6 Trends That Will Drive Better Board Oversight in 2015

Activist investors focused on leveraging opportunities to shape corporate fiduciary practices continue to impact board chairmen in both large and small companies. Here, our experts identify six trends in board oversight in 2015.

1 Greater independence. Facing increasing pressure from activist shareholders, boards— more and more—are standing up to management, challenging decisions such as those involving executive compensation. “The days when the board was automatically subservient to management are over,” said Keith Gottfried, an attorney and partner in Morgan Lewis’ business and finance practice.

2 More strategic planning. “We are seeing more boards developing strategy,” said Hank Boerner, chairman and chief executive of the Governance and Accountability Institute in New York. “There’s increasing involvement in both long-term and short-term decision-making.”

Ella Marie Koscik, chair of the MDI Group, an Atlanta staffing company, adds that, “It’s key that board members not only have knowledge of the industry, but also have a clear understanding of the company’s business goals and strategy. As a team, we’re constantly evaluating whether we’re effectively moving the company toward our business objectives and overall strategy.”

3 More genuine diversity in board appointments. Boards are increasingly appointing directors who are not closely tied, socially or professionally, to the chairman or other directors. “Too often, boards are put together through networking, meaning people recommend people similar to themselves,” said Mr. Gottfried. He recommends broader reach-out to identify and recruit capable people of different backgrounds and life experiences.

4 Greater alignment of directors’ skill set with organizational need. “Every company should go through the exercise of assessing the board’s strengths and needs,” said Mr. Gottfried. “The chairman should be recruiting new board members who have particular strengths needed by their organization. Does your board have at least one financial expert, for example?”

5 More openness to activist investors. More and more activists want to meet with boards and make suggestions informally—at least initially. Boards are increasingly responsive. “More boards are ready to meet with activists, and listen to what they have to say,” said Boerner.