Lee Henderson, Center for Board Matters Leader, and Jamie Smith, Center for Board Matters Director at EY, have outlined key findings from a comprehensive survey and in-depth interviews with over 100 directors. The research, detailed in an EY memorandum, reveals a strong consensus on the most critical drivers of board effectiveness in today’s rapidly evolving business environment, alongside areas where boards perceive the greatest need for improvement.
The current landscape presents significant challenges for corporate boards. Agendas are packed, board materials are increasingly voluminous, and the speed at which critical topics emerge often outpaces traditional meeting cycles. Compounding this, stakeholders’ expectations of directors are rising, and activist investors are actively seeking targets. In this high-stakes environment, directors cannot afford missteps, underscoring the urgent need for a robust understanding of board effectiveness.
Board Snapshot: Priorities, Strengths, and Opportunities
The EY research highlights a clear hierarchy of importance for directors, with a remarkable agreement on the top two factors influencing board performance.
Information Flows and Board Culture Drive Effectiveness
Nearly three-quarters of directors surveyed (72%) identified the quality and flow of information from management to the board as a top-three driver of effectiveness. This was closely followed by board culture and dynamics, cited by 62% of respondents. While all surveyed elements of board effectiveness are acknowledged as vital, this strong consensus suggests that information and culture are considered foundational, acting as catalysts that enhance other critical functions.
Effective information flows empower directors to make informed judgments and engage meaningfully on strategy, risk oversight, and performance evaluation. A healthy board culture, in turn, enables directors to leverage this information effectively, fostering candid conversations, encouraging dissent, and promoting productive challenge. These two factors are deeply interconnected; a robust information pipeline supports a more transparent and dynamic culture, and a strong culture encourages the open communication necessary for high-quality information exchange.
Committee Functioning, Culture, and Information Emerge as Strengths
When asked about areas where their boards perform best, directors most frequently cited committee functioning (54%). Board culture and dynamics were close behind at 53%, with the quality and flow of information from management ranking third at 50%.
The perceived strength in committee functioning can be attributed to the sustained focus boards have placed on these structures in recent years, particularly concerning the oversight of technology. Many boards have proactively reviewed and refined their committee structures, updated charters to clarify responsibilities, and even adapted committee names to reflect evolving mandates. Recent EY research indicates that boards are carefully considering the placement of cybersecurity and artificial intelligence responsibilities across their various committees and are actively exploring optimal structures for technology governance.
The effectiveness of committee engagement with the full board is also a key factor. Directors caution that boards must be deliberate in distinguishing between issues best handled by committees and those requiring the attention of the entire board. Committee chairs play a pivotal role in achieving this balance, continually assessing committee agendas and identifying topics that warrant full board discussion rather than simply receiving a committee report. Furthermore, chairs can ensure that committee reports highlight rigorous discussions, consensus-building efforts, and the resolution of differing opinions.
Directors’ confidence in board culture suggests a significant commitment to intentionally shaping, monitoring, and strengthening this crucial aspect of board operations. Leading boards are actively implementing practices to cultivate a healthy culture. For instance, structured facilitation techniques, such as ensuring every director has an opportunity to weigh in on a topic and allocating time to explore dissenting viewpoints, can empower quieter voices and normalize constructive challenge. The cultivation of diversity of thought is also paramount; having directors with varied backgrounds and experiences whose perspectives are actively sought can prevent groupthink and mitigate blind spots.
Furthermore, many directors emphasize the critical role of the board’s relationship with the CEO in fostering a productive culture. A trust-based partnership between the CEO and the board is seen as essential for enabling candid dialogue and constructive challenge. CEOs can strengthen this trust by investing in one-on-one relationships with each director, especially the independent board chair or lead director. When evaluating and selecting a new CEO, boards should also consider the candidate’s potential engagement style with the board. Additionally, directors suggest that engaging directly with senior leaders beyond the CEO, with the CEO’s knowledge, can further enhance trust and partnership, citing examples such as pre-committee deep dives with chairs or expert members, or the establishment of structured mentoring relationships.
Areas for Improvement: Composition, Evaluation, and Information Flows
Despite perceived strengths, directors identified several key areas where improvement is most needed. Board composition and director succession planning emerged as the top concern, cited by 52% of directors. This was closely followed by board evaluation and the fostering of a culture of continuous improvement, identified by 44% of respondents. Surprisingly, the quality and flow of information from management, despite being recognized as a strength by half the directors, was also flagged for improvement by 39% of respondents.
Board Composition and Succession: Addressing Knowledge Gaps
Directors’ prioritization of board composition and succession planning reflects the critical need for boards to remain agile and relevant in an environment characterized by rapid change, often outpacing traditional director refreshment cycles. One director aptly noted, "The biggest challenge for boards over the next five years will be director obsolescence," citing the accelerating pace of technological change and evolving business models.
This risk necessitates a thoughtful approach to director tenure, focusing on the relevance and performance of skills rather than relying solely on age or term limits. Directors emphasize the imperative for boards to "constantly think about succession and not hesitate to ask a director to step down before they’ve reached retirement." Transitions in board and committee leadership should be integrated into succession planning, with clear processes for performance feedback and defined timelines to ensure these changes are as disciplined and anticipated as any other refreshment decision. However, some directors acknowledge the difficulty some peers face in recognizing when their skills or experiences may no longer align with the company’s most pressing needs.
A notable trend revealed by the survey is the proactive steps many boards are taking to refresh their membership in alignment with evolving business requirements. Nearly half of the directors surveyed (46%) reported that, within the past three years, their board has transitioned one or more directors off the board before they reached formal age or term limits, primarily to accommodate new directors with essential skills.
However, the implementation of proactive board refreshment has been uneven. Approximately half of boards have not proactively transitioned any directors in the past three years, and notably, 7% of directors reported that their board discussed asking a director to step down prior to the official retirement age but ultimately took no action.
Directors interviewed highlighted two key elements for effective board refreshment: setting clear expectations regarding tenure with prospective directors during the candidacy process, and regularly discussing how the board’s composition needs are evolving in parallel with the business. Some also stressed the value of depersonalizing refreshment decisions through formal or informal tenure-limiting mechanisms, such as establishing an average board tenure goal. A common benchmark cited was a 10-year average across all board members.
Evaluation and Continuous Improvement: Initiative Matters
The significant emphasis placed on board evaluation and continuous improvement as the second most critical area for enhancement underscores the directors’ recognition of the need for boards to remain current amidst constant change. Directors acknowledge that without a robust culture of feedback and ongoing improvement, boards risk stagnation.
In seeking to understand what "improvement" means to directors, respondents were asked what practices would most elevate their peers’ contributions in the coming year. Notably, individual director education emerged as a top-three area. Interviews confirmed a growing expectation for directors to proactively take personal initiative in deepening their fluency in critical topics, particularly Artificial Intelligence (AI) and other emerging technologies, which are transforming the business landscape at an unprecedented pace. As one director observed, while full-board education provides a shared context and the benefit of collective inquiry, individual learning allows directors to "do education at their own pace." Both approaches are considered valuable, with evaluations serving as a catalyst to identify opportunities for ongoing skill-building that support collective board effectiveness.
Furthermore, approximately half of respondents (51%) identified the enhancement of constructive challenge toward the CEO and management team as a key area for peer improvement. This aspect, much like internal board discussions, highlights the interplay between individual directors’ styles and the overall board culture. A director’s inclination towards critical examination is most impactful when the board actively encourages constructive dissent and provides the necessary information to scrutinize assumptions and evaluate trade-offs. Board evaluations that effectively uncover these dynamics can significantly strengthen both the methods and the instances of meaningful challenge.
Information Flows: High Importance, Uneven Performance
The quality and flow of information from management to the board was the sole area where director perspectives on their boards’ effectiveness diverged significantly. While 50% of directors identified it as a notable strength, a substantial 39% indicated it as an area requiring the most improvement.
Achieving high performance in this domain relies on effective coordination and clearly established expectations between the board and management, which can present a more complex challenge than practices solely within the board’s purview. Boards encountering difficulties in information flow may benefit from examining whether the issues stem from shortcomings in management reporting or from the board members’ own discipline in articulating their information needs. Explicit communication regarding the information the board requires, the points at which board input or approval is necessary, and the identification of what is or is not proving effective is crucial. Directors who reported positive experiences with their board’s information flows frequently cited clarity on the required board input or approval as a key contributing factor. Conversely, if expectations are already well-defined, boards may need to reinforce information-sharing practices or more assertively communicate their expectations to management.
The directors interviewed also proposed several practical tactics for optimizing information flow. For example, establishing a ground rule that materials posted to the board portal are considered "read" can significantly reduce, or even eliminate, presentation time during meetings, thereby freeing up valuable time for robust discussion. Short video summaries from management highlighting key takeaways from pre-read materials can also enhance information digestibility. Additionally, the consistent use of formatted monthly or quarterly memos from the CEO or CFO has proven beneficial in helping directors track commitments and stay abreast of rapidly evolving developments. These memos, as one director noted, are "excellent for extending the work between meetings – helping boards maintain continuity even when topics are not on the agenda every time."
Actions for Boards to Consider
These recommended actions offer practical avenues for enhancing board effectiveness, acknowledging that a singular approach may not suit every board. They are presented as prompts for reflection and adaptation, drawing heavily on leading practices shared by directors during EY’s interviews.
Composition and Director Succession Planning
- Proactive Refreshment: Boards should actively consider refreshing membership to align with evolving business needs, not solely relying on age or term limits.
- Skill Relevance: Regularly assess and address knowledge gaps within the board, particularly concerning emerging technologies like AI and evolving business models.
- Clear Tenure Expectations: Set explicit expectations around director tenure during the candidacy phase and maintain clear succession processes for board and committee leadership.
- Objective Decision-Making: Depersonalize refreshment decisions through formal or informal tenure-limiting mechanisms, such as an average board tenure goal.
Committee Functioning
- Strategic Role Definition: Thoughtfully determine which issues are best addressed by committees versus the full board.
- Chair Leadership: Empower committee chairs to actively manage the balance between committee and full board responsibilities, ensuring effective communication and integration.
- Focused Reporting: Encourage committee reports to concentrate on the rigorous conversations that occurred and the consensus reached, particularly where opinions diverged.
Culture and Dynamics
- Intentional Shaping: Devote continued attention to intentionally shaping, monitoring, and strengthening board culture.
- Inclusive Facilitation: Implement structured facilitation practices, such as inviting all directors to participate and allocating time for exploring contrary positions.
- Diversity of Thought: Cultivate diversity of thought by actively seeking perspectives from directors with varied backgrounds and experiences.
- CEO-Board Partnership: Foster a trust-based partnership with the CEO through one-on-one relationships and by considering engagement style during CEO selection.
- Cross-Functional Engagement: Facilitate structured interactions between directors and senior leaders beyond the CEO, with the CEO’s knowledge, to build trust and understanding.
Evaluation and Culture of Continuous Improvement
- Personal Initiative: Encourage directors to take personal initiative in deepening their understanding of critical topics, especially AI and emerging technologies.
- Board-Level Education: While individual learning is valuable, full-board education sessions create a shared context and benefit from diverse director questions.
- Constructive Challenge: Foster a culture where constructive dissent is encouraged, and directors have the information needed to probe assumptions and trade-offs.
- Actionable Feedback: Ensure board evaluations provide actionable feedback to peers, identifying areas for skill-building that enhance collective effectiveness.
Information Flows
- Clear Expectations: Establish and communicate clear expectations regarding management reporting and board input points.
- Actionable Information: Focus on the actionability of information received, ensuring it helps directors prioritize and process critical signals.
- Meeting Efficiency: Implement practices like pre-read materials being taken as read to maximize discussion time during meetings.
- Digestible Formats: Utilize tools like short video summaries from management to make pre-read materials more accessible.
- Continuity: Employ consistent monthly or quarterly memos from leadership to maintain continuity on evolving topics between meetings.
Looking Ahead: Sharpening Fundamentals to Sustain Board Effectiveness
Board effectiveness is cultivated through a core set of foundational capabilities, continually refined through intentional examination and adaptation. Boards can leverage their existing strengths in committee functioning and culture to evolve their approaches to composition, evaluation, and information flows. A collaborative partnership with management to ensure focused, actionable information is paramount, alongside a strategic approach to prioritizing and processing this information efficiently. As the demands on boards continue to grow, maintaining a steadfast focus on these fundamental principles will be essential for navigating increasing complexity and ensuring sustained effectiveness.
Summary
Directors are in strong agreement that information flows and board culture are the primary drivers of effectiveness, while also acknowledging persistent challenges in board succession planning and evaluation. Furthermore, directors have clearly indicated their priorities for board time and resources, with AI, talent, and geopolitical risk now significantly outweighing previous concerns like cybersecurity and data privacy. By reinforcing these fundamental aspects of board effectiveness, organizations can better equip their boards to guide companies through the complexities of a rapidly changing global business landscape.
