October 13, 2023
Board Assessments: Directors Critical of Peers but Not Making Changes
According to PwC’s latest annual director survey and highlights, directors are frequently critical of the performance of some of their peers but that hasn’t driven much board turnover. Specifically, the survey found that:
– 45% of directors think someone on their board should be replaced
– 39% say their boards have not made any changes as a result of their last board assessment
– Only 11% of directors say their board’s assessment processes resulted in the decision to not renominate a director
This is not a new problem, but the responsiveness rates haven’t markedly improved over the years. PwC notes that “annual rates of turnover in the S&P 500 were approximately 7% in 2023” and refreshment rules — like mandatory retirement ages and term limits — have not been very popular or effective at addressing the issue.
In the survey, directors point to ineffective assessment processes and board leadership often being unwilling to have hard conversations with underperforming directors. Interestingly — but not surprisingly — the response to an assessment differed depending on the independence of board leadership. 68% of directors on boards with independent chairs said their boards took action as a result of an assessment, while only 56% of directors on boards with executive chairs answered this question in the affirmative.
– Meredith Ervine