For many years, Heidrick & Struggles has been tracking the trends that have shaped the global governance arena including important long-term changes in board independence, diversity, financial oversight, risk management, and in the shareholder base the directors serve.    

More recently, we have been helping our clients understand the expanding environment in which they are operating. How is the role of business in society changing? What are the implications for directors? What does the future hold?

Clarity has been hard to find as directors struggle to draw reasonable boundaries and consider their responsibilities in the midst of a post-pandemic, high-interest rate economy, geopolitical uncertainty and conflict, emerging technologies, cybersecurity concerns, and a long list of social and environmental concerns. While there are important industry and regional differences—indeed, differences from one company to another, most accept that the role of the board is expanding. More is at stake. More is uncertain. And more is expected now of directors.

New approaches are emerging for boards and individual directors who see promise in this shifting landscape. In what follows, we draw on the results of two recent surveys of CEOs and directors around the world, and our experience, to describe how directors and CEOs are answering six questions that are reshaping the boardroom.

Six questions reshaping the boardroom 

1. Who is influencing the board agenda today—and are board members happy with that?
2. Where does the board spend its time—and are those the right places?
3. How are boards addressing the widening risk environment?
4. Are boards more operationally involved?
5. How should boards engage with the workforce?
6. How are boards thinking about diversity today?

Who is influencing the board agenda—and are board members happy with that?

One of the key themes shaping global boardrooms today is that more stakeholders want access to boards today and have increasing power to influence boards. To better understand the relative influence of stakeholders today, we asked directors and CEOs to stipulate which stakeholders have accelerated their influence most in the post-Covid environment. Overall, they report that the CEO and leadership team, the broader workforce, regulators, and consumers have increased their influence more than others.

In the GCC and the Middle East and North Africa (MENA) region more broadly, the outlook differs somewhat from the global view, with regulators and consumers identified as the top two stakeholder groups that have accelerated their influence most in the post-Covid environment, followed by CEO and leadership team and the broader workforce.

The growing influence of regulators in the Kingdom of Saudi Arabia (KSA) and the region is particularly evident given the changing regulatory landscape affecting boards. According to a recent study completed by the GCC Board Director Institute (GCC BDI), there are signs that boards in the GCC are becoming more comfortable with regulatory demands and expectations regarding board composition, disclosure, and transparency.¹ Nearly half (44%) of the board members surveyed by GCC BDI believed the regulatory framework in their country strikes the right balance—a considerable jump from the 27% who agreed with the statement two years ago. And 52% felt that local rules and regulations on corporate governance have kept pace with global regulatory changes.

Where does the board spend its time—and are those the right places? 

Though survey respondents in KSA and the GCC more broadly were aligned with their global peers on most often spending more time on emerging technologies, including AI, more Saudi respondents report spending more time in areas including operational and other risks, geopolitical volatility, and sustainability than global peers.

In KSA, we also heard from both directors and executives that it would be beneficial to focus more time on the future rather than on postmortems. Given the growth aspirations (both regionally and globally) of the major companies in KSA, it is critical for boards to spend more time in guiding management on this aspired future since many executives do not have hands-on experience of internationalizing their businesses.

Boards in KSA and globally can expect to continue to operate in an environment where more is at stake (geopolitical uncertainty and climate change, for example) and more is uncertain, with constant technological advancements. Boards need to be ready on an ongoing basis for change and build the ability to pivot to relevant focus areas with a focus on building the right capabilities within the board and among organizational leaders

How are boards addressing the widening risk environment? 

Most directors accept that the complexity, intensity, and accelerating rate of change in the boardroom require a new approach to governance. Ironically, perhaps, in an environment where there is a call for leaders to have more expertise on every topic, what really helps them succeed are wisdom, business judgment, and learning. These capabilities have never been more important. Governing in this environment requires new and practical approaches to ensuring expertise and managing risk.

To better understand how boards are adjusting to this new reality, we asked what steps they have taken since Covid to better manage uncertainty and risk. Respondents around the world remain anchored primarily in risk management practices that are “internal” in nature; that is, derived from interactions among the board itself and between the board and management, and from a push by the board for more investment in risk by the management team. However, we also see growing willingness to draw in the contributions of “external” experts.

Similar to the global view, respondents in KSA and the GCC are also requiring management to spend more time on understanding and defining risks. However, we see less emphasis on boards spending more time talking with management about risks and understanding and defining the risks for the board.

Are boards more operationally involved?

Board involvement in day-to-day management has long been more common in KSA and the GCC than in other regions, and continues to be so, according to our survey. But their reasons why are a bit different, suggesting that directors in this region are still finding it a bit difficult to let go of the daily work of their companies. Some feel there is value that can be added given their operational expertise, especially since management team members sometimes lack this. 

We also heard that, in some instances, the board is not happy with the amount of transparency being provided on project progress, movement toward strategic targets, and associated challenges, and hence they often feel the need to dig deep. Some executives, on the other hand, feel that the board is too operational and delegation of authority for even the CEO is small for the size of P&L and budgets that the CEOs are responsible for. 

While frequent operational involvement is common for boards in KSA, our experience and discussions with our clients also reveals the level of contrast that exists—where some boards are overly involved in daily operations, while others may risk being too hands-off, missing strategic opportunities. This variation in board engagement needs careful management, with the onus on members to consciously assess their level of involvement, staying mindful of when to step back for strategic clarity or step in for necessary guidance, to maintain a balanced and effective governance role.

How are boards engaging with the workforce? 

Workers are increasingly influencing the board agenda globally. Perhaps not surprisingly given their deeper operational engagement than directors in other regions, leaders in KSA and the GCC are even more keen on direct engagement with the workforce, in a number of ways including through employee surveys and town halls.

Given the growing influence the workforce has on business globally, it is not surprising that directors are engaging more and exploring novel approaches to understanding the needs of this increasingly important stakeholder. While reticent to allow formal engagement approaches, most directors—with the support of many but not all CEOs—are interested in more direct interaction.

Related to the theme of directors engaging more with the workforce, as well as operational involvement overall, we are also seeing an increase in board focus on talent management, including talent attraction and retention, succession planning, and compensation and benefits review. We see boards in KSA focusing more on multi-year succession planning with the objective to de-risk CEO and C-suite succession. Boards are also more engaged in discussions on employee value propositions and compensation and benefits in order to drive talent attraction and retention in a market where competition for local talent is very high. We see boards prioritizing having talent management experience within their members to be effectively able to engage on these issues.

How are boards thinking about diversity today? 

In light of some of the themes shaping global and Saudi boards today—including more being at stake and uncertain, increasing involvement from diverse set of stakeholders, and growing expectations for the board—ensuring board diversity with the right balance of expertise, demographics, and widening of perspectives is even more important today than it has been in the past.

When looking at 2023 board appointments in KSA, we continue to see challenges with board diversity, with opportunities to increase diversity on all fronts. This includes the required focus on increasing demographic (including gender, age, and nationality) diversity as well as diversity of experiences.

Summary 

Boards globally and within KSA are also looking at a range of options and actions to improve board diversity, as well as governance.

Following is a set of recommendations that reflect adjustments effective boards are making:

1. Expand sources of expertise
2. Avoid over-boarding
3. Increase the investment in board succession 
4. Continue to invest in and focus on strengthening board diversity
5. Cultivate a learning culture on the board
6. Take peer and self-evaluation, and board refreshment, seriously
7. Effectively use the board secretary role
8. Balance operational involvement with future-focused guidance

For more, download the full report 

Acknowledgments 

Heidrick & Struggles wishes to thank the following executives for sharing their insights: Mohammed Al-Shroogi, chairman, GCC Board Directors Institute; H.E. Eng. Abdullatif A. Al-Othman, governor, GCC Board Directors Institute; Bakr Darwish, NRC chair, Prince Mohammed bin Salman, Royal Reserve Development Authority; and Maryam Ficociello, chief governance officer at Red Sea Global; risk management committee chair, Royal Commission for AlUla. Their views are personal and do not necessarily represent those of the companies they are affiliated with.

Heidrick & Struggles also wishes to thank the following colleagues for their contributions to this article: Jay Bevington, Richard Guest, Maliha Jilani, Shaloo Kulkarni, and Markus Wiesner.

Reference

¹ Board Effectiveness Review 2023: Determining board effectiveness across the GCC, GCC Board Directors Institute and Heidrick & Struggles, 2023.