This newsletter’s Table of Contents is as follows:
- Board composition: The road to strategic refreshment and succession
- New Study: It’s the end of work as we know it.
- DIRECTORS BEWARE: SEC Proposes New Cybersecurity Disclosure Rules that will affect Board Appointments
- A new Corporate Governance Tidal Wave is coming: Record-breaking ESG proposals! Are your REPORTING METRICS ready?
1. Board composition: The road to strategic refreshment and succession
Having the right individuals in the boardroom is critical. Corporate directors need to have the skills and experience that align with the company’s long-term strategy. Diverse and fresh perspectives are also important. While boards have been focusing on these topics, other areas like director tenure and board succession planning are often addressed only when the board needs to replace a retiring director. This is not overly surprising considering they can be sensitive topics. So how should boards be thinking strategically about their board composition—now and in the future—to ensure optimal performance?
Actions for consideration relating to board refreshment:
i. Make sure board refreshment and succession planning priorities are on the agenda
ii. Assess corporate director skills and attributes, and incorporate results from board assessments
iii. Set directors’ expectations around tenure
iv. Take a multi-year view toward departures and address upcoming leadership changes
v. Agree on a board succession plan that prioritizes needs and builds a talent pipeline
Source: PWC
2.New Study: It’s the end of work as we know it.
The pandemic crisis may not be quite over, but it’s clear that it has already created a unique opportunity to reimagine talent strategy for the coming decade, and the world of work will look very different in 2030 than it does today, according to a new CEO survey by consulting firm Protiviti and the University of Oxford.
The following are key takeaways on what the future of work will look like:
Hybrid is here to stay.
- While 78% of companies’ employees worked full-time in the office pre-pandemic, survey respondents said that 70% of employees will have a hybrid home-office work model by 2030.
- Company Management may resist the hybrid model, but employees have more work options and so companies must adapt
- Workers found greater efficiency and collaboration during the pandemic.
- Work is no longer just somewhere to go. It’s something that can possibly be done everywhere and anywhere.
New skills will be needed.
- 86% of all participants agree that the type of jobs their employees will perform in 2030 will be different from today.
- While the conventional wisdom holds that new technologies such as AI and automation will replace humans and therefore decrease jobs, 75% of survey respondents say that adoption of new technologies will actually increase the size of their workforce as employees do different types of jobs with greater efficiency and productivity.
- 86% of business leaders believe their company will face a shortage of skilled labor by 2030.
- Interestingly, 78% of North American business leaders believe that quantum computing will have no relevance for their operations in 2030, while more than half of leaders in Europe and Asia Pacific believed it would have a transformative impact.
- 85% of all business leaders will look to improve their use of AI and automated recruitment processes for staff hiring over the next decade.
Culture changes (and potential clashes) ahead.
- For the first time we will have four generations, from Boomers to Gen Z, working alongside one another—and each will have different expectations of how work is done and how groups work together.
3. DIRECTORS BEWARE: SEC Proposes New Cybersecurity Disclosure Rules that will affect Board Appointments
On March 9, 2022, the Securities and Exchange Commission proposed new rules regarding disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance.
The Proposed Rules would require (1) disclosure of information about a cybersecurity incident within four business days of determining that the incident is material, (2) updated disclosure of previously disclosed cybersecurity incidents, and disclosure of previously undisclosed, individually immaterial incidents when a determination is made that they have become material on an aggregated basis, (3) disclosure of cybersecurity policies and procedures and governance practices, including at the board and management levels, and (4) disclosure of the board of directors’ cybersecurity expertise. If adopted, the Proposed Rules would represent a significant expansion of the SEC’s current cybersecurity disclosure framework by adding more detailed and prescriptive requirements, which could have implications for corporate governance.
The considerations for whether a board member has cybersecurity expertise include:
- whether the director has prior work experience in cybersecurity, including, for example, prior experience as an information security officer, security policy analyst, security auditor, security architect or engineer, security operations or incident response manager, or business continuity planner;
- whether the director has obtained certification or degree in cybersecurity; and
- whether the director has knowledge, skills, or other backgrounds in cybersecurity, including, for example, in the areas of security policy and governance, risk management, security assessment, control evaluation, security architecture and engineering, security operations, incident handling, or business continuity planning.
4. A new Corporate Governance Tidal Wave is coming: Record-breaking ESG proposals! Are your REPORTING METRICS ready?
A new report notes that shareholders have recently won five majority votes on ESG issues ranging from sustainable packaging and net-zero emissions to gender/minority pay disparity and racial justice, suggesting the wins so far could take the total beyond last year’s record-breaking 39 majority vote wins.
GOING FURTHER
The report authors say shareholders have gone further on established ESG themes.
Many more proposals this year seek quantitative reporting on climate change and diversity, implying companies must work harder to satisfy increasingly insistent stakeholders. Proponents are focused on how companies can cut greenhouse gas emissions to zero, and how they influence politics, combat systemic racism and treat workers.
But other themes are also emerging. Key ideas, many of them new, raised in 2022 proposals include:
- formal audits for climate change plans,
- environmental justice assessment,
- chemical footprinting,
- misalignment between stated corporate values and political influence spending,
- liability from misclassified workers in the US supply chain,
- more comprehensive workplace diversity program reports and
- the long-term impact for investors of shifting costs from balance sheets to society at large.
Shareholder proponents ‘want specific plans for carbon-neutrality but they also see big problems with exposure to the rancorous social policies pursued by company-supported lawmakers, especially in statehouses.
“Gauzy promises” clearly are not sufficient. With some companies releasing more details on diversity and environmental impacts.
Those that don’t will really stand out.
