In a survey of more than 600 C-suite executives by PwC and The Conference Board, most rate their board of directors' overall effectiveness as middle of the road: 56% say their boards are doing a fair job, while only 29% rate it as good or excellent.  

The survey also found some positive feedback, with boards receiving high marks for their firm grasp of corporate strategy (85% of respondents), key business risks and opportunities (72%), and the competitive landscape (62%). Moreover, 68% are confident that their boards effectively engage with shareholders.

 But executives have concerns about:

• Who is on the board: 89% want one or more of their directors replaced;

• What knowledge they bring to discussions: 50% say their boards do not understand the impact of digital technologies and 40% say they do not understand the company's climate strategy; and

• How they engage in the boardroom: 33% say their boards ask probing questions.

The report also offers practical guidance on how boards can improve their performance, with the overarching recommendation being that boards need to partner closely with the C-suite in improving board effectiveness. Survey results and insights include the following:

Key findings

1)  Board effectiveness: Overall performance

• Most executives rate their boards' overall effectiveness as middle of the road

• 15% rate it as poor; 56% rate it as fair; 29% rate it as excellent or good.

• In traditional areas of oversight, boards continue to perform well

• Most executives say their boards have a strong understanding of:

• Corporate strategy, 85%; key business risks and opportunities, 72%; competitive landscape, 62%.

• In more specific areas of oversight, there is room for improvement

• Only half (50%) say their boards have a strong understanding of cybersecurity/data privacy vulnerabilities, and the impact of digital transformation/emerging technology.

"US corporate boards typically assess their effectiveness through their annual self-evaluations of board, committee, and increasingly, individual director performance. While CEOs typically participate in that process as board members, the rest of the C-suite is often not involved. Boards could benefit from seeking input from the Chief Financial, Legal, and Human Resources Officers, and on a rotating basis from other C-suite executives, about board composition, capabilities, and effectiveness," said Paul Washington, Executive Director of The Conference Board ESG Center.

2)  Board composition: Refreshment and diversity

• Most executives (60%) trust their boards to prioritize board diversity

• However, only 20% think their own boards are diverse enough.

• 66% cite long-tenured directors' reluctance to leave as the top reason for a lack of board diversity.

• Executives are keen on refreshing their boards

• 89% of executives believe at least one of their directors should be replaced; 75% say two or more should be replaced.

• This may be due to the C-suite increasingly wanting directors with experience in emerging issues such as cybersecurity and human capital management.

• In contrast, directors cited (in a separate PwC survey) their fellow directors' behavior as the main reason for wanting board refreshment—specifically, their peers' unwillingness to challenge management and the tendency to overstep their role.

"Effective corporate governance requires collaboration between boards and management teams," said Maria Moats, Leader, Governance Insights Center at PwC US. "Executives have an active role to play helping directors stay prepared and informed. By working together to bridge their differences and align their thinking, both sides may ultimately have what they need to build trust and prepare the company to tackle future challenges.

3)  Board and director engagement

• Most executives believe their boards are operating at the right level

• 82% say their boards do not overstep their role.

• But executives question whether their boards are effectively challenging them

• Only 33% say their boards ask probing questions.

• Just 21% think their directors are spending enough time fulfilling their responsibilities.

4)  Board knowledge and expertise

• High marks in traditional oversight areas including finance and operations

• 67% of executives say their boards have strong financial expertise; 55% say the same regarding operations expertise.

• Fair marks in cybersecurity

• 65% say their boards have at least fair experience in cybersecurity, data security, and data privacy.

• Low marks in ESG and climate

• 39% say their boards have poor ESG expertise; 47% say the same regarding climate expertise.

5)  Stakeholder understanding and engagement

• Most executives are confident that their boards effectively engage with shareholders

• 68% are confident in their boards in this area.

• However, executives are less confident in their boards' understanding of stakeholder priorities

• 48% believe their boards do not fully understand shareholder priorities.

• 57% do not think their boards fully understand the concerns of stakeholders other than shareholders.

"The shifts toward ESG and stakeholder capitalism do not mean the board needs to reinvent the wheel. The board still has multiple decision-making, oversight, advisory, and engagement roles. Still, these changes do require boards to take a fresh look at their roles and responsibilities and to address more topics than before. Boards—in collaboration with management—should consider how they can build ESG and stakeholder perspectives into existing processes," said Matteo Tonello, Managing Director of ESG Research at The Conference Board.