In a recent 2022 research, it has been found that the #1 skill requirement on boards is talent management overtaking strategy for the first time.
What have CEO's and board members been busy with during the last two years as companies dealt with the massive impact of the pandemic on employees, customers, stakeholders, top line and bottom line?
The chart below summarizes key issues - whether it was the great american resignation as workers dropped off the workforce in large numbers especially women, to take care of children, the aged and their families, or dealing with low employee productivity, associated mental health and burnout concerns, taking decisions on remote work, hybrid workforce, business resilience, cyber security and other issues.
Diversity and inclusion on boards - with active legislation in 14 states in the US, increased corporate activism from Goldman Sachs, Blackrock and others, the need to adhere to ESG metrics and compliance, the push to link pay especially variable pay, incentives and equity to D&I metrics including gender pay parity, CEO to worker median pay ratios, have only heightened the need for people skills on boards.
There has been an increase in 2022 to a 19.2% representation of HR skills on S&P 1500, showing an upward trend of hiring CHROs and Chief Diversity and Inclusion Officers on boards.
The need for inclusion on boards is making remarkable progress, but as we track progress of minority representation, minority women specifically as well as LGBTQ+, veterans and differently abled, there is still a long way to go to bring about equity.
The definition of Human Capital Management / Executive compensation as a board skill, is your track record of experience related to People. Exposure in matters pertaining to governance of key workplace policies (without getting into management and operational matters) — ethics and compliance, prevention of sexual harassment and workplace safety, business conduct, employee engagement and other key metrics.
Track record of experience related to pay for performance philosophy, understanding and experience related to executive base compensation, variable, equity and long term incentive plans are critical. Gender pay parity and CEO vs Employee median pay ratios are important metrics here.
In a Harvard study, it was found that 62% of companies in the Fortune 200 incorporate stakeholder metrics - ESG measures - in their executive compensation programs. However, the influence these metrics have on pay outcomes can differ drastically, with many companies using a largely discretionary assessment to determine payouts.
A growing coalition of 61 top business leaders across industries announced on January 26, 2021, their commitment to the Stakeholder Capitalism Metrics, a set of environmental, social and governance (ESG) metrics and disclosures released by the World Economic Forum and it's International Business Council (IBC) in September 2020, that measure the long-term enterprise value creation for all stakeholders.
What are the people metrics (core and expanded), proposed by the world economic forum as a part of its four pillars below?
Some highlights of companies that have already taken a step forward in linking director and executive compensation towards achievement of ESG goals are given below:
It has taken some time but as boards, CEOs and companies continue to deal with People issues that directly impact their business results, brand reputation and culture, it has become apparent that talent...people...culture and rewards, will continue to be a much in demand skillsets for boards.
Comments