More executives needed in politics, say board members
- 75 percent of board members want business leaders to get more involved in politics
- Brexit, the EU framework agreement and trade conflicts top risks for board members
- Digitalization is now an overarching and integrated element of corporate strategy
- Business needs digital natives, but also leaders who have successfully implemented digital transformations
- A renewal of ageing boards is imminent; only 16 percent of board members under 50
- 75 percent believe the Responsible Business Initiative (KOVI) will harm Swiss business
Boards of directors are growing increasingly concerned about the impact of political uncertainty on business, according to the 2019 Knight Gianella Board Survey, carried out for the first time this year by the IMD Global Board Center and IMD Professor Stefan Michel.
47 percent of the board members surveyed cited international political and economic themes as the biggest challenges facing boards of directors, the sixth edition of the survey found, including Britain’s planned departure from the European Union, global trade conflicts and the EU’s framework agreement with Switzerland.
214 directors who sit on the boards of 647 listed and large unlisted companies in Switzerland took part in the representative survey from Swiss executive search firm Knight Gianella.
“By contrast with previous surveys, it’s not topics like digitalization and lack of talent coming to the fore. Board members are most concerned about developments on the national and international stage,” said Sandro V. Gianella. “In Switzerland, the EU framework agreement is one of the external factors causing great uncertainty on boards.”
Board members are aware that they should be more politically active and that business figures should take on more responsibility in wider society. 75 percent of respondents would like to see business leaders getting more involved in politics. 68 percent are worried about the increasing rejection of globalization. 64 percent believe that Swiss business is doing much more to tackle climate change than the public realizes, but 36 percent think that business is not doing enough. 75 percent believe that the Corporate Responsibility Initiative (KOVI) would do great harm to the Swiss economy. 30 percent think that KOVI would be adopted today, while 46 percent think it will be rejected.
“In spite of the increased commitment to social responsibility, the study shows that while boards may think about sustainability issues, they don’t incorporate them sufficiently into their work on strategy,” said Sandro V. Gianella.
The second topic of most concern boards of directors is digitalization, which is named by 44 percent as a major challenge. Digitalization has transformed the demands placed on boards in the last five years, with board members have had to acquire expertise about digitalization, cyber risks and digital transformation. 95 percent of those surveyed said that these requirements had changed significantly.
91 percent of board members say that digitalization is no longer an isolated specialist subject, but an “integrated element of corporate strategy”. Only a small proportion of respondents consider the topic as irrelevant or less relevant. The number of companies that are only “at the start” of their digital transformation, has fallen from 19 to 9 percent in just one year.
“This is one of the most insightful findings,” said IMD Professor of Marketing and Service Management Stefan Michel who is also Dean of IMD’s Executive MBA. “Five years ago, ‘digitalization’ and ‘digital transformation’ were topics that most board members could not anchor in the firm’s strategic landscape. The vast majority of firms have now integrated their digital strategy into the firm’s overall strategy agenda and, by doing so, most identify a skill gap at board level that should not be closed by digital natives at board level. Instead, each and every board member needs to become ‘fluent’ in digital.”
“The call for more digital natives on boards of directors is as loud as ever. However, being a digital native is no longer a unique selling point on its own,” said Sandro V. Gianella. “The people who are really in demand are managers who have taken their companies through a digital transformation and successfully pushed through the strategic, operational and cultural changes.”
According to the survey, digital transformation is creating a new corporate culture, with a direct and wide-ranging impact on the management of most companies. Agility is in demand. Respondents believe that “company structures are getting more agile”, “adventurous approaches have to be allowed”, “flatter hierarchies are important”; while at the same time “companies have to stay on course financially”. The faster pace and the desire for experimentation require a greater tolerance of mistakes: “Error culture is crucial for innovation,” says one respondent.
Boards will face dramatic changes over the years to come. 64 percent of respondents know that one or more members of their boards are set to be replaced in the near future. Ageing board members are a definite concern. According to Knight Gianella’s board survey, the most heavily represented age-group on Swiss boards is the 50 to 59-year-old cohort, which accounts for 49 percent of all board members. Under 50-year-olds only account for 16 per cent. 36 percent of the members of boards of directors in Switzerland are older than 60. Women accounted for 24 percent of the members of boards on which respondents sat as their main mandate.
You can find the survey results here