Getting More From Your Board
Explore the opportunities and focus areas for private company boards identified in our KPMG 2023 Private Company Board survey
In a complex and challenging business environment, private company boards play important role. And while we have seen a significant improvement in their effectiveness over the past few years, our survey of U.S. private company directors suggests there are several areas where boards could be stepping up.
In this edition of Privately Speaking, we explore the opportunities and focus areas for private company boards identified in our 2023 survey and provide some high-level findings from the report.
Dive into our thinking:
Three big opportunities
We asked U.S. private company directors where they saw opportunity to improve board oversight. Three main areas of focus emerged—each with their own challenges and opportunities.
1. Corporate strategy, including business development, partnerships, joint ventures and M&A.
The good news here is that effectiveness and engagement on corporate strategy has significantly improved over the past few years. In fact, our respondents believe they saw the greatest improvements in this category.
Yet, interestingly, many company founders feel that their boards aren’t stepping up enough—57 percent of founders said their boards had become more effective at overseeing strategy, compared to 70 percent of independent private company directors surveyed.
What they said: “Personally, I don’t think there is enough tension between the board and management on some of the strategic decisions being taken. All too often, the board typically just goes along with the CEO.”
“Private companies have seen a lot of change, challenges, and complexity over the past few years. Boards have become increasingly important to leaders and founders as a way to navigate risks and opportunities. But, just as much as a company is always changing and evolving, so too should the skills, capabilities, and focus of the board.”
- Conor Moore, National Leader, KPMG Private Enterprise, KPMG LLP
2. Talent, including hiring, development, retention, and succession.
Talent is perhaps the area with the most room for improvement. Our data shows that very few boards are focusing on key areas such as diversity, equity, and inclusion (DEI) and environmental social, and governance (ESG) matters. Engagement on topics such as executive and board succession planning remains low.
Not surprisingly, few founders say their boards could be increasing oversight of succession planning, and even less so in critical talent areas like D&I, environmental and social matters, and employee health and well-being.
What they said: “Senior management—which includes the founder and majority shareholder—are nearing retirement, which is creating some uncertainty for the future, both for customers and employees. As a board, we need to ensure the continuity of the culture and the service if we want to help the company maintain stable business operations.”
3. Risk management, including cybersecurity and data privacy.
This is one area where everyone agrees that boards have significantly improved in oversight. It’s an encouraging trend, given the economic, health, cyber, and technology risks that have emerged since the onset of the pandemic.
Respondents, however, were more focused on risk management than crisis prevention—suggesting many private company boards are being more reactive than proactive when it comes to risks.
What they said: “Private companies tend to be younger and much more focused on growth. But sometimes they are not paying enough attention to developing good corporate governance hygiene and risks can sometimes be overlooked.”
About the 2023 Private Company Board survey
To gain a better understanding of the challenges facing U.S. private company boards today—what is working and where they could improve—the KPMG Board Leadership Center surveyed nearly 600 private company directors. Survey respondents included independent directors; founders and other executives; investment firm partners, employees, and operating advisers; and family members and employee stock ownership plan (ESOP) trustees. Get the survey highlights here.
The three missed opportunities
Our survey also highlighted three areas where boards could be doing more to enhance the value they deliver to private companies and their executive teams.
1. Independent directors
Again, founders held divergent views. Almost two-thirds (63 percent) of founders said their boards included an independent director, perhaps reflecting a desire to retain more control of their business.
What they said: “I get the impression that independent directors are a tool that very few business owners know how to use effectively.”
2. Diversity, equity, and inclusion (DEI)
DEI, on boards, executive teams, and through the enterprise, can lead to better decision-making, risk management, and innovation. Unfortunately, DEI ranks relatively low on our respondents’ list of priorities. They reported no real increase in their focus on board diversity; director education; or employee DEI.
Directors representing investment firms, however, put a lot of stock in D&I. Almost half (forty-six percent) of investment professionals sitting on private company boards said they have increased their focus on building a more diverse board, compared to just 25 percent of founders.
“Private companies don’t always experience the same pressure as public companies to address diversity, equity, and inclusion. But we are finding that employees, investors, and regulators are very focused on this issue. Private company boards will want to consider how this might influence their organization’s ability to find talent and secure investment in the long-term.”
Sal Melilli
Partner and National Audit Leader, KPMG Private Enterprise, KPMG LLP
3. Environmental, social, and governance (ESG)
However, our research also shows that progress towards greater transparency has been slow. Just 13 percent say their organization reports publicly on its sustainability or ESG metrics. And only 8 percent say they get third-party assurance on their ESG data.
Does your company publish a sustainability report, or include environmental, social, and governance (ESG) data on its website or in other publicly available information?
About the KPMG Board Leadership Center
The KPMG Board Leadership Center (BLC) champions outstanding corporate governance to drive long-term value and enhance stakeholder confidence. Through an array of insights, perspectives, and programs, the BLC—which includes the KPMG Audit Committee Institute and close collaboration with other leading director organizations—promotes continuous education and improvement of public and private company governance. BLC engages with directors and business leaders on the critical issues driving board agendas—from strategy, risk, talent and ESG to data governance, audit quality, proxy trends, and more.
Get all the insights from the KPMG 2023 Private Company Board survey here.
Privately Speaking Series
Privately Speaking tackles the issues that privately-held entities, including private equity- and venture capital-backed companies, care about most. In each edition, we share insights, as well as practical, actionable tips to help boards and executive management grow, strengthen, and transition their privately-held businesses.
Whether your company is starting out and growing or strengthening and transitioning, this series promises to explore ways to help companies be successful at any stage of the business lifecycle.
Explore more
Meet our team
