Blogs

The Conference Board,in collaboration with Morrow Sodali and Weil, Gotshal & Manges, released a report: “The Roles of the Board in the Era of ESG and Stakeholder Capitalism” that provides benchmarking data and associated insights, on various board practices, based on working group discussions and polls, data analytics, and a survey of GCs and corporate secretaries, as further detailed on page 11 of the Overview and Key Insights. Where relevant, the total number of respondents to each question or series of questions is provided.

Big picture benchmarking takeaways include the following:

Board impact—Nearly all boards discuss ESG and long-term stakeholder welfare concerns, and more than half consider these factors in their decision-making process. Nearly one-quarter of respondents said that these factors have impacted their boards’ ultimate decisions. (42 respondents)

That said, the increased focus on ESG has had a much greater impact on boards than stakeholder interests, with 80% of respondents saying ESG has had a strong (39%) or moderate (41%) impact vs. 10% and 48%, respectively, as to stakeholder impact. (80 respondents)

Director qualifications—According to data analytics from ESGAUGE, corporate governance is the most commonly disclosed director-specific ESG experience among S&P 500 and Russell 3000 companies, followed by human resources/human capital, as shown here:

Among other things, the report notes the importance of defining the criteria used in director qualification disclosures to support the value and integrity of the disclosure. Along those lines, see these sample board matrix disclosures from 2022 proxies that define the enumerated skills: Accenture | Baker Hughes Company | BlackRock | Boeing | Church & Dwight | ExxonMobil | FNB | Johnson Controls | Netflix | Ovintiv | The Timken Company, as well as our reports last week: “2023 Proxy & Form 10-K Prep” and “Institutional Investors Speak! Portfolio Company Priorities” regarding investor concerns over issue-expert directors.

Board oversight structure—Consistent with previous benchmarking, the Nom/Gov Committee is most commonly assigned ESG oversight responsibilities.

The authors of the report anticipate that oversight responsibilities will evolve with the maturation of ESG and associated oversight demands and expectations. Use of an integrated approach wherein ESG responsibilities are divvied up across the key committees based on their unique remits is trending up (see page 2: “Multicommittee/board ESG frameworks on the rise”).

Communication and engagement—A plurality of 46 respondents (43%) said that their boards do not get enough information on ESG and stakeholder expectations, while 39% described the quantity of information as “about right” and 17% were unsure. However, more than 90% of 44 respondents deem the quality of information provided to the board to be okay or good. The report advises companies to identify and stay focused on the most salient issues given the expanding ESG universe.

Effectiveness and evaluation—A majority of 32 respondents indicated that their boards evaluate the company’s ESG performance at least annually and a plurality of respondents rated the quality of their board’s evaluation as okay/fair.  

Access these supplemental reports for additional benchmarking data and insights:

• Incorporating ESG and Stakeholder Interests into Board Business Decisions
• Optimizing Board Composition, Structure, and Capabilities in the Era of ESG and Stakeholder Capitalism
• Enhancing Board Information and Stakeholder Engagement in the Era of ESG and Stakeholder Capitalism
• Improving Board Evaluations of Corporate, Management, and Its Own Performance in the Era of ESG and Stakeholder Capitalism

Access additional resources on our Sustainability and Stakeholder Governance pages.

                  This post first appeared in the weekly Society Alert!