Boards of Directors cite increased competition for talent as their number one concern, according to the 2022 NACD Public Company Board Practices and Oversight Survey. This is the second consecutive year that talent was reported as the top issue with inflation (#2) and the uncertain pace of the economic recovery (#3) rounding out the top three.
Many boards have shifted their discussions and expanded their focus to include enterprise-wide human capital and talent topics, with 57% of directors reporting human capital strategy is a regular and recurring agenda item. Often, the compensation committee is tasked with oversight of workforce talent and the more progressive committees have started to formally identify what to measure, request reporting from management and build processes that will enable their governance. But many challenges exist to get boards in a position to feel comfortable in overseeing everything that talent and human capital encompasses. NACD details some of the specific challenges noted by directors with these less-traditional areas of focus.
- ESG: Establishing clear ESG priorities has been a significant challenge with 23% of directors struggling to define scope of what the E, S, and G actually mean for their company, 9% not understanding how ESG is material to the bottom line and 44% saying the lack of uniform disclosures in ESG reporting is the biggest challenge.
- DE&I: As companies integrate DE&I practices into their talent strategies, boards have also increased their focus with 69% of directors reporting that their board understands how these initiatives relate to the company’s overall strategy and approach to talent. But understanding the importance is not enough, as only 29% of respondents indicated DE&I priorities are integrated in vendor selection, supply chains or aligned with corporate’s vision and purpose.
The role of a board director has become increasingly complex as they attempt to determine priorities, stay current on proposed regulations, understand different expectations among shareholders and navigate the complexity of societal issues that impact the company and its people. The Center recently published The CHRO’s Guide to the Expanded Role of the Compensation Committee which describes best practices on how a CHRO can assist committees with expanding their charter, and maximize their time for the topics that matter most.