NACD ANNUAL PUBLIC COMPANY SURVEY REVEALS KEY BOARDROOM INSIGHTS FOR 2023

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National Association of Corporate Directors

Jul 11, 2023, 10:22 ET

Artificial Intelligence, ESG, Climate Change, Human Capital, and Board Culture Are Top Issues, According to an Annual NACD Survey of More Than 300 Public Company Directors

WASHINGTON, July 11, 2023 /PRNewswire/ -- The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 23,000 board members, today released findings from the 2023 NACD Public Company Board Practices and Oversight Survey.

While a host of issues—from economic to political to social—are of critical importance to public company directors, Artificial Intelligence (AI) is one area where most directors surveyed see a gap between the opportunities that AI presents and the expertise needed to harness them. Ninety-five percent of directors think that the adoption of AI will impact their business, yet only 10 percent believe their management teams are highly proficient with AI tools, and more than two-thirds said AI is not regularly discussed at the board level.

Besides AI, public directors are also contemplating a changing ESG landscape, citing a steadfast resolve for ESG programs but noting that a lack of uniform standards is a challenge. Climate change is also an increasing topic of conversation in the boardroom, and human capital and board culture also feature prominently in the 2023 survey.

"Our Board Practices and Oversight Survey reveals data-driven insights into current boardroom issues facing public companies and their directors," said NACD president and CEO Peter Gleason. "We know that topics like AI, climate change, and human capital are top of mind for public directors, but gaining a sense of the growing areas of concern, how much time boards are devoting to these areas, and what their biggest challenges are is incredibly helpful to NACD, our members, and the wider governance community."

Key Findings from the 2023 NACD Public Company Board Practices and Oversight Survey:

Board focus on artificial intelligence is in its early stages.

Ninety-five percent of directors believe that the increased adoption of AI tools will impact their businesses, but it is not yet regularly discussed.
Only 28 percent of respondents indicate that the topic of artificial intelligence features regularly in board conversations.
Only 10 percent report that their management teams are very or extremely proficient with AI issues.
As the risks and opportunities of AI technology grow, boards must plan how they will oversee this new technology domain.

Boards remain steadfast in focus on ESG, but challenged by unclear standards.

A majority (62%) of respondents continue to believe that ESG programs create long-term value within their organizations.
Despite growing debates about ESG, more than half (58%) indicate that ESG issues have actually increased in priority.
The main governance challenge is a lack of uniform disclosure standards, which complicates measurement and reporting of ESG-related activities.

In fact, 46 percent of respondents cite the lack of uniform standards as the most challenging aspect of providing oversight to ESG issues.

Climate issues increasingly feature in board discussions.

Forty-four percent of respondents indicate that the frequency of climate change-related board discussions has increased over the past two years.
This increase in board focus coincides with a slight increase in more concrete action by the companies they oversee.
Forty-six percent of respondents indicate that their company now has established climate targets, and that they are on track or ahead of schedule in reaching these targets, compared to 43 percent last year.

As board engagement on human capital grows, more formal oversight practices are emerging.

Boards are just starting to formalize their oversight of human capital issues. Only 34 percent have delegated specific human capital oversight elements to relevant committees, and only 52 percent have discussed human capital strategy as a recurring agenda item.
While 82 percent of respondents feel that their board has the expertise to oversee human capital-related risk, far fewer boards are actively probing how well human capital is managed across the enterprise.
These boards are starting to apply the same rigor to human capital oversight as they do to financial reporting and strategy. For example, 36 percent assess how human capital drives performance, and 44 percent evaluate the effectiveness of the CHRO.

Board culture can be undermined by problematic individuals and group dynamics—and virtual meetings.

Thirty percent of respondents considered problematic individuals to be among the most significant barriers to sustaining an effective board culture, underlining the impact of each individual director.
Group dynamics also have an effect, with 22 percent of respondents noting the deleterious effects of silos and subgroups of directors.
Many boards have gained efficiencies through the use of virtual meetings, but excessive use of such meetings may exacerbate these barriers.
A quarter of directors indicate that the lack of in-person interactions during virtual meetings has diminished the quality of discussion (26%) or board collegiality (26%).

Click here to read the full report released by NACD.

About NACD

The National Association of Corporate Directors (NACD) is the premier membership organization for board directors who want to expand their knowledge, grow their network, and maximize their potential.

As the unmatched authority in corporate governance, NACD sets the standards of excellence through its research and community-driven director education, programming, and publications. Directors trust NACD to arm them with the relevant insights to make high-quality decisions on the most pressing and strategic issues facing their businesses today.

NACD also prepares leaders to meet tomorrow's biggest challenges. The NACD Directorship Certification^® is the leading director credential in the United States. It sets a new standard for director education, positions directors to meet boardroom challenges, and includes an ongoing education requirement that prepares directors for what is next.

With an ever-expanding community of more than 23,000 members and a nationwide chapter network, our impact is both local and global. NACD members are driven by a common purpose: to be trusted catalysts of economic opportunity and positive change—in business and in the communities we serve.

To learn more about NACD, visit nacdonline.org.

About the Survey
The 2023 NACD Public Company Board Practices and Oversight Survey report presents results from our annual questionnaire. This report details responses from 328 public company directors on their boardroom activities to oversee several critical areas, including ESG, human capital, and artificial intelligence (AI).

Data Collection
Leveraging its proprietary member database as a sample frame, NACD sent email invitations to directors and others who serve on boards, asking them to participate in the 2023 Board Practices & Oversight Survey. The survey was in the field from April 3, 2023, to May 3, 2023, and the questionnaire was administered electronically. Respondents were instructed to respond on behalf of one of the boards on which they serve.

Analysis
Percentages are based on the total number of responses specific to each question. For example, if a question received responses from only 100 out of 328 total respondents, and 75 respondents answered "yes" while 25 answered "no," the result is reported as 75 percent affirmative. In some cases, survey responses totaling fewer than 5 percent are not represented in graphs for the sake of clarity.

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