Decoding Investor Priorities: Key Insights for Boards in 2024

Investor support for adding a board member with specialized knowledge in niche areas like AI, cybersecurity, and climate decreased 15% from last year, according to an EY study. The firm’s governance team conducted a series of interviews to gain insight into investor priorities and sentiments heading into this year’s proxy season and offers key takeaways for business leaders.

What they’re saying: Talent strategies top the list of areas that investors want companies to prioritize. Additionally, investors expect a higher level of board accountability for oversight of material risks and more transparency regarding director qualifications. They are increasingly willing to vote against directors when concerns are not addressed through typical engagement efforts.

Dig deeper: The report includes a number of interesting findings:

• Talent agenda. Investors expressed interest in how a company’s strategies around compensation, flexibility, training, and development help them attract, retain, and adapt their workforce.
  
  
• Board oversight.  Investors want to understand precisely how the board is governing material topics. Expect inquiries about:
  
  
  • How directors are developing the competency needed to effectively provide oversight and keep pace with developments
    
    
  • How oversight responsibilities for a topic are allocated at the committee level
    
    
  • Who speaks to the board and how frequently it discusses a certain issue
    
    
• Board expertise. 81% of investors want disclosure of board training and education on niche topics like AI, cybersecurity, and climate (up from 79%).   While some investors agree that there may be a need to bring a specialist to the board, upskilling the full board on these expanded topics is preferred by investors. Disclosures should include details about third party perspectives and training that board members receive in order to carry out their duties.
  
  
• Board accountability. Investors are wrestling with the best way to hold boards accountable for managing major risks. While 38% believe utilizing both shareholder proposals and voting against specific directors is most effective, 33% favor targeting individual directors for greater impact. Interestingly, 29% lean towards supporting shareholder proposals as the primary approach. This diversity in tactics highlights the evolving landscape of corporate governance and the ongoing debate about how best to ensure boards effectively manage critical risks.