Boardroom Directors With ESG and DE&I Skills in ‘High Demand’

Directors with environmental, social and governance (ESG) and human capital skills are highly sought after by company boardrooms, according to key findings from the National Association of Corporate Directors’ (NACD) latest report. 

Key findings from its 2021 Inside the Public Company Boardroom report revealed that the amount of directors with strong ESG and human capital skills has doubled since 2018 as companies increasingly value directors and candidates with these in-demand qualities. What’s more, boards are increasing their oversight of ESG practices, with 51% of boards disclosing oversight of ESG/sustainability, up from 34% just a year ago.

“It is clear that larger social issues, such as environmental, social, and governance and diversity, equity, and inclusion (DE&I), are inspiring an evolution of who is at the table and which skills they possess,” stated NACD President and CEO Peter R Gleason.

NARROWING GENDER GAP IN BOARDROOM

The report also showed that the gender gap is continuing to narrow. If trends continue, boards will be 50% female by 2035. Males composed about 87% of outgoing directors this year compared with 63%  of incoming directors, as reported. The overall gender balance in the Russell 3000 Index is approximately three men for every one woman on a board, which stands in contrast to 2018, when the ratio was five male directors for every one female director. Also, gender imbalances in board leadership positions saw a slight year-over-year decline. As a whole, gender imbalances were less prevalent on boards with greater percentages of independent members.

Interestingly incoming board directors in 2021 had more skills and experience in finance (53%), technology (35%) and marketing (20%) than incoming directors in 2020 (44%, 30% and 16%, respectively). Outgoing directors’ top skills included management and strategic vision.

TOP BOARDROOM TOPICS

The NACD also provided insights on the issues that corporate directors and senior executives will contend with in the coming year. Its 2022 Governance Outlook: Projections on Emerging Board Matters report revealed the following insights:

• Increased focus on CEO, board succession planning: Trendlines point to a growing importance of succession planning both for CEOs and other board members. Many directors note that relationships between boards and CEOs have grown more important since last year, continuing a pattern seen since the start of the pandemic. In addition to board succession planning, expect a greater focus on director onboarding and education in the coming year
• Covid-19 and other disruptions aren’t done yet: New variants of Covid-19, supply chain delays, and inflationary pressures will continue to pose challenges for company boards in 2022. Meanwhile, social concerns like DE&I and ESG will keep boards and executive teams focused on progress in those realms.
• Competition for talent will be tougher than ever, as reported. Around 70% of directors report that finding and recruiting top talent will be at the top of the list of trends to impact their organisations over the next 12 months. Other issues on their minds for 2022 include increasing the pace of digital transformation (42%); supply chain disruptions (40.8%); changing cybersecurity threats (38.7%); and growing inflation (34.9%).