As we kick off the new year, we asked our practice group leaders to reflect on the trends they saw in the industry in 2023 and what may lie ahead in 2024. Mike Magsig, Managing Partner, and Heather Smith, Partner, Global Board & CEO Practice, discuss recent trends and major issues in the new year.
Trends in 2023
Increased Demands on Leadership: Shareholders and regulators have been holding boards and CEOs more accountable for company performance. From Disney to InBev, investors are more inclined to take action to address underperformance. There is a growing drumbeat for changes in board composition, governance transparency, and CEOs when companies’ market share declines relative to peers. With greater foresight in setting strategic direction, nimble execution is required of the executive team, and attentive board oversight in carrying out its fiduciary responsibilities is demanded. Such actions are intended to enhance corporate value creation.
Growing Attention on Board Effectiveness: As boards re-examine their fiduciary responsibilities, such as duty of care and duty of loyalty, growing attention is given to a board’s effectiveness. Self-evaluation and outside assessment are leading to changes in board composition, refreshment, and transparency.
Revamped Emphasis on Diversity: Boards and C-suites are replacing quotas with the “Rooney Rule,” which calls for candidate slates to be inclusive of diversity. Using the Rooney Rule strategy, companies have the option to interview more women and minorities for open positions, and boards are working to nominate underrepresented members to the board and elevate those voices once they are in the boardroom.
Predictions for 2024
- Attention on Enterprise Value Creation: Greater emphasis will be placed on boards having sufficient financial and general management expertise on the board. A growing demand for recruiting recently retired CEOs with a history of superior performance will be evident. In the Conference Board’s C-Suite Outlook, C-suite executives are faced with the challenges of “seeing around corners” to identify leading-edge commercial growth opportunities while retaining a prudent risk posture. Executives who master these skills will be better positioned to drive organizational success.
- Focus on Board & Executive Team Alignment: Strong strategic alignment by the board and executive team is critical to maximize performance. This should be carried out in a climate of mutual trust, collaboration, and transparency. This alignment drives performance by creating a cohesive organization with a shared vision supported by effective communication, agile decision-making, heightened risk mitigation, and increased employee engagement.
- Elevated Talent Issues: Talent will be a regular topic on the agendas of full board meetings. Aside from periodic compensation discussions, the board will more heavily focus on leadership and pipeline talent development, while addressing succession and talent gaps. Retention strategies and hybrid work environments will also receive considerable attention. According to EY’s Americas Board Priorities 2024 study, 56% of directors ranked the talent agenda among the top five board priorities for 2024.
- Continued Focus on Technology: The continually growing risk of cyber threats and the opportunities and threats presented by AI will be top-of-mind topics in the boardroom and the C-suite. How talent is resourced is a key topic. In fact, in the National Association of Corporate Directors’ (NACD) annual Board Trends and Priorities Survey, directors ranked changing cyber security threats, increasing pace of technological change, and advances in artificial intelligence in the top 6 trends out of 20+ as having the greatest effect on their company over the next year.
The significant issues confronting boards and CEOs in 2024 are unprecedented in an environment of rapid change and unforeseen events. As our DHR team engages with a wide range of boards and CEOs, we bring an invaluable perspective to consulting assignments addressing the challenges of 2024.