News | Legal News

19 October 2016

40% of board appointments still made within closed networks

More than half of board appointments go to candidates already known to the organisation, with four in ten appointments being made without any formal process, new research shows.

The Harvey Nash Board Report in association with London Business School's Leadership Institute finds 26% of UK boards have never undergone an external board evaluation and only 45% have had an evaluation in the last two years, despite their role being to govern and audit the business.

The research has been carried out using feedback from more than 650 non-executive directors from the UK, Nordics and Asia-Pacific.

Despite increasing emphasis on the importance of diversity of thought in the boardroom, only 29% of respondents are creating succession plans focused on populating the board talent pipeline with a richer mix of backgrounds and experience.

Functional expertise is the main area of diversity actively pursued by boards, with 48% prioritising gender, 23% ethnicity and being lesbian, gay, bisexual or transgender only actively pursued by 3% of boards.

External pressures created by economic uncertainty, digital disruption and an increased need for transparency, means many boards are also struggling to adapt.

Christine de Largy, Chair of the UK Board Practice, Harvey Nash, commented: "In the face of the current challenging global economic climate, boards need to evolve to be fit for the 21st Century.

"The results indicate that in order to improve board governance standards worldwide there should be significantly more uptake of board best practice through the use of evaluations, assessments, process and focussing on the talent pipeline."

Although digitalisation is firmly on the board agenda - second only to strategy - only 14% of respondents say their board has a fully comprehensive digital strategy and 45% say their digital strategies are somewhat incomplete or not at all complete.

Randall S Peterson, Professor of Organisational Behaviour and Academic Director of London Business School's Leadership Institute, says: "There are some pockets of good practice in the boardroom, but largely, boards have some way to go to reach their fullest potential.

"When boards view diversity as a business opportunity rather than a problem to be managed, and start to routinely have their behavioural dynamics assessed, they will create improved and sustainable value for their business."

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