2024 ASEAN BOARD TRENDS REPORT

The 2024 ASEAN Board Trends Report is a collaborative effort led by the Insititute of Corporate Directors Malaysia (ICDM) with its ASEAN partners in the region which include the Institute of Corporate Directors Philippines (ICD), focusing on the theme "Refocus on Board Effectiveness". It emphasizes the need for boards to introspect their effectiveness in the wake of various global challenges such as a harsher VUCA environment, impending financial crises, and geopolitical tensions.

The report can be downloaded in the ICDM website through this link (Click me) alternatively, a copy of the report is also available for download at the bottom of this article.

Overview

• The report stresses the imperative for boards to introspect their effectiveness amidst global challenges, including a VUCA (Volatile, Uncertain, Complex, and Ambiguous) environment, financial crises, and geopolitical tensions.

• It is based on a survey conducted in Q4 2023, garnering 335 responses, to gauge how the role of the board has evolved and identify focus areas for future improvement, particularly in board effectiveness.

Figure 1. By Country

2024 ASEAN Board Trends | Refocus on Board Effectiveness | pg. 29

The chart illustrates the distribution of survey respondents by country across all participants, as well as segregated into board members and management.

Figure 2. Size of the company by revenue per annum

2024 ASEAN Board Trends | Refocus on Board Effectiveness | pg. 29

The chart presents the size of companies by annual revenue, distinguishing between all respondents, board members, and management.

Key Themes for 2024 & Beyond

In response to the current challenges facing boards in 2024, the following points outline critical areas of focus. These considerations encapsulate the priorities that are keeping boards attentive and proactive in their governance practices:

1. Board Agenda and Priorities: Boards must reassess and realign their strategic priorities to address key threats effectively, moving beyond traditional approaches to a more dynamic, future-oriented strategy.

2. Board-Management Dynamics: The survey highlighted misalignments between board and management priorities, emphasizing clearer communication and alignment on strategic goals.

3. Board Architecture and Culture: There's a call for more progressive and forward-looking boards that can navigate the shifting business landscape, requiring a blend of diverse skills, knowledge, and a culture of open dialogue.

4. Board Effectiveness Evaluation: A critical look at board deliberations and decision-making processes to ensure they contribute value and possess a diverse range of views for comprehensive governance.

5. Board and Sustainability: Boards are encouraged to deeply integrate sustainability into their governance, moving beyond token gestures to substantive actions that align with corporate strategy and stakeholder expectations.
   

Key actions moving forward

In response to the demands of 2024, boards must prioritize key areas of governance to navigate effectively. These focus points address critical aspects such as board effectiveness evaluation, composition review, management dynamics, risk assessment, talent governance, sustainability integration, and authentic leadership.

• Undertake a Formal Board Effectiveness Evaluation: Boards should conduct regular, independent evaluations to gain a holistic understanding of their effectiveness. This involves assessing the board's composition, dynamics, and relationship with management to identify areas for development and training needs.

• Reevaluate Your Board Composition & Remuneration Package at Regular Intervals: The recommendation is for boards to periodically review their composition through a skills matrix analysis to identify gaps relevant to the organization's future direction. This action also suggests that boards should look beyond their usual circles when sourcing candidates to ensure diversity and fresh perspectives.

• Work Out Your Board-Management Relationship & Dynamics: Emphasizes the importance of a symbiotic relationship between the board and management, where boards act as a guiding compass. Improving interpersonal relationships, asking the right questions, and encouraging robust discussions are key to this process.

• Relook at Your Organisation’s Materiality & Key Risks Matrix, Set Your Priorities Right: Boards, in conjunction with management, should have strategic sessions to agree on key material issues and risks. This collaborative approach helps in setting the right priorities and ensuring that the board's agenda is aligned with ground realities and strategic imperatives.

• Talent Governance and Organisation Culture: Recognizing that the success of an organization hinges on its people, this action calls for boards to foster a positive organizational culture. This involves expanding the scope of board committees or implementing new ones to address current and future employee expectations, thereby enhancing governance and innovation.

• Look at Your Sustainability Agenda and Targets – No Greenwashing: Boards are urged to genuinely integrate sustainability into their strategic planning, moving beyond mere compliance. This involves acquiring a deep knowledge of sustainability issues relevant to the business and engaging in practical efforts rather than symbolic gestures.

• Be an Authentic & Purposeful Leader: Boards are encouraged to lead with purpose, understanding their role and whom they serve. This includes being mindful, curious, and empathetic, setting the right tone at the top, and building trust through authentic actions and leadership.

Survey Insights

Responses highlighted the necessity for boards to adapt and evolve in response to global challenges, with a significant emphasis on:

• The importance of sustainability and ESG (Environmental, Social, Governance) considerations.

• The need for boards to possess a deep understanding of current and future business landscapes to identify opportunities and mitigate risks.

• The role of board composition in enhancing diversity, skills, and perspectives to meet the demands of a rapidly changing business environment.

Conclusion

Introspective Governance:

• Reflective Practices: Boards are encouraged to engage in self-evaluation, not just in terms of individual performance but also in the collective functioning of the board. This involves assessing whether current practices are still fit for purpose in addressing new challenges.

• Skills and Knowledge Enhancement: There is a push for board members to update their competencies, especially in areas like digital literacy, crisis management, and global economic trends, ensuring they can offer relevant guidance in decision-making processes.
  

Dynamic Functioning:

• Agility in Decision-Making: The dynamic nature of today’s business landscape requires boards to make timely decisions without sacrificing due diligence. This necessitates a more agile governance framework that can respond quickly to changes.

• Embracing Innovation: Boards are tasked with fostering a culture of innovation, which includes being receptive to new ideas from management and other stakeholders, as well as exploring unconventional solutions to complex problems.
  

Sustainability-Focused Approach:

• Beyond Compliance: Sustainability is no longer a box-ticking exercise; it is a strategic imperative. Boards are expected to lead in defining the company's sustainability vision and ensure that it is integrated into the corporate strategy.

• Long-Term Value Creation: Boards must shift focus from short-term gains to long-term value creation, considering the environmental, social, and governance (ESG) impacts of the company’s activities.

Continuous Learning and Adaptation:

• Ongoing Education: The board’s competence must evolve alongside the external business environment. This could involve regular training sessions, workshops, and exposure to new business models and strategies.

• Risk Management: Understanding and adapting to emerging risks, whether they are technological, geopolitical, or environmental, is crucial. Boards must develop a robust framework to identify and manage such risks proactively.

Strategic Alignment:

• Board-Management Synergy: The alignment between the board’s vision and the management’s execution is critical. Boards must work closely with management to ensure that strategies are well-understood and properly implemented.

• Unified Purpose: Ensuring that the company’s mission and values are articulated and embraced across all levels of the organization is a key role of the board.

The 2024 ASEAN Board Trends Report is, therefore, a comprehensive guide for board members in the ASEAN region to overhaul their practices. It seeks to cultivate governance that is reflective, proactive, and capable of turning challenges into opportunities for sustainable growth. By advocating for these shifts, the report recognizes the intricate link between strong governance practices and the long-term success and resilience of organizations.

The report can be downloaded in the ICDM website through this link (Click me) alternatively, a copy of the report is also available for download at the bottom of this article.