While reviewing the stories for this edition of Private Company Director, the mind couldn’t help but wander. Just slightly, of course. The various articles kept me in rapt attention as I am sure they will you as well.
But the pieces are based on the sessions that will be held at this year’s iteration of the Private Company Governance Summit, which will be held May 15-17 in Washington, D.C. This year, the conference will feature panel sessions that expand upon several of the topics covered by our features, as well as additional sessions on preparing family members for board service and determining the right size and mix for your board, pre-conference sessions on board basics and getting on a board and three sure-to-be-incredible keynotes in the event’s first two days. Our second day will also include our Private Company Boards of the Year Awards ceremony, which is sure to be spectacular.
Why am I so sure of the event’s quality? Well, the quality of the nominees that we have received for the award. While we are just in the opening stages of the award judging at press time, it can be said that we have received a strong variety of entries, from family advisory boards to fiduciary boards of ESOPs to nonfamily fiduciary boards with over $400 million in revenues. Traditionally, it has been the goal of the awards to honor private company boards that best serve their stakeholders, whether that be owners, shareholders, employees or the community. The strong list of 2024 nominees ensures that, in the award’s eighth year, we will once again be able to honor a set of companies that embodies the very best that private company boards have to offer.
So the question becomes, what are great boards, such as the ones we will honor at PCGS, monitoring in 2024? What topics are directors keeping at the front of their minds and on their agendas so that they can ensure the success of their companies and the attentions of their management teams? To get the answer, we looked to the National Association of Corporate Directors and its yearly Board Trends and Priorities Survey.
According to the survey’s more than 500 respondents, the threat of an economic recession tops the list of board concerns. The question of economic stability was the only issue listed as one of the five trends set to have the greatest impact on the company over the next 12 months by a majority of directors, at 50.1%. “Increased regulatory requirements” were cited as a major point of concern by 42.9% of directors and changing cybersecurity threats received recognition by 41% of the group.
The survey also saw directors weighing in on areas in which their boards need to make the most improvement over the next year’s time, and it appears that strategy will be receiving a great amount of boards’ collective attention. Eighty-one percent of respondents believe it is either “important” or “very important” for their board’s oversight of strategy execution to improve, while 80% of board members felt the same about strategy development. Oversight of risk management was cited as very important to improve by 36% of directors, and 33% of respondents thought the same of cybersecurity oversight.
Use of AI technology is an issue that continues to rise in importance for private (and public) company boards, a fact that was reflected in the survey’s responses. Clearly, directors are intrigued, with two-thirds of respondents stating that they have “personally experimented with generative AI technologies.” While the answer is a little less straightforward when it comes to whether AI presents more of a risk or an opportunity for the companies represented by boards, the verdict still falls on the side of opportunity, with 50.7% of responding directors reporting that AI is either “more an opportunity” or “slightly more opportunity” than risk. Just 13.1% felt AI was “slightly more risk” or “more of a risk.”
The report also stated that only 17% of respondents have had a discussion with management about how AI could affect the company’s efforts in recruiting talent and addressing workforce needs, something that seems to indicate a clear gap between the importance of the issue and steps toward risk mitigation.
Do you want to be able to ask the right questions of management when you finally have that conversation? There’s a session on the board’s role in risk oversight and mitigation at Private Company Governance Summit 2024. I’m just saying: I’ll save a seat for you.