What are recent concerns of corporate boards? How are they providing innovative strategies and solutions to address the challenges they face? These are the questions asked of boards every year. To keep up with questions like these, we must pay attention to how governance practices and industry trends are changing. The business sector is constantly evolving and companies must have board directors that can keep up in performance and expertise.

So, how are companies responding to such a dynamic environment? Surprisingly, boardroom turnover remains low. In 2023, just over half of S&P boards appointed at least one new director. To achieve excellent problem-solving skills and high performance, boards need a diversity of perspectives. Companies should prioritize appointing new directors to gain a wide range of skills and experiences. In doing so, they must monitor the tenure of their current directors. In 2023, the average tenure of S&P 500 directors was 7.8 years, just about a year less than what it was ten years ago. To sustain performance in the industry, companies need to refresh their directors. This allows them to continuously reassess the need for existing skill sets and obtain new ones if necessary, maintaining variety. Companies should evaluate the tenure of directors and potential retirement limits. Directors must refresh as the industries they lead continue to change.

It is also important to note how effective current board evaluation practices are. 98% of S&P 500 companies conduct annual performance evaluations, while just under half of companies conduct individual director evaluations. These evaluations should provide meaningful information so that governance policies and practices remain well-informed. Companies may consider using an independent third party to conduct evaluations or integrating some form of peer evaluations. It is important that boards are transparent and willing to undergo such evaluations so that hard, but necessary, decisions can be made regarding board and director performance.

Additionally, diversity has continued to rise in the boardroom in the last year. 33% of new directors joining S&P 500 boards and 24% of all S&P 500 directors in 2023 were women and/or a member of a minority group and/or LGBTQ+. These statistics are encouraging, with diversity gaining much-needed momentum in governance. By allowing an assortment of unique individuals to join decision-making processes, companies ensure that valuable perspectives can give oversight on emerging issues and responsibilities.