In the face of disruption and uncertainty – a turbulent economic and geopolitical environment, surging inflation, high interest rates, ESG commitments, talent management and dramatic changes in the business and risk environment, companies must navigate these challenges with the skills and experience of board members continuously tested.
Drawing on our research, insights, and interactions with directors and business leaders, we highlight five issues for governance, nomination and remuneration committees to bear in mind as they consider and carry out their 2024 agendas.
Enriching board decisions through visible and invisible diversity
Boards, investors, regulators, and other stakeholders are increasingly focused on the alignment of board composition with the company’s strategy - with diversity being at the front and center. The ability to challenge long-held assumptions; understand megatrends; and effectively calibrate strategy, risk, and talent in the context of heightened stakeholder expectations puts a premium on thinking differently.
Boards are encouraged to examine diversity in their composition along the lines of visible and invisible diversity. Visible diversity connotes easily identifiable characteristics that may affect the initial impressions or stereotypes formed about a director. They include geographic origins, gender, discipline, etc.
In KPMG Nigeria Board Governance Centre (BGC’s) Boardroom Diversity Survey report of 2022 titled ‘Poised for Change?’, 42 percent of directors polled said geographic diversity is represented on their boards whilst 24 percent deem geographic diversity as not relevant. Despite what spectrum one stands, in the debate for inclusion and diversity, acknowledging and being deliberate in ensuring adequate geographical representation on the board is essential for fostering inclusive environments.
Gender diversity on boards in Nigeria continues to be a key area of focus given the level of progress made. The disclosure requirements of gender diversity in annual reports has put more spotlight on this with more gains recorded on gender diversity in the banking sector when compared to other sectors in Nigeria. This is largely due to the very specific disclosure requirements introduced by the CBN’s Nigerian Sustainable Banking Principles in 2012 and cited by the Corporate Governance Guidelines for Commercial, Merchant, Non-Interest and Payment Service Banks in Nigeria in 2023.
Other regulations such as the Nigerian Code of Corporate Governance, 2018 and the Nigerian Communications Commission Guidelines on Corporate Governance 2023 require committees responsible for nomination to ensure an appropriate balance of gender diversity on the board.
Furthermore, with the responsibility for overseeing organisational risks in a volatile, uncertain, complex and ambiguous (VUCA) environment, boards should consider the disciplines or fields of knowledge of directors. Diversity of disciplines fosters creativity and a combination of insights from different fields can lead to novel solutions and strategies.
On the other hand, invisible diversity encompasses attributes that may not be immediately apparent and may require continued interactions to uncover. They include cognitive and generational diversity among others.
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