News Analysis

Are workers too powerful? US directors think so.

by Dan Byrne on Feb 17, 2023

Are workers too powerful in modern US companies? US directors think that, in general, they are – and some believe that’s here to stay.

Nearly two-thirds of board members in the United States say that talent has gained too much leverage in the labour market. 

That’s according to new data from Corporate Board Member, who have been conducting surveys on the top priorities of American boards for 20 years. 

Here are the main findings:

Directors think talent has gotten too strong. Are workers too powerful?

We know that labour issues have always been a polarising issue in the United States, and the latest figures speak volumes to how directors currently see that balance. 

64% believe talent has gained too much leverage in the labour market. Of these, 25% think that will continue for some time, and 39% believe it will “swing back soon.”

Corporate Board Member’s report accompanying the data – titled What Directors Thinkhas described this as a “radical change”.

“Even as the perceived threats from Covid continue to recede, attitudes about workplace policy and practice that were shaped by the pandemic are outlasting it,” it said.

Closer look

The “leverage” mentioned in the data centres around things workers today will commonly look for when negotiating job offers — remote working options, flexi-time, compensation, more leave, and more childcare support. 

Despite the talk of recession and uncertainty in the tech market, many companies are still making these things available en masse, whether they want to or not. 

So, are workers too powerful based on this? In many ways, the answer to this question depends on national work culture.

Revenues retain the top spot

“It would be easy to think the priorities of the board have changed in two decades,” the report said, “but the directors we polled for this year’s survey say they are still very much focused on the core duties of any public company board: growing revenues and increasing profitability.”

60% of directors have said that growing revenues is a top priority. 50% also said this about increasing profitability. In short, boards continue to focus on maximising returns for shareholders, so no surprises there.

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Directors know they’re in the spotlight

75% said they expect board responsibilities to grow in the next 3-5 years, an expectation in keeping with the growing level of attention on corporate governance. 

Far from the rubber-stamp, yes-man days of the past, boards are now expected to act as a challenge to leadership, questioning strategy where they feel it’s necessary and not simply approving everything the CEO says. 

As a result, meetings will be longer, decision-making will be more in-depth, and board roles will generally demand more input from directors. 

But, the survey also found that most directors were up to this. Not one director said they or their colleagues would be incapable of providing “top-level oversight” – even with the heightened responsibility. 

How this fares when lawmakers have their say on board responsibility remains to be seen.

‘Job done’ on diversity?

In a finding that goes somewhat against the grain, a small percentage of respondents said their board was actively looking for “diversity attributes”.

25% were doing so for skillset diversity, 20% for racial diversity, and just 10% for gender diversity. 

While each of these figures is a dramatic increase from a decade ago, it’s still low when we apply the common narrative of diversity being near the top of board agendas. 

Corporate Board Member puts this down to a ‘job done’ mentality. In other words, most companies have already reached their diversity goals, so there’s no need to continue an urgent push. 

Moreover, only 19% of respondents said their shareholders had actively requested discussions about more diversity on the board. So, in general, pressure to do any differently in this area just isn’t materialising.

Other findings at a glance:

  • 80% said they were adequately compensated for their roles, even with the increased responsibilities on directors. 
  • Respondents were evenly divided on ESG’s place in their boardrooms. 50% said it got too much attention, and 50% said it got enough or too little. 
  • The top issues shareholders want to discuss with boards are long-term strategic planning (35%), short-term growth and financial performance (33%) and executive compensation (24%)
  • Cost-containment is the most popular strategy for 2023-24 among respondents (64%). The next more important is digital/tech at 50%.

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