In June 2017, members of the North American and European Audit Committee Leadership Networks (ACLN and EACLN) met in Washington, D.C. for their annual summit. One session focused on the workforce of the future and what it may mean for companies and boards. The other session addressed audit-committee effectiveness in the face of mounting shareholder demands. The following is a summary of those conversations. Detailed reports are available for download on the right.
The workforce of the future
Demographic and societal shifts together with new technologies are dramatically affecting all aspects of business including the workforce. Flexible work models are changing how, when and where workers perform their jobs and posing both opportunities and risks for organizations. A new focus on talent management has prompted the need for a cross-functional effort, rising to the board of directors as well.
Technology and demographics
Two primary workforce trends that audit committee chairs discussed during the meeting were technological advances and changing worker demographics. As new technologies continue emerge, companies need more workers with certain skills while their need for other skills decreases. Meanwhile, the makeup of the workforce is shifting, as baby boomers retire and millennials enter, often with different expectations than their predecessors. In part this has increased the number of contract and contingent employees (the “gig economy”). And while this new way of working provides flexibility that both sides enjoy, some wonder if the trend will last and if the risks will eventually cause a swing back to the traditional work model.
These workforce trends can benefit companies that adapt and reconfigure their business models and processes to boost productivity. However they must stay focused on recruitment, retention and employee training. Younger workers are also calling for organizations to reevaluate physical work spaces, company culture and purpose. Many members shared that their own companies have responded by going beyond just the HR function and coordinating with resources from finance, IT and real estate.
Board attention on the talent agenda
Given the potential strategic opportunities and risks involved with changing work models, many of the members noted that they are increasingly seeing this issue raised to board’s agenda and its various committees including audit, and the compensation or HR committees. Boards may want to consider how they handle talent, including delegating responsibility and what information they receive .
Running effective audit committee meetings
Audit committees are facing increased demands on their time, both from their traditional mandates and from developing issues. As a result, ACLN and EACLN members discussed ways to better manage the committee’s time to more effectively address all issues.
Preparation enables focus on what matters most
to address responsibilities mandated by its charter and to handle emerging matters . Leading audit committee chairs work with management to build meeting calendars for the year to address routine oversight and add timely matters to each meeting’s agenda. They also ensure materials are concise and delivered in a timely manner before the meeting to ensure all members are ready to meet.
Uses for executive session to streamline discussion
Audit committees benefit from effective use of executive session to address questions, allay confusion or allow members to speak candidly on sensitive topics. Members of management may or may not be present, depending on the topic and the questions at hand. Inviting executives separately also can help members understand points of disagreement so they can better focus during the meeting itself.
Balancing workload among committee members
The role of the audit committee chair can become onerous, especially outside of meetings. Participants discussed ways to engage other committee members to distribute responsibility. This can help the committee use its full expertise as well as prepare for chair succession.
Regular reporting to the board
By delivering regular reports to the full board, the committee can build a broader understanding of its work among non-committee members. Different approaches work better for different boards, but the importance of this reporting is consistent across companies.