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Directors & Boards — Is Your Board Tech-Ready?

  • November 2018

This article first appeared on Directors & Boards. 

New research finds few boards have enough tech savvy in the boardroom and even fewer have tech committees.

In the year since, 145 million plus U.S. adults had their Social Security numbers stolen in a breach at credit reporting service Equifax, you would think companies scrambled to add serious tech savvy in the boardroom.

We reviewed the 2018 Fortune 100 companies and looked closely at their directors, analyzing for technical and digital experience. Our analysis shows boards are making some progress towards improving their expertise around technology issues and readying their abilities to respond to tech-related challenges, whether they be an actual attack or a tech-fueled disruptor entering the industry.

But in other areas, boards are lagging, potentially leaving companies vulnerable.

If you don’t think this sounds like a board’s job, you’re missing the impact of technology on business today. A cyber attack or data breach is more than a security problem; it can quickly escalate to a board problem. Losing market share year over year to fast moving tech-enabled insurgent can also quickly become a key agenda item for boards.

In 2013, Target’s data breach exposed over 60 million consumers and put cyber security risk on the map as a business continuity and consumer trust imperative. Now, in 2018, that risk continues with major securities breaches for companies ranging from Under Armour to Orbitz. Yahoo’s brand and reputation never truly recovered from its data breach in 2016. These are just a few examples. The list of companies facing threats brought on by technology only grows longer and the potential for impact on board-level issues will only increase. Companies need more than IT resources to face this transformation; they need a tech-savvy board.

There are two key steps a board can take to improve its tech-readiness:

  1. Adding directors with technology experience.
    What kind of experience? In many cases, CEOs advocate for someone with general management experience in technology because that individual could be most useful in broad discussions around governance roles. A practitioner with a specific technical skill set, on the other hand, could become less relevant over time, or even stale. One exception could be hiring someone who has a considerable spike in data management or cybersecurity.

  2. Establishing a technology committee.
    Building on the concept of adding a single director with technical knowledge, a technology committee’s mandate would be to assist and advise the board of directors in technology investment, strategy and trends.

Unfortunately, our research found few boards are following this advice.

We reviewed the technology presence in the boardroom of the Fortune 100, and found that just over two-thirds of the companies we surveyed had tech expertise on their board. Among currently serving board members, 12% have direct technology experience. Nearly a quarter of those with direct technology experience became directors in the last two years.

The vast majority of tech board members are what we call Tech GMs – they held a relevant, non-tech executive role at a tech company such as CEO, president, COO, chief product officer or chief marketing officer. Tech GMs make up 72% of current tech board members, reflecting a general corporate preference for individuals who will be able to contribute broadly to the board discussion rather than provide specific technical skills.

Tech committees are emerging even more slowly. Only 16% of the Fortune 100 firm currently have them. The finance and insurance sector has made the most progress, with 44% of such companies featuring tech committees. Interestingly, as Amazon takes 50% market share in retail, only 6% of retail companies have established technology committees for their board. Additionally, only 13% have directors from tech and we question whether the governance models are adapting to address this threat. Incredibly, none of the media and telecom sectors have one.

From within the tech committee data, some important questions arose. Most of the committees — 81% — have tech expertise in their ranks. But that also means that 19% of tech committees have no tech experience, which is surprising and very difficult to understand. How can these committees manage their mandate to support and advise on tech related issues?

This suggests that many tech committees are not staffed with the necessary array of talent to face the wide variety of tech-inspired challenges on the horizon. General management knowledge of technology and an ability to help the rest of the board understand the important governance and investment trends is critical. Also, key expertise valuable for most modern companies include cybersecurity, data management and digital transformation.

The threat of cyberattacks and the imperative of digital transformation will continue to challenge companies. Boards must be prepared, with the right amount of in-house knowledge and support structures to help see the company through any manner of tech challenge that may — and probably will — emerge soon.



View the original article on Directors & Boards here.

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