Grant Thornton: Boardrooms lack diversity and digitalisation
A new report released by Grant Thornton finds that the composition of boardrooms around the world needs upgrading to reflect today’s digital economy and diverse business community. The report highlights significant opportunities for improvements to performance and growth to those who meet the challenge. It also points out that, without revision, boards will struggle to meet the diversity of thinking and skills required to effectively advise management teams in meeting the challenges of today’s economy.
Grant Thornton’s new report, Corporate governance: the tone from the top, draws on interviews with business leaders and board members around the world. The research reveals a desire for board members to have current industry knowledge – 62% of those surveyed cite this as an important factor. Furthermore, 86% think board members should bring new ideas to the table with which to challenge management. However, a significant concern raised in interviews with board directors is the lack of technology experience among boards today.
Harish HV, Partner – Leadership team at Grant Thornton in India, commented:
“The role of boards is not only to set the tone from the top, but also to advise and guide management teams. A lack of digital savvy in the boardroom is a glaring gap . Digitalisation has disrupted markets, and the way we do business, but it hasn’t yet changed boards. The digital sector is also among the most entrepreneurial; generating ideas and innovation. Companies with digital acumen on the board will be better placed to embrace and exploit new technologies to drive productivity and performance.
The winds of change are blowing over the Indian Governance landscape and increasingly companies will need younger directors, (average age of Indian Board is 61 years, Source: Grant Thornton Governance Observer) who readily embrace the digital wave, bring in fresh perspectives based on their ability to relate with aspirations and needs of current generation customers, willing to challenge management decisions and strategies, etc.”
Grant Thornton’s research also exposes a gap between perception and reality when it comes to the gender composition of boardrooms. While they remain overwhelmingly male – only a sixth of directors globally are women – more than two thirds (68%) of business leaders believe they do an effective job of encouraging diversity. Our last analysis of 150 large listed companies in India indicated that only a 7% of directors are women, which is significantly lower than the global average of 16%.
Harish HV at Grant Thornton in India further added:
“A lack of diversity has an impact on performance. Groups, who are the same, think the same. This isn’t good for new ideas and challenging existing practices – something boards tell us they want to see. But this presents a huge commercial opportunity for businesses. Evidence suggests that mixed boards outperform those of a single gender, who can succumb to groupthink. Diversity means more than just gender – diversity of culture, background, knowledge and thought are all important. But doing more to ensure a better blend of men and women sit at the top table, by creating better opportunities for women to progress, would be a giant step in the right direction.
The time is ripe for an appraisal of the way boards operate, their culture, the knowledge they possess and who they consist of. This is critical to ensure they continue to reflect the businesses they govern and the society they are part of. There are real opportunities available to those boards who can successfully adapt.”
Grant Thornton’ research report also indicates that 9 out of 10 business leaders believe that culture is a vital cog in the corporate governance framework.
Bhanu Prakash Kalmath, Partner at Grant Thornton in India commented:
“The spate of corporate scandals has reiterated the need to have the right culture in an organization. Culture is the ethical compass for companies and history will judge them based on it. Culture plays a significant role in not only having a better governance mechanism but also in enabling companies to growing ethically and in being socially responsible in the long run”
Grant Thornton’s new report, Corporate governance: the tone from the top, explores three major aspects of corporate governance – the role of culture, board composition and strategic planning – and how they are affecting businesses around the world. It draws on interviews with over 1,800 businesses across 36 economies and 82 in-depth discussions with board directors.
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