Tensions rise between boards and executives as disruption grows

Directors on boards at some of the world’s largest firms lack confidence in their company’s ability to turn disruptions into opportunities. A quarter of directors also told a global survey by Heidrick & Struggles, Boston Consulting Group and INSEAD, that they were not confident their executive team could confront long-term challenges such as sustainability successfully.

With uncertainty surrounding every aspect of business, from inflationary pressures on costs, to supply chain disruption and regulations, board directors face a mounting list of issues that their companies must address. On top of climate and sustainability issues, that also includes intensifying trade and geopolitical hostilities, and the adoption of new generative AI technologies.

To assess the sentiments among boardrooms around the world, and see how firms are doing when it comes to addressing these issues, a new report has surveyed 444 directors and executives around the world, along with a dozen roundtables that brought together more than 130 directors in North America, Europe, Southeast Asia, Africa, and South America. Carried out by leadership advisory and on-demand talent solutions firm Heidrick & Struggles, in collaboration with Boston Consulting Group (BCG) and the INSEAD Corporate Governance Centre, the researchers found that boards have made advances to address sustainability topics – but there is still work to do.

A 77% majority of boards now believe their company has a responsibility to address sustainability concerns. That includes 23% who describe it as a primary responsibility for the board, which equals or surpasses all other objectives – and 54% who see it as a significant responsibility, even if it is not a business’ primary focus.

However, boards still note concern that their firms are unable to metabolise sustainability commitments to the extent that it opens up opportunities. While a rounded-up 50% of boards said they strongly or somewhat agreed their company could turn sustainability disruption to their competitive advantage, the rest we unconvinced. A 24% chunk were unsure to agree or disagree with the idea, while 21% disagreed their firm could make the most of sustainability opportunities, and 6% strongly disagreed.

Boards were even less sure of their company’s ability to box clever on two other sweeping issues they face going into 2025. As the proponents of GenAI technologies continue to hype their potential, only 37% of board members agreed to any extent that their firms were well positioned to make the most of the disruption. Meanwhile, as geopolitical tensions continue to rise, a 44% minority expressed confidence in their ability to adapt to potential changes on the horizon.

The uncertainty and pace of change confronting companies is already creating tension between boards and executive teams – which may also cause problems further down the line. The researchers note that conflicting views among stakeholders “can exacerbate the lack of alignment within a board and between its directors and management” – making objective decision making increasingly important, but also difficult.

In that case, there is a particularly concerning indication of division within the boardroom, as 29% of directors lack confidence in their CEO’s ability to navigate disruption and boost long-term value. That includes 8% who said they strongly disagreed that their executive team had the capacity to navigate through ongoing disruptions.

This was reflected back at boards by executives, however, who were similarly sceptical of the abilities of directors to meet the needs of a changing marketplace. A 26% portion of CEOs said they felt that way – including 6% who felt strongly about it – showing an increasing tension between top leadership teams grappling with a more complex and diverse range of issues than ever before.

Commenting on the findings, Jeremy Hanson, a partner with Heidrick & Struggles and co-author of the report, said, “While it is encouraging boards are stepping up on sustainability, this year’s survey reveals tensions between directors and management. With so much at stake, alignment between board directors and management isn’t just a best practice; it’s essential for addressing both today’s challenges and those of the future. Importantly, alignment does not mean boards should shy away from constructive debate with management. Fostering open, even difficult, conversations is crucial for boards to reach resilient, well-rounded decisions in today’s demanding environment.”