Executives are vital to provide leadership to businesses, but they aren’t the only ones. Boards hold an equally important role. Though most boards sit more on the advisory side, members’ knowledge and opinions on company strategy, policy and who a company’s management should be can dramatically shape its outlook and finances.
Executive search firm Spencer Stuart published its annual Board Index earlier this month and found that many boards are slowly making evolutionary changes to better reflect today’s business realities. The operative word is “slowly.” The study found there’s more that needs to be done—and fast—to bring boards more in line with companies’ needs. Fewer than a third of CEOs told the firm they feel their company has the board it needs to address the issues they’re facing. And among boards, about a quarter say they have one or more members who should no longer be there because their skills and expertise are outdated. Yet many board members stick around for a long time. Only 58% of S&P 500 boards got a new member in 2024, and the turnover rate for board members is about 7% to 8%.
Spencer Stuart offered some advice for shaking up a stagnant board, other than the directive that board members need self-awareness to know when their service is no longer useful to the company. The entire culture behind board membership should be built around the board’s mission as a dynamic group committed to the company and its shareholders. Third-party evaluations into boards—and individual members—could assess their effectiveness. And adopting formal policies to promote turnover—including term limits, maximums or post-full-time-job-retirement requirements—could also help push the awareness that the board should be constantly refreshed.
In terms of incoming board members, Spencer Stuart found modest gains in many expertise and diversity-related factors. Nearly three in 10 new board members have financial expertise—up three points from last year—and the largest proportion of new board members come from tech or telecommunications backgrounds. Just over a third of board members appointed last year were first-time members, and 14% of those were younger than 50—all of these statistics are up 3% from 2023. The one place that saw a sizable gain was the number of new female board members with financial backgrounds: 34% appointed this year came from finance, while just 25% in 2023 did. However, that large step forward came with a small step back: The number of new women board members was down—representing 42% of new members this year, as opposed to 46% last year.
Even though generative AI has been talked about by the business community for almost two years, there are still many unrealistic expectations about what it can do for a company—often among board members who don’t have much technical knowledge. I talked to Krishna Sudheendra, CEO of digital transformation company UST, about what CEOs need to know about setting realistic expectations and goals for AI. An excerpt from our conversation is later in this newsletter.
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Federal Reserve Chair Jerome Powell at a press conference in May.
The interest rate cut that everyone was waiting for happened earlier this month. And yet there’s already lots of........© Forbes