, and EDI

The anticipation of future director retirements places a special focus on recruiting next-generation directors. Next generation talent pays attention to and asks questions about culture in general and about Equity, Diversity and Inclusion (EDI) in particular.

Potential director candidates listen to the corporate social voice of the CEO, keeping watch for potential missteps in sensitive areas like political polarization, climate change, negative publicity, reputational harm, workforce retention, and retribution from influential sources. Conversely, they note whether the CEO is reluctant to speak up on key social issues.

Talent

Given ever-increasing stakeholder expectations and societal pressures, the CEO of the future needs a complex set of leadership skills. Enlightened boards should consider how they will find and recruit a CEO with those skills. That implies having open discussions with their current CEO about potential successors as well as pinning down development plans for the management team.

Massive layoffs and hiring freezes in certain sectors – such as technology - have led highly-skilled tech workers to be wary about their next employer’s loyalty. It’s going to take time to rebuild the trust that’s been lost. With that in mind, board directors in every sector of the economy are questioning how their organizations intend to attract and nurture next generation talent.

Board effectiveness and board evaluations

In recent years, there’s been a growing recognition that an effective board is a strategic asset, not just a hurdle to overcome for compliance purposes. Not only that, boards are facing increasing scrutiny from stakeholders on all sides.

“Board effectiveness remains a focus for investors and consumers. They want to see board directors and company executives not only fulfill their fiduciary duties but act with integrity. That means boosting financial performance and considering the broader impact of corporate activities.” – Kezia Farnham, Diligent

That recognition and scrutiny has resulted in a significant overhaul in board evaluations. In many cases, the traditional check-the-box, survey-based exercise has been replaced by a more rigorous and strategic approach.

Accelerating the learning curve on AI

Board education about artificial intelligence (AI) has become a priority, not only to raise awareness of how it’s relevant to the organization, but also to increase knowledge of the board’s legal duties. Whereas boards have had over ten years to understand and deal with other cybersecurity issues, the astonishing speed in the adoption of AI doesn’t allow us the luxury of time.

“The rise of AI raises the stakes for cybersecurity. Yet, because cybersecurity has been an issue for many years, some companies have developed a false sense of security. For boards and CEOs, it will be increasingly important to renew their focus on cyber risk and put in place more sophisticated frameworks and practices.” - SpencerStuart

Focus on Strategy Trends

Prioritizing strategy on the agenda

Increasingly, effective boards are recognizing the vital importance of allocating and committing prime time agenda space for strategic matters that require director education and discussion. After all, boards meet infrequently and their meeting agendas are already filled with regular business.

Allocating time to strategy means that management avoids regurgitating reports that directors are expected to pre-read and be ready to discuss. Despite efficient use of time, special meetings or board retreats may still be needed to allow for the concentrated focus time required.

“The beginning of the year is a great time to check in on alignment, both among board members and between the board and leadership. Are you on the same page regarding long term goals and strategic direction? Are you confident that leadership is navigating change in a way that works for the culture, ethics, and value to the business?” - Boardspan

The politicizing of ESG

Despite the fact that some experts suggest ESG (Environmental, Social, Governance) is losing momentum in the boardroom, sustainability goals and results remain critical, with climate disclosure rules emerging in some sectors.

Regulatory compliance for climate change reporting has emerged as a battleground in the political arena. Regardless, effective boards are paying attention to identify opportunities to reduce climate change impact and to be able to provide effective reporting as needed.

“Stakeholders want to see a genuine and proactive commitment to climate impact. Whether your ESG program is lacking or thriving, start adding ESG oversight so you can thoughtfully and transparently explain your climate impact.” – Kezia Farnham, Diligent

Focus on Financial Trends

Boardroom trends in the finance area are focused on the impact of central bank interest rate changes. To respond to uncertainty in this area, management may find that finance committees are asking for additional sensitivity analysis.

The impact of interest rates varies by sector. For charitable foundations, higher interest rates can be a good thing for interest bearing investments. For charities working to solve issues related to complex poverty and homelessness, lower interest rates help with construction and renovation investments. Companies with capital projects and governments with large debt servicing costs continue to be mindful of interest rates.

Focus on Risk Trends

Organizations continue to navigate an era of global disruption. AI, cybersecurity, and economic volatility all pose substantial risks that boards are monitoring.

In some boardrooms, governmental politics are beginning to infiltrate, causing personal divisions as directors take sides. Social unrest in western democracies is increasing division in an already conflicted world. Enlightened boards are paying attention to workplace impact and the ability to recruit future talent who feel safe.

In Summary

What some consider a boardroom trend - a general direction in which something is developing or changing – may, at first glance, not seem relevant to you or your board. But that’s a great discussion to have.

As directors, our goal is to use our knowledge, leadership, and influence to add value at the strategic level. The more we each invest in our own reading and thinking about boardroom trends, the better will be our participation and contribution to the board, the organization, and its stakeholders.

Your takeaways:

• Give serious consideration to the boardroom trends that might impact your organization in the near term and longer-term future. It will help your board evolve its governance structure and processes to keep up instead of catching up.
• Collaborate with your board chair to keep agenda time open for future-oriented thinking, strategic issues, and boardroom trends.
• The Board/CEO relationship is being tested in our complex world where boards are expected to lean in and engage with stakeholders. Focus on building trust in those relationships.
• The role of the board chair in succession planning for directors, committee chairs, and the chair position is vital to maintain a healthy boardroom culture.

Resources:

• 2024: The Year of the Strategic Board. Insights from the Boardspan Team. Boardspan. December 2023.
• Top corporate governance trends for 2024 & beyond. Kezia Farnham. Diligent. December 2023.
• Getting boards ready for 2024. Ben Maiden. Governance Intelligence. November 2023.
• Top 10 Governance And Leadership Trends For 2024. Michael Peregrine. Forbes. December 2023.
• Corporate governance trends and challenges for board members. Dan Konigsburg. Deloitte.
• Board Governance Trends. SpencerStuart.

Thank you.

Scott

Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online membership with practical tools for board directors who choose a growth mindset.

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