What is the agenda for reimagining more strategic, future-looking boards?

E2. Enhance effectiveness: Change ways of working to allow the board to deliver full value.

Suboptimal dynamics and lack of trust can mean that executive teams miss opportunities to benefit from the wise counsel and strategic direction of their boards.

“Management teams view boards as a necessary evil and boards don’t feel that they necessarily have the opportunity to influence the operations and the strategy of the company in a very meaningful way,” observed one of the directors in the study.

The nature of information flows to the board reflects this dynamic. Directors often receive either overly filtered information that limits the scope of board judgement, or overly voluminous data that lacks actionable insights. “I walk away from board meetings thinking, ‘What did I really learn?’ That’s not good enough,” commented one director.

A mix of disconnects, whether from a trust deficit or role clarity or boundary tensions, naturally impede board effectiveness. Overlay on this the part-time nature of the director role and information asymmetry, and the result is a boardroom environment that one board member describes as “shadow boxing.”

Effective governance depends on boards and management teams openly identifying problems and opportunities and jointly determining the best path forward. The directors in our study consistently pointed to trust as the key enabler: “Understanding and trust are, to me, at the center of effective supervision,” one said.

E3. Exercise foresight: Engage the ecosystem to improve foresight and sensing.

Boards suffer from a lack of opportunity for future-oriented thinking, inadequate access to fresh perspectives and insufficient mechanisms for strategic exploration.

The current board model, often overly focused on backward-looking data and compliance, is ill-equipped for a future that is predicted to be faster, more complex and more fragmented. This systemic failure to prioritize future-oriented thinking leads to reactive governance as the pace of change quickens.

 “You can have all kinds of data,” one director commented, “but if a week ago’s data is no longer relevant, so what? So, to me, it’s about trying to look around the corner, making sure you’ve got people around the table who understand how to operate within an increasingly complex world with flexibility and agility.”

The consistent director lament about the lack of opportunity to engage on the future points to a profound foresight deficit in boardrooms:

• Lack of time dedicated to strategy and foresight, hindering a board’s ability to guide the company proactively, especially through dramatic shifts and emerging risks
• Lack of fresh, diverse perspectives and inadequate access to expertise on emerging topics, limiting the board’s ability to bring creative approaches to new challenges

E4. Encourage independence: Prevent governance failures with curiosity and critical challenge.

Board effectiveness depends on independent thought, curiosity and critical challenge, yet internal cultural pressures and consensus-seeking often stifle debate, risking governance failures. In the words of one director: “The role of the director is not just to have read the documents and have an opinion, it’s to be able to challenge the thinking. So how are you good at challenging thinking?”

Boards can face subtle yet powerful social and time pressures that can lead to conformity and groupthink. For example, the need to achieve unanimous voting can create a cultural penalty for dissent.

The pressure for consensus often brings with it a lack of critical challenge that can lead to institutional ignorance and ethical blind spots, significantly increasing the risk of corporate failures. Boards might be held accountable for something they were not equipped to see coming because they failed to raise the right questions or were not educated about a certain number of topics.

A board member said: “You almost have to systematize a contrarian view and not necessarily from being crazy disruptors all the time – that way you don’t get anything done — but more from pushing our thinking.”

E5. Engineer simplicity: Give directors greater confidence in their governance of the global enterprise.

The complex structures, numerous subsidiaries, and diverse jurisdictions of large global enterprises create governance challenges and make it difficult to know with real confidence what is happening across the breadth of the organization.

And of course, the greater the number of moving parts, the greater the potential fault lines and points of failure: 

• Vertically, between the board and CEO or executive team; between head office and regional executives, between regional executive teams and regional management; and between management and operators 
• Horizontally, across markets and geographies

Any number of “dual disconnects” can occur between the following axes:

• Detection and interpretation of signals (trends, events, performance) and the resulting decision-making
• Between the decision-making and the resulting action-taking

The challenges of achieving a reliable “line of sight” into risks, opportunities and performance issues – across different business units and operating divisions and multiple geographies - create a governance dissipation effect. These fault lines and possible disconnects make it far harder for a board to achieve justifiable confidence that they aren’t about to be badly surprised.

As a result, many of the directors interviewed prioritize simplifying and streamlining governance mechanisms. They see value in implementing principles-based governance frameworks that balance global consistency in policies, standards, processes, organizational and governance control mechanisms with necessary local adaptation.

“With an increase in complexity, having consistency and standardization in a global organization is really important, provided you understand and appreciate what potential limitations that could impose,” advised one of the study participants.

E6. Employ AI: Augment board capabilities as part of a broader enterprise AI strategy.

Despite AI’s transformative potential, boards fully acknowledge underutilizing the technology in relation to enterprise and governance matters.

One director in our study was “blown away by how little boards really understands about AI,” despite its potential to “change absolutely every single job on the planet.”

This AI gap means boards are missing immediate and medium-term opportunities for enhanced efficiency and deeper insights into enterprise governance and operations. They are also ill-prepared to effectively oversee the enterprise-wide risks and opportunities that AI’s rapid evolution presents in a NAVI business environment. “In my boardrooms, there’s really no access to data for asking, ‘What if?’ The use of data in the boardroom is very static, not dynamic,” said one director, describing the current state. A director describes their unease and the opportunity they see for AI augmentation: “By the time you meet, the information is stale ... It isn’t real-time, and that honestly scares me. There’s huge potential in getting real-time, data-driven insights and really enhancing our governance through technology."

The use of AI by the board and the establishment of enterprise responsible AI framework are not separate, but integral. The well-documented risks of AI – such as reliability, explainability, compliance, ethics and transparency – exist as much in the board as in the broader enterprise.

Conclusion: Seize the opportunity to reimagine

The prevailing sentiment from the interviews is a stark warning: the current governance model is under strain; without adaptation and change it is not a matter of if it will break, but when, and how boards choose to respond.

As one director grimly noted, “It will last until, like Rome, it burns up. It will last until there’s an epic failure. And then all of a sudden, there’ll be a depth charge and all the fish will swim in another direction.”

While not all directors feel the heat to this degree, the prevailing sentiment among study participants is that boards must recognize that “What got you here, won’t get you there,” as paraphrased from Marshall Goldsmith, the American executive leadership coach and author.

Recognizing the risks and doing something about them are not the same thing. Without a breakdown or catastrophe, there’s often little impetus for change. It falls on the shoulders of board chairs, and board members willing to challenge the status quo, to highlight the dangers of inertia. This necessitates embracing continuous self-examination and adaptation before a crisis demands it.

It also requires a willingness to pursue a phased, multi-year governance program that moves beyond incremental change and considers more significant reform, or even fundamental transformation, where needed.

By reimagining governance mechanisms and embracing technological and cultural shifts through the virtuous cycle of the 6E agenda, boards can transform from sometimes reactive oversight-oriented bodies to agile, forward-looking strategic partners, helping to create organizational strength and sustained value creation in a dynamic global economy.

Special thanks to the following individuals who significantly contributed to this report and research: Dr. Dean Blomson, Independent Governance Researcher and EY alumnus; and EY researchers Sandeep Gupta and Swathi Sivaraman.

Summary

The EY Board of the Future research explores the question of whether the current governance model can be sustained through interviews with 21 nonexecutive directors from some of world’s largest listed companies. The study highlights the increasing risks faced by boards of complex global organizations in an increasingly (NAVI) business environment. Key findings center on a six-part action agenda for reimagining governance to create more strategic, agile and future-focused boards.