Boards retreating from good practice developed during Covid-19 says The Chartered Governance Institute UK & Ireland

A new report out today from The Chartered Governance Institute UK & Ireland (CGI) and the Centre for Synchronous Leadership (CSL) has revealed that many boards have not maintained effective governance practices developed during the Covid-19 pandemic.

The 2021 Mindful Exclusion Report found that more boards and executive committees had started to go ‘beyond their bubble’ – by horizon scanning, investing in team alignment and creating a healthy flow of power. The presence of these three practices was associated with more effective governance.

2022 is characterised by a retreat to their more traditional preoccupations, with fewer boards and executive committees engaging in all three of these practices. As a result, feedback and trust levels have declined, organisations are less satisfied with their mix of skills at the top and diversity of lived experience is less valued.

This year’s report also shows that boards and executive committees that had engaged in these three practices at the end of 2021 – referred to as Scanners, Synergisers and Stewards – are now reaping the dividends, including stronger financial performance.

In addition to demonstrating the clear benefit associated with the three mindful practices, the report also identifies ten specific areas requiring attention – based partly on the differences in how Scanners, Synergisers and Stewards behave.

1. Prioritise employee-related issues.
2. Put innovation and impact on society back on the agenda.
3. Engage with diversity, equity & inclusion (DEI) at a deeper level.
4. Be more proactive in addressing climate change.
5. Ensure that there is HR/people expertise in the boardroom.
6. Consider the experience of ethnic minority stakeholders as a litmus test for psychological safety.
7. Reassess the time commitment required for effective board participation.
8. Interrupt the cycle of compulsive homogeneity – assess how a candidate adds value to your existing team, rather than if they are ‘impressive’.
9. Ensure that there is some level of DEI, sustainability and IT/digital expertise in the boardroom.
10. Continue to redress ethnic and gender homogeneity, whilst cultivating psychological safety and ensuring that diversity of lived experience is valued in all of forms.

The research identified that:

• 72% of respondents indicated that employee attraction and retention was a significant challenge in 2021, with only 32% saying that their organisation’s response had been effective. Despite this, talent management, organisational culture and employee well-being are being prioritised less.
• Innovation and impact on society are less likely to be prioritised now than they were during Covid-19. 64% of respondents reported there is little or no understanding of people facing poverty in their boardroom.
• The proportion of respondents reporting that their organisation has employee networks has risen from 51% to 70%, as has the incidence of many other structures related to diversity, equity & inclusion. And yet the influence of employee networks has gone down.
• Both the average frequency and duration of board meetings has risen in the past year. 42% of boards now have over 10 meetings a year (up from 32% last year), and 82% have meetings lasting three or more hours (up from 52% last year).
• The average number of members on boards has risen from 9.5 to 10.9. The number of members joining boards in the past two years has gone up from 2.8 to 3.2; the number leaving has hardly moved – from 2.5 to 2.6.
• Homogenous boards and executive committees are the least interested in diversity – regardless of whether this is diversity of expertise or lived experience. Boardrooms that already have high levels of one form of diversity are the most likely to prioritise other forms of diversity for future selection.

Peter Swabey, Policy and Research Director at CGI, said:

“History teaches us many things. One of these is about the temptation, after a crisis, to retrench and return to old habits rather than embracing the opportunity for lasting change. We decided, therefore, to test the results of the 2021 Mindful Exclusion Report and see whether the core practices that had helped boards and executive committees to go beyond their bubble in 2021 had stuck in 2022 and unfortunately we have found the opposite”

“Company secretaries are at the forefront of changes in board practice. Our role as the key advocate for sound, moral corporate behaviour has been at the centre of our training and guidance to new and practicing governance professionals and everything else that we do. The growing focus on ESG and, in particular, ESG reporting has raised the profile and significance of effective governance and board decision making in these areas, making this aspect of board behaviour more important than ever. These findings demonstrate the heightened need for better induction training, board evaluation and boardroom diversity.”

Justine Lutterodt, author of the report and Managing Director at CSL, said:

“All of us live in bubbles – of familiarity, comfort, and ‘impressive people’. As human beings, this is our default approach to making sense of the world. The problem is not that we have bubbles, but that most of the time we do not even see them. Of those who do, few of us are willing to take ownership for how they distort our decision making, and fewer still take action to prevent this from happening.”

“Our intention with this report is to equip boards and executive committees to engage in more meaningful self-reflection and dialogue about how to improve boardroom decision making. We have partnered with the Chartered Governance Institute because we believe that company secretaries have a key role to play in this journey.”

For further information, please contact David Mortimer, Head of External Affairs:

dmortimer@cgi.org.uk

+44 (0)20 7612 7072

+44 (0)7904012673

Notes to Editors:

1. The Chartered Governance Institute UK & Ireland is the professional body for governance and the qualifying and membership body for governance professionals across all sectors. Its purpose under Royal Charter is to lead ‘effective governance and efficient administration of commerce, industry and public affairs’ working with regulators and policy makers to champion high standards of governance and providing qualifications, training and guidance. As a lifelong learning partner, the Institute helps governance professionals to achieve their professional goals, providing recognition, community and the voice of its membership.
2. One of nine divisions of the global Chartered Governance Institute, which was established 130 years ago, The Chartered Governance Institute UK & Ireland represents members working and studying in the UK and Ireland and in many other countries and regions including the Caribbean, parts of Africa and the Middle East. Website: www.cgi.org.uk
3. The Centre for Synchronous Leadership (CSL) is a thinktank, consultancy, and membership organisation that focusses on systemic transformation in the business sector. It has been researching, supporting and activating corporate changemakers since 2010. In addition to its influential community of business leaders, the Centre also supports a number of recent graduates and fellows in the non-profit sector that help it to stay ‘in sync’ with the needs of society.
4. About the study:

• The 2022 Mindful Exclusion Governance study consisted of five roundtables, ten qualitative interviews and a quantitative survey, along with an extensive review of industry reports.
• The survey was fielded from February to May 2022, with 57 company secretaries, board directors and C-suite executives taking part. Survey respondents included representatives from organisations of different sizes in the business, non-profit and public sectors.