How today’s boards are transforming for tomorrow

When asked where management can improve the quality of information sent to the board, the results were dispersed, suggesting there is no single type of improvement sought. The top three responses were a desire for more interpretation about the importance and meaning of the information presented (33%), improving the ratio of forward-looking information to backward-looking results (33%), and a greater focus on critical key performance indicators (KPIs) (31%). However, when we look at the top three, we see a theme emerge about items that facilitate a discussion rather than ones that simply improve a traditional presentation. One effective approach we have seen is for management to provide executive summaries to each section of board meeting materials highlighting areas of change since previous meetings and calling attention to key points and relevant issues that the board will need to vote on.

Boards have further to go in continuing to evolve the way they work

One challenge with initiating many of these changes is that creating the right agenda and communicating new expectations with management is difficult – and many directors know it. Many also call out the need for improvement in coming to an agreement with management on both long- and short-term risk-taking, the exact places where more discussion and less presentation would be most helpful. Our survey results reveal a major disconnect in this area that should give board members and CEOs pause: Directors reported high confidence that they are aligned with management on identifying their companies’ top risks but express relatively low confidence in alignment with management on both short- and long-term risk appetite.

In a business environment that many board members and corporate leaders describe as one of “permanent uncertainty,” this disconnect is a potential red flag that boards may need to address. As has been all too clear in the last several years, internal and external risks can develop and escalate with remarkable speed, and interrelationships between risks can create multiplier effects that greatly increase their negative impact on company operations. On the flip side, companies that invest and seize opportunities in uncertain times can gain significant, lasting competitive advantage. Board members need to prioritize explicit and regular discussions with management about how much risk the firm can and should take on in pursuit of growth and opportunity, to survive and thrive.

Survey respondents want to see more forward-looking information and more interpretation from management on meaning. They also seek changes in the way the board operates through more open discussion time, more frequent communications with management outside board meetings, and more meetings with stakeholders and briefings from independent advisors to help the board as a whole come to speed on new and emerging topics. All these changes in the ways boards receive and consume information could help reduce this disconnect and improve board-management alignment on risk appetite.

Where boards need help

Directors value both working together and learning together. However, changing the board agenda to add more discussion time may mean that directors will have to spend time outside of the board meeting coming up to speed on critical issues and reviewing routine matters. Interestingly, most directors report that their most valuable interactions are collective experiences, such as meeting with stakeholders or the board’s independent advisors. Virtual board meetings and board briefings may be one way to achieve this. For example, a one-hour presentation on an unfamiliar or evolving topic, such as generative AI from the firm’s chief information officer (CIO) or emerging consumer trends from an independent advisor, may help to ensure all directors start with a similar set of baseline information, enabling more valuable, and more productive, discussions on emerging technologies or corporate strategy.

Sources of information

While there is unlikely to be a one-size-fits-all model, there are several common foundational principles from which all boards can build, which are detailed in the EY Board Effectiveness Framework. Though they may increase on the margins, it is unlikely that the number or duration of board and committee meetings will radically increase. The same is likely the case for the time directors commit to their role, which many feel grew in response to the series of disruptions that companies experienced in the past three years. Spending more time in one area likely entails taking time away from other agenda items. Boards may need to make intentional trade-offs as they transform how they receive information and how they get work done. For example, a greater focus on management summaries and KPIs means that the board may have less engagement with corporate performance details. More group learning may mean less collective board time available for other activities or scheduling learning opportunities outside board meetings. Given a wide variety of internal and external pressures, some of these changes may be inevitable.

We have identified a few areas where boards can consider making trade-offs to increase their effectiveness:

Creating more time for discussion in board meetings by doing more work before the board meeting

For the last two decades, it has been almost conventional wisdom that great boards have great discussions. It is not surprising that board members want more time for dialogue with each other and with members of management. Boards may seek to expand board and committee meeting time to accommodate such discussions. However, in our experience, there is scant evidence of this. Rather, something must come off the agenda. Our survey indicates that many would reduce the time for management presentations. Such presentations often cover routine matters that could be covered in a consent agenda. However, to do this, directors must commit to a careful review of management material as part of board preparation. In short, more time for discussion likely means that board members do more work before the board meeting. They may also need to work with their general counsel and governance teams to put safeguards in place to ensure that all board members can fulfill their fiduciary duties for oversight of routine matters.

Asking management for more interpretation of results while recognizing the potential of a narrow view of the company’s position

Some boards have experimented with management giving a written interpretation of financials and other materials in the board book. These can then be the focus of discussion as they specify which topics are for information only, which require specified director dialogue and which require votes or consent. However, boiling down corporate performance to specific mission-critical issues and focusing on a few KPIs that can fit on a dashboard may lead to a more limited representation of the firm’s position. This may place a greater burden on management – and the board – to ensure that some safeguards are in place and that an accurate and holistic picture of the firm is in place.

Streamlining board-management communications by coordinating asks from individual directors and working together to prioritize information needs

Management fatigue is real, and many boards see streamlining communications as a means to both clarify expectations and reduce the burden on management. It is not unusual for individual directors to ask well-intended questions of management that may be lower value and consume significant management follow-up time that is out of proportion to the issue’s significance for board oversight purposes. A streamlined approach may require individual directors to temper their own requests and take time to coordinate requests with other members of the board. To do so, board leaders (the lead independent director or non-executive chair and key committee chairs) may need to take on more active roles in vetting and coordinating board members’ information requests to management.