Canadian Directors Divided on Board Involvement in Human Capital Oversight beyond the CEO, Knightsbridge/CCBE/ICD Study Reveals
Executive compensation dominates board discussions with insufficient information and/or time given to assess other strategic human capital issues
TORONTO, Oct. 4, 2011 /CNW/ - Risk management is an increasing priority for Canadian boards, but directors are divided on the board's role in helping to mitigate human capital risk and improve organizational performance beyond the CEO level.
This is according to a new research report, "Beyond the CEO -The role of the Board in ensuring organizations have the talent to thrive," by Knightsbridge Human Capital Solutions (Knightsbridge) and the Clarkson Centre for Board Effectiveness (CCBE), in partnership with the Institute of Corporate Directors (ICD).
Courtney Pratt, Knightsbridge Board Chair said: "CEO compensation has been dominating the Board's human capital agenda to the detriment of other critical human capital issues. The rapidly growing war for talent combined with an increasingly competitive business environment, has made the quality of an organization's human capital a key driver of competitive advantage."
The study revealed that there are key disagreements among directors about the board's responsibilities, and inconsistencies between the board's desired and actual oversight, specifically:
- While there is unanimous agreement about the board's responsibility for CEO hiring, compensation and succession, only about two-thirds of directors believe boards should monitor or provide oversight on other human capital issues and risks.
- Of those surveyed, only 65% agree that boards should monitor compensation across the entire organization, and only 63% agree that boards should monitor the succession of critical positions below the CEO and top executives
- Despite unanimous agreement that CEO succession is a key board responsibility, only 55% of the directors surveyed agreed that their board had identified suitable potential successors
- Almost half (46%) of directors believe that the board is directly responsible for ensuring that the organization's strategic plan sufficiently addresses talent-related risks, while the other half (54%) believe that a monitoring role was more appropriate
- There are also important gaps in strategic oversight with 30% of boards stating they are under-equipped to assess the effectiveness of their organizations' HR strategies, while 25% feel their organizations do not have sufficient talent to achieve key objectives
The directors surveyed also identified three primary barriers to overseeing human capital risks such as lack of time due to operational matters; lack of directors with sufficient human capital expertise or financial resources to hire external expertise; and a belief that human capital oversight beyond the CEO is not within the board's scope.
David Beatty, Conway Director, Clarkson Centre for Business Ethics and Board Effectiveness said: "In our ten years of research into Canadian boards, we have seen many broad improvements, but as this study shows, there is still much work to be done to ensure that board processes result in the desired outcomes. This is particularly true for talent oversight; an area that directors universally embrace as a core duty."
Stan Magidson L.L.M., ICD.D, President and CEO of the Institute of Corporate Directors said: "We hope that this report will serve as a catalyst for boards to consider how they can most effectively oversee human capital issues and risk. In an increasingly competitive global economy, recruiting, retaining and growing the right talent truly matters."
John Thompson, Former Chairman of the TD Financial Group and Fellow of the ICD commented on the study: "Focusing on human capital not only mitigates strategic risk, but also contributes to superior performance. There are many industries in which competing companies have similar strategies, offer like products and services, share the same customer base and draw from the same talent pools. Why then do a few of the companies consistently outperform? I believe that leadership, organizational culture, and talent development are the difference."
NOTES TO EDITOR
About the Study
Beyond the CEO - The Role of the Board in Ensuring Organizations have the talent to thrive was commissioned by Knightsbridge in association with the Clarkson Centre for Board Effectiveness (CCBE) at the Rotman School of Management and the Institute of Corporate Directors (ICD) to assess the role and effectiveness of human capital oversight in Canadian boards of directors. The study group consisted of one-on-one confidential interviews and an anonymous director survey in April and May 2011. CCBE compiled and analyzed the data in May 2011. The report authors acknowledge there may be some bias as survey respondents self-selected to participate. The full report can be viewed at: www.knightsbridge.ca and www.icd.ca
About Knightsbridge Human Capital Solutions
Knightsbridge works with organizations to help them seamlessly execute their strategy through people. Teams of experienced specialists in Leadership & Talent Development, Executive Search & Recruitment, Career Development & Transition, and Workforce Management provide integrated solutions to deliver on your human capital needs.
Knightsbridge is Canada's fastest growing human capital company, with 22 offices and more than 265 employees across Canada, the U.S and the U.K., including Toronto, Montreal, Ottawa, Calgary, Vancouver, as well as Halifax, Moncton, and St. John's through our strategic alliance with Knightsbridge Robertson Surrette. We serve our clients globally through strategic alliances with Lee Hecht Harrison for career transition services and Amrop for global executive search. www.knightsbridge.ca
About the Clarkson Centre for Board Effectiveness
The Clarkson Centre for Business Ethics and Board Effectiveness (CCBE) is the locus of corporate governance research and communications at the Rotman School of Management. Our mandate is to monitor Canadian corporate governance trends and to provide guidance to firms looking to improve their board effectiveness and disclosure. Current CCBE research focuses include CEO compensation disclosure, a study of small and medium-sized enterprises' governance, and tracking the governance impact of Directors who sit on the boards of four or more TSX Index-listed companies. Since 2002, CCBE's annual Board Shareholder Confidence Index has become the standard by which Canadian governance best practices are measured. The BSCI ratings and other current Clarkson Centre publications are available at www.rotman.utoronto.ca/ccbe.
About The Institute of Corporate Directors (ICD)
The Institute of Corporate Directors (ICD) is a not-for-profit, member-based association representing Canadian directors and boards across the for-profit, not-for-profit, and government sectors. With more than 5,000 members and a network of nine chapters, the ICD promotes the effectiveness of directors by providing quality director education and professional certification; opportunities for continuous learning and networking through local chapter events; board matching and referral service; and access to timely information on current and emerging governance issues and best practices. For more information, please visit: www.icd.ca
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