Private Company Boards Need Additional Information and Time to Enable Strategic Discussion, Survey Finds

The current business environment is providing boards with numerous governance challenges and an evolving risk landscape. The rapid advancement of artificial intelligence (AI) has left private company directors struggling to maintain the appropriate level of expertise and knowledge for oversight of this technology. Private company board packs also lack the necessary insight and context needed to enable strategic discussion in the boardroom, hindering decision-making. Additionally, many private company boards have yet to establish a structured succession planning process, leaving directors unprepared for a sudden board leader or CEO departure.

These are among the findings of the 2024 Private Company Board Practices and Oversight Survey. The survey, in the field from May 1 to May 28, 2024, analyzed data from 214 private companies. Below are the key insights from the report.

Barriers to Technology Oversight

Artificial intelligence and other emerging technologies have remained top of mind for directors over the past year. In the 2024 NACD Board Trends and Priorities Survey, directors named the increasing pace of technological change (33%) and advances in AI (32.8%) among the top trends they foresaw having the greatest effect on their company over the next 12 months. Moreover, 35 percent of directors in the NACD Quarterly Survey: Q1 2024 and 36 percent of directors in the NACD Quarterly Survey: Q2 2024 listed AI as one of the business issues topping their board’s agenda. 

Despite this, private company directors are facing many barriers to providing proper oversight of AI technology as the rate of advancement continues to accelerate. Respondents in the 2024 Private Company Board Practices and Oversight Survey named the lack of sufficient technology expertise in the boardroom (34%) and adequate metrics to assess AI’s impact on performance (34%) as their top barriers.

However, private company boards are taking steps to increase the board’s knowledge as they recognize the need for a diverse skill set in the boardroom when it comes to this issue. Thirty-six percent of boards attended continuing education events and 19.5 percent conducted sessions with external advisors. Directors themselves are also working to grow their own skill sets through reading news articles (91%), taking online courses (71%), and using materials provided by management (64%).

Areas of Improvement for Board Packs

With an abundance of issues facing boards and companies today, including new regulatory disclosure requirements and an increasingly volatile economy, the necessity of board packs to help streamline discussions has never been greater. Despite this, nearly half of private company directors believe that board packs are moderately effective (34%), slightly effective (14%), or not effective at all (3%) in enabling strategic discussion in the boardroom.

Respondents named numerous challenges that impede the effectiveness of board packs. For example, 45 percent believe that board packs are overly focused on operations at the expense of strategy, 39 percent believe that they are too internally focused and fail to provide insight into the wider market, and 39 percent believe that boards are unprepared for potential vulnerabilities due to an absence of risk reporting.

In order to improve the effectiveness of board packs, 57 percent of respondents expressed that they provide formal feedback to management regarding the quality of these materials. Respondents also noted that they give management a clear brief for their board reports, outlining the information required and the questions that must be answered (40%).

Read the complete article in the fall 2024 issue of Directorship.

Heather Kierzek is the assistant editor of Directorship.