Our most recent director pulse survey highlighted the specialized skills boards are seeking to add, the skills they have added to their boards in recent years, and the impact those directors have had on the effectiveness of the board. Further, an open-field answer at the end of our survey yielded the most feedback we’ve ever received in one of our surveys. The responses augmented the data in illuminating both the sentiment on boards about the advantages and disadvantages of adding directors with specialized skills, and about how boards can better prepare themselves for overseeing the most pressing issues of the day.
Directors with specialized skills can help, and boards have been appointing them.
The 502 survey respondents, given the option to choose multiple answers, noted the addition of about 1,100 directors with specialized skills over the previous three years. Nearly half added a director with financial expertise; this aligns with our reporting from the U.S. Spencer Stuart Board Index, which highlighted the natural turnover that has come upon the 20th anniversary of the Sarbanes-Oxley Act.
Specialized skills are great for emerging challenges that are not yet well understood.”
—Survey respondent
Beyond that, 30% of respondents added a digital/technology specialist and 23% added a cybersecurity expert. The cybersecurity trend is also not surprising, especially since the SEC proposed rules in 2022 to increase public companies’ reporting of cybersecurity issues, including material breaches and board oversight of cyber risks. Beyond breach prevention and readiness, an increasing number of boards today recognize cybersecurity as an integral component of their organizations’ financial security, operational resiliency and brand reputation.
“Other” was fourth overall, accounting for almost 20% of responses. The majority of these cases related to some type of specific skill set, including industry or sector expertise, product or innovation background, and/or experience in global settings.
In the past three years, which of the following specialized skills have been added to your board through a director recruitment? (Select all that apply)
In general, specialized technology skills were perceived to enhance board oversight of this area of focus the most
In general, the majority of directors with specialized skills were seen to be enhancing their boards’ oversight of those particular areas of focus. Directors with experience in cybersecurity (92%) and/or digital/technology (92%) were seen as having the most overall positive impact on the board’s oversight, followed by financial expertise (87%) and AI (87%).
It’s great to have specialized skillsets, in fact it's necessary to have a diverse and widely experienced board across all executive, industry and vertical functions.”
—Survey respondent
Very few respondents said that adding a director had “significantly detracted” from their oversight of that area, and only a handful more said they moderately did. Roughly 11% overall said there was “no impact” or significantly/moderately detracted, the highest levels of those responses from DE&I (34%) and ESG (17%) specialized skills. That may reflect the strides boards have already made enhancing their oversight of ESG and corporate DE&I.
In the open-field responses, specialists’ value was noted particularly in industries or sectors where specific issues — e.g. cybersecurity or government regulations — presented the greatest potential impact to the business landscape, or where the emerging challenges were greatest.
How has adding a director with [insert expertise] impacted your board's oversight of this area of focus?
Respondents question the value of specialized directors
The topic of specialized directors generated more commentary in the open-field response than any other question we have asked previously in a pulse survey. The quote at the top of this section offers a fair summary of the responses: that while specialized skills can help a board stay on top of certain issues, there are concerns that adding too many directors with specialized skills can negatively impact the board’s composition and its ability to effectively oversee the most pressing issues of the day and effectively carry out the full range of the board’s governance responsibilities.
Recruiting more board members with specialized skills and expertise has been an interesting evolution and helpful in areas like finance and AI. But I worry about how it could devolve into a board of specialists whose focus is drawn away from strategic organizational planning.”
—Survey respondent
- Concerns about the overall impact of specialized directors. The most effective board members, many respondents said, are well-rounded in terms of experience and expertise and can positively contribute to the board’s dialogue in multiple areas. Some of the most adamant negative responses used the term “one-trick pony” in describing specialized directors. “To distinguish one or more directors as experts serves to diminish the value of all others,” one respondent wrote. “That is truly the opposite of sound governance.”
Some respondents noted that specialized directors overly focus the board on their specialty, defer on participating in discussions outside of their specialty, or are disregarded by other board members on all other topics outside of the specialty. In the end, there was consensus that while diverse backgrounds and experiences were valuable to boards, broad expertise and experience in business operations were most valuable. “Adding a [specialist] director at the expense of other business challenges can be very limiting,” a respondent said. “We look for directors who have good all-around experience in business rather than a specialist subject.”
- Alternate ways to access specialist expertise on boards. Several responses pointed to alternative ways that boards can gain expertise on major topics without adding a specialized director. Some suggested adding advisory councils, hiring external consultants, adding a technology committee or tapping into internal management team members to guide them through thornier issues. Others pointed to the value that ongoing director education can bring in helping boards managing emerging topics.
- Letting management lead. Ultimately, many of the responses touched on something of an existential debate for boards. While there was agreement that it is important for boards to stay on top of today’s business trends, some responses said adding specialized expertise runs the risk of overstepping. “I believe specialization is a management responsibility,” one respondent said. “Given the various operations within a company, it’s hard to have a board member with expertise in every space. If we continue to ask boards to be ‘specialists,’ we will need to redefine the expected role of boards.”
