Observations on Board Priorities from the recent PwC uncertainty and transformation in the modern boardroom report
Boards are increasingly relying on quantitative data, such as corporate culture surveys, including metrics of employee turnover to assess corporate culture, moving away from subjective “gut checks” according to PwC’s recent 2024 Annual Corporate Directors Report.
This shift reflects lessons learned from high-profile corporate failures attributed to culture issues. Using metrics, especially when used with longitudinal data, provides more actionable insights and fosters accountability, aligning culture oversight with strategic priorities. Long gone are the days where board members would make surprise visits to factory floors and after chatting to a handful of employees felt they had sufficient evidence to return with a positive “our employees are happy” report to the board. According to our LRN Benchmark of Ethical Culture report, senior leaders are 2.6x more likely than individual contributors to perceive their culture as strong. Data from culture surveys can help bridge this perception gap by providing objective metrics and aligning leadership insights with frontline experiences. The report also identifies clear cultural dimensions (e.g., transparency, organizational justice, and principled performance) that are critical for fostering an ethical workplace. Evaluation tools that highlight these data points provide actionable feedback for boards and leadership.
From the LRN report, psychological safety emerged as the strongest predictor of employees reporting misconduct, with a 2.4x higher likelihood of reporting for each unit increase in psychological safety scores. This underscores the importance of leveraging surveys to understand and enhance employee perceptions of safety.
Boards should continue adopting data-driven methods for evaluating corporate culture. This can include dashboards or real-time reporting mechanisms that tie cultural metrics to business outcomes, and benchmark data from similar companies in relevant industries. Getting regular reports from Compliance Officers can help keep boards up to date on the pulse of its organization.
It wasn’t all positive news though, ESG-related issues are losing prominence in board agendas, with fewer directors reporting regular discussions on these topics compared to prior years. Only 5% of directors listed environmental or sustainability expertise as a priority for board additions in the next year. Moreover, 66% of directors admit that ESG concepts are not consistently understood by their boards.
The polarized political environment has turned ESG into a contentious topic, often criticized as politically motivated. Directors may be retreating from ESG discussions to avoid potential backlash or controversy. Also, the breadth of ESG, encompassing everything from climate change to human rights, has created a lot of ambiguity. Some boards perceive ESG as a “distraction” rather than a strategic necessity and directors report fatigue with extensive data and discussions without seeing tangible impacts.
This feeling is also translating into how boards are hiring. The data suggest that boards are prioritizing traditional financial and operational expertise, aligning with near-term goals rather than long-term ESG.
Boards could find that deprioritizing ESG risk alienates stakeholders, especially those international (European) investors and employees, who increasingly demand accountability on these fronts. Further, lack of focus on ESG expertise may leave boards ill-equipped to handle emerging risks and opportunities, particularly in areas like climate resilience and sustainability-driven innovation.
Knowledge here is key. Boards must educate themselves on ESG topics and integrate these into risk management and long-term strategy. Clarity on how ESG impacts business performance could bridge the disconnect.
While some of the findings of the report, especially the drop in focus for diversity and ESG were disappointing, the shift to data-driven cultural assessments is a promising trend in aligning governance practices with corporate success. Ethical cultures outperform by 50% across business metrics like customer satisfaction, innovation, and adaptability. This only highlights the value of systematically measuring cultural dimensions through these kinds of surveys and evaluation tools to identify strengths and address gaps.
