Dive Brief:

• Corporate directors are turning their attentions to issues like cybersecurity, crisis management and shareholder engagement, while exhibiting less interest in diversity goals, according to a new study from PricewaterhouseCooper (PwC). PwC's 2019 Annual Corporate Directors Survey, which polled 734 directors, also found that, while collegiality among directors is highly desirable, it sometimes impedes their effectiveness.
• Interest in gender diversity has declined from 46% in 2018 to 38% in 2019, but interest in racial or ethnic diversity increased slightly, from 34% in 2018 to 38% in 2019. However, directors, including women, reject the idea of laws setting diversity quotas, as in the case of a 2018 California law requiring all public companies headquartered in the state to meet minimum thresholds for female directors.
• Culture also was highlighted in the report. While more directors blame middle managers for culture-related problems, they also blame themselves for not performing their oversight role to address culture dysfunctions. Boards stifle dissent, according to 43% of respondents, which can degrade decision-making, the study noted.

Dive Insight:

Directors appear to be taking more interest in addressing corporate culture dysfunctions, especially in the aftermath of the #MeToo movement. Boards want to protect their organizations' reputation and brand from scandal and uphold stockholders' interests. In a research report by Marsh & McLennan Companies, directors described the traits of a dysfunctional culture as one lacking clear vision or values, often led by an information-controlling CEO. Failure to overhaul a toxic culture can permeate an entire organization, driving away employees, customers, investors and potential candidates — and that responsibility for oversight increasingly falls on the board.  

The PwC survey noted a declining interest in gender diversity initiatives among directors and a rejection of mandates requiring minimum thresholds for female executives. But this might not signal a retrenchment in diversifying the workforce or creating an inclusive work environment. For example, Equilar's Gender Diversity Index (GDI) showed that the number of women in the boardroom rose over 20% in 2019, up from nearly 17% in 2018. The report also noted that the percentage of women joining boards as first-time members exceeded 50% in three of the past four quarters. The index describes the increase in women directors as "sustained" progress, driven by activist investors and other contributors. However, women executives can take much of the credit, as other studies have shown, by bringing along and promoting other women.