The second full year of the Diligent Institute was marked by challenges and change for the corporate world and society as a whole.
Perhaps there is no better word for the year 2020 than pivotal. In the business world, corporate leaders across the globe found themselves dealing with multiple crises, each one unprecedented in its scale and impact. The COVID-19 pandemic endangered the health and safety of every person on Earth, while highly localized responses to combatting the spread of
the virus led to dramatically different outcomes across companies, communities and countries. Global economic turmoil brought about by the pandemic disrupted supply chains and threatened entire industries. A racial justice reckoning in the U.S. and other parts of the world galvanized leaders to work harder to solve far-reaching problems of racism and inequity. And through it all, the accelerating effects of climate change were felt by communities suffering through record-setting temperatures, massive storms, historic floods and devastating wildfires, making the future increasingly uncertain. 2020 was a year when the vast majority of businesses had to pivot just to survive.
In the midst of these crises, directors too were forced to pivot – to adapt more quickly and
completely than ever before. Many were asked to lend a hand in daily operations to help senior executives through crisis management. Directors found they had to stay updated at least weekly on critical developments, and they needed to answer new questions surrounding public safety, employee mental health, altered risk landscapes, and more. Most importantly, as initial crisis management shifted back to focusing on the long-term, directors were tasked with looking at a year full of unexpected suffering and to glean from it lessons to make their companies more successful and effective moving forward.
Identifying and Responding to Landmark Shifts in Modern Governance
Against this backdrop, Diligent Institute entered its second full year with a schedule of reports focused on the way boardroom practices were evolving to meet new pressures. We began with our Beyond the Boardroom: How Corporate Directors Gain Insight report, which explored how directors prepare for board meetings. This report was followed in early March 2020 by an exploration of gender and diversity practices on corporate boards, A Few Good Women:
Gender Inclusion in Public Company Board Leadership, focused on the rates of women’s inclusion in committee and board leadership.
And then, just like the companies and boards we study, Diligent Institute had to pivot.
On March 13th, shortly after the publication of our report on board gender diversity and inclusion, the COVID-19 virus outbreak became a pandemic. Companies across the United States, including Diligent, sent their employees to work from home – for an indeterminate amount of time. Suddenly, we realized the most pressing need was to hear directly from directors how they were adapting to the new demands being made of them and share the
“lessons learned” in short order. Rather than following our previous research plan – which involved a number of multi-week surveys and deep dives into the data – we pivoted to conduct interviews with directors and publish the insights we gleaned in stages so they would be as timely and relevant as possible. The resulting Ask a Director series was published in weekly blog articles and in print from March to May, with a follow-up series published in November
From these interviews, we learned that directors were spending more time in meetings discussing issues that related to ESG factors – environment, social and governance. Early in the pandemic, many corporate leaders were discussing the feasibility of continuing their ESG plans, and whether regulators and institutional investors would still insist on companies disclosing ESG metrics in 2020 in the midst of the pandemic and economic turmoil. But by mid-June, with COVID-19 infection rates spiking in the wake of shutdowns ending, widespread protests of racial injustice sparked in the wake of the killing of George Floyd, a record high temperature of 100.4°F recorded north of the Arctic Circle, and the worst wildfire season on record getting an early start in California, corporate leaders globally began to call on one another to accelerate action on ESG issues.
In response, Diligent Institute’s Stakeholder Capitalism: Translating Corporate Purpose into Board Practice report sought to determine how boards were thinking about and acting on these and other issues related to the health and welfare of stakeholders. Additionally, the Diligent Institute teamed up with the NYSE and Diligent Corporation to produce Impossible Until It’s Done: Corporate Board Diversity and Refreshment Practices, which explored the ways boards are working toward meeting their leadership diversity goals.
On the Minds of Directors: COVID-19, ESG, Economic Growth and More
Foremost on the minds of corporate directors throughout 2020 was the state of the economy and the health and welfare of the companies they serve. To track how directors were thinking about the economy and its related effects, Diligent Institute collaborated with Corporate Board Member magazine to launch the first-ever Director Confidence Index. This regular pulse survey – conducted over the course of a 48-hour window each month – provides a timely
glimpse into how corporate directors are feeling about the economy and its prospects, as well as their take on additional research questions each month.
To gain a deeper perspective on the issues “top of mind” for directors, Diligent Institute partnered on the 2020 edition of Corporate Board Member’s annual What Directors Think survey, which covered director views on a variety of topical issues as well as their projections for 2021. The results show corporate boards in a time of pivotal change on topics as far-ranging as ESG, business models, growth strategies and employee health and welfare.
The following is a short summary of the key findings from Diligent Institute’s 2020 research.
Beyond the Boardroom
We designed this study to understand more about what kinds of information directors seek as they prepare for board meetings, how they feel about what they receive from their management teams, and where else they turn for insights and education.
Our Research Question: What are directors doing to gain insight and prepare for board meetings?
Our goal was to shed more light on directors’ meeting preparation practices for those who work with boards on a regular basis – including CEOs, General Counsels, Corporate Secretaries, and other governance professionals. This research also seeks to reveal opportunities for these actors to re-examine their board information and communication models.
We surveyed directors from around the world to learn how they currently prepare for board meetings. The data on how directors prepare for meetings is reviewed through two different lenses:
- The percentage of directors who engaged in each activity.
- The percentage of time directors spent on each activity, on average.
What We Learned:
A Few Good Women: Gender Inclusion in Public Company Board Leadership
In A Few Good Women, we wanted to measure the levels of inclusion of women board directors on public company boards. This report examines the rates of participation by women directors on committees, as committee chairs, and in board leadership positions, including board chair and lead director roles.
Our goal was to determine the following:
- Are women merely being asked to join boards, or are they being provided with opportunities to lead while on the board – as lead director, board chair, or as chair of a committee?
- How often are women taking on board leadership roles, and how does that compare with men?
- Do women take on board leadership positions immediately upon joining boards, or are they required to wait? Do they wait longer than male directors for leadership opportunities?
What We Learned:
Stakeholder Capitalism: Translating Corporate Purpose into Board Practice
In this report, we set out to determine if the positive sentiments of corporate leaders on stakeholder capitalism would translate into action and systemic change. We examined responses to a survey from over 400 corporate leaders, following a Diligent panel program on “Measuring Stakeholder Capitalism.” It provides a glimpse into how corporate directors and executives are acting on the sentiment that stakeholder interests are critically important to long-term business viability.
What We Learned:
Impossible Until It’s Done: Corporate Board Diversity and Refreshment
The New York Stock Exchange (NYSE) and Diligent wished to foster discussion about the progress and methodologies used to promote diversity, equity and inclusion (DE&I) at the highest levels of the corporate world. Our survey was designed to identify which specific board diversity and refreshment practices companies have implemented and shine a light on any strategies they have yet to embrace.
Our research questions:
- What goals are companies setting around board diversity?
- What are the time frames within which companies plan to achieve their board diversity goals?
- Which board refreshment strategies have companies already implemented?
- How likely are companies to implement other board refreshment strategies in the future?
What We Learned:
Increasing board diversity is on the minds and agendas of the majority of corporate boards. Four out of five respondents (81%) indicated that their board either already has a plan for increasing boardroom diversity or will have one soon. However, nearly half (45%) lacked a specific timeframe for meeting diversity goals.
Ask a Director Series
May and December 2020
In 2020, Diligent Institute completed two installments of our “Ask a Director” series, which are entirely interview-based. Our first of the year, which was conducted in March and April and published in May, was focused on initial corporate responses to the COVID-19 pandemic, directly from the perspectives of board members
This first installment sought to answer the
following research questions:
- How does corporate governance change in a crisis?
- How should management teams and boards handle “regular updates” throughout the crisis?
- What are the best practices for virtual board meetings?
We found that in crisis management, directors felt the need to provide extra support to management, and that the lines between management and the board were even blurring in some cases. Directors prioritized keeping pace with frequent updates, both from their management teams and the outside world, and focusing in on the most critical information. At the time,
we thought everything else could wait.
As we all know, the way the pandemic struck and has played out continues to surprise us all. As 2020 drew to a close, we wanted to check back in with the director community about the crisis. As we found out, their perspectives, concerns, and priorities had shifted drastically since March.
So, our second installment sought instead to answer these research questions:
- How have director roles and responsibilities changed as a temporary crisis became permanent?
- What pandemic-era board governance practices and mindsets will be permanent?
- How has COVID-19 changed risk management and strategic planning?
- What are the biggest takeaways from the pandemic for directors?
Throughout the fall of 2020, we learned that directors had shifted back into long-term strategic management with a COVID-19 lens. They had adapted to the virtual meeting, and even discovered some unforeseen benefits and advantages to take forward post-pandemic. Above all, they began to view the pandemic as an opportunity for a moment of reflection, and a chance to lean into transformational change for their boards and companies overall.
Director Confidence Index
October and December 2020
In October, we launched our inaugural Director Confidence Index (DCI), a pulse survey about director confidence in the economy and their perspectives on other topical matters. The survey, conducted in partnership with Corporate Board Member, ran twice in 2020: once in Q3, and again in Q4. In 2021, the DCI will move to a monthly cadence.
The DCI allowed us to track U.S. public company directors’ confidence in the economy and future business conditions over time, and also gave us the chance to understand their perspectives on quickly evolving topical issues such as the 2020 presidential election in the U.S., COVID-19 vaccination rollouts, boardroom diversity mandates, and much more.
In 2020, we discovered that director confidence in the economy one year from the time they were surveyed was uniformly higher than their confidence in current business conditions. When asked what backs up their relative future optimism, answers largely hinged on a successful and efficient COVID-19 vaccine rollout in 2021. We also discovered surprising results on director perspectives on diversity mandates and mandating employees get the COVID-19 vaccine:
What We Learned:
- Board Practices |
- Corporate Sentiment |
- Cyber Risk |
- Digital Transformation |
- Director Perspectives |
- Diversity, Equity and Inclusion |
- Economy |
- Environment, Social, Governance (ESG) |
- Executive Remuneration |
- Governance, Risk and Compliance (GRC) |
- Modern Governance |
- Stakeholders and Governance |
- Year in Review