New Zealand boardrooms are not keeping pace with today’s digital economy, leaving glaring knowledge gaps around the board table.
That’s the verdict of Grant Thornton’s new report, ;Corporate governance: the tone from the top’ which finds that the composition of boardrooms around the world, including New Zealand, 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.
The report 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 percent of those surveyed cite this as an important factor.
Furthermore, 86 percent 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.
“The role of boards is to set the tone from the top, but also to advise and guide management teams,” says Tim Downes, National Managing Partner, Grant Thornton New Zealand.Read more: Westpac and Payment Express launch Westpac Direct from Account service
“A lack of digital savvy in the boardroom is a glaring hole. Digital 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. Harnessing this at a strategic decision making level is vital to firms that have an interest in exploiting technology to drive growth.
“The truth is, board experience and wisdom on how to run businesses successfully remains as important as ever.”
However, Downes believes boards need a 21st Century upgrade across the country.
“This means boards making best use of their digital experts and other specialists,” he adds. “People immersed in the digital dimension must have appropriate influence.
“If your business only has junior management with digital expertise then your business likely has untapped potential, and you need to reflect on your talent mix, recruitment and people development accordingly.
“Companies with digital acumen on the board will be better placed to embrace and exploit new technology to drive productivity and performance.”
According to Downes, 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 percent) of business leaders believe they do an effective job of encouraging diversity.
Figures released earlier this year from Grant Thornton’s annual women in business survey shows that New Zealand women are going backwards rapidly on several fronts when it comes to senior management and boardroom appointments.
In New Zealand 19 percent of senior management positions in the businesses that were surveyed are currently held by women.
This is an all-time low since the survey started in 2004 and 9 percent below New Zealand’s long run average of 28 percent.
“A lack of diversity has an impact on performance; groups who are the same think the same,” Downes adds.
"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.”