Technology, media and telecommunications (TMT) C-suite executives and independent directors are mostly aligned on organizational priorities and the biggest threats to growth, but their views diverge on threat preparedness and the adequacy of time and attention spent to address certain critical issues, according to Protiviti’s 2024 Board Governance Survey. Our survey sheds light on opportunities to improve board governance and performance by probing and understanding the differing perspectives of directors and C-suite executives.
Regulatory readiness: Signs of misalignment
For instance, our survey suggests that TMT independent board members have a more favorable assessment of organizational preparedness for compliance or regulatory-related matters, including data privacy, compared to C-suite executives. Roughly 63% of the TMT board members surveyed stated that their organizations are very prepared for the impact of compliance or regulatory changes, whereas only 39% of C-suite leaders share that view.
The divergent opinions on regulatory readiness are unsettling, given the avalanche of new regulations and compliance actions that TMT organizations face globally. For example, regulations coming out of the European Union and the United Kingdom are impacting global technology firms with users in the regions. Those regulations include the Digital Services Act, the Digital Markets Act, the Data Governance Act, the U.K.’s Online Safety Act, and the landmark Artificial Intelligence Act.
In the United States, federal lawmakers and policymakers have been working for years to pass regulations intended to make the internet safer for children, protect net neutrality, strengthen data privacy and address risks posed by artificial intelligence — measures that would directly affect TMT firms if enacted. The lack of movement on these bills is not a reason to sit idle; consumers are demanding that companies address these issues, and it is also an opportunity to prepare for sweeping regulatory changes that are sure to come.
Of the regulations slowly making their way through the U.S. Congress, the proposed federal data privacy legislation, also known as the American Privacy Rights Act (APRA), requires particular attention. In the absence of a federal data privacy law, at least 18 states — including California, Florida, Kentucky, Maryland, Minnesota, Nebraska, New Hampshire, Texas and Virginia — have enacted laws that are already creating complex compliance challenges for TMT organizations.
What organizations can do now: As laws affecting TMT companies proliferate globally and at the state level, companies and boards need to be more proactive in cataloguing, assessing and reacting to the impact of evolving regulations and potential enforcement actions on their business models. For many TMT organizations, this effort should include the following:
- Staffing up on compliance, risk management, legal, privacy and legislative expertise, with clearly assigned roles and responsibilities. In most cases, the pace and volume of new regulations require a dedicated and capable compliance function within TMT organizations to serve as the responsible party or owner, working in concert with other functions, including the engineering team, to ensure that compliance is baked into product development from the start.
- Creating a data-driven, comprehensive risk-management framework that will enable them to break down risk silos and conduct regular risk assessments across regulatory topics consistently and efficiently.
- Leveraging new and emerging technologies that will enable efficient compliance with data-intensive and time-sensitive regulatory requirements.
- Seeking independent advice to help ensure that they are operating according to policy, regulatory and ethical standards.
Divergent views on succession, compensation
Asked to identify the top issues that are not receiving sufficient board time and attention, the C-suite leaders cited corporate culture; innovation and research and development; cybersecurity and data privacy; and environmental, social and governance matters. The board members, on the other hand, had different responses: They mentioned CEO and management succession planning, crisis management, contingency and scenario planning; corporate culture; and risk-management oversight.
According to the survey, only 50% of C-suite leaders believe that the board is effective in aligning executive compensation with value contributed to long-term performance, compared to the 83% of board members who state that they are doing a good job in this area. Of course, TMT board members admit that CEO and management succession planning requires greater board attention. This is not surprising; it aligns with Protiviti’s 2024 Top Risks Survey, which points to succession planning (as well as the ability to attract and retain top talent) as the No. 2 top-risk issue for organizations globally.
What organizations can do now: According to a global survey of more than 240 organizations conducted by the Association for Talent Development, the primary causes of shortcomings in succession planning include limited C-suite bandwidth, insufficient resources, and the lack of available knowledge and expertise. Addressing these root causes is the first step that organizations can take to modernize their succession-planning capabilities. Additionally, boards and executives should consider these five high-impact actions:
- Establish transparency for those targeted for succession;
- Clarify who must stay to retain the next generation of leaders;
- Hold the right conversations with an emphasis on an actionable plan;
- Ladder up to emphasize development and sustain executive bench strength; and
- Measure up to assess effectiveness of retention and succession strategies.
This recently published issue of Protiviti’s Board Perspectives elaborates on the above actions and offers additional suggestions for organizing the board’s oversight of talent management and succession planning.
Board dynamics and meetings
There were some notable differences between the C-suite leaders and board directors on whether or not board members affect meeting agendas and the level of preparation for each meeting. For example, 81% of the C-suite respondents agree that board members are allowed to affect the agenda in advance of formal meetings, compared to only 62% of board members who agree with that view.
Do board members come prepared for each meeting? Fewer C-suite leaders — just 75% — answered in the affirmative, compared to 86% of board-member respondents.
Overall, the independent board members feel very strongly that the board does a good job discharging its fiduciary duties and sets the tone for encouraging candor in communications. The C-suite leaders are less convinced about this point.
Final thoughts: Our survey exposes management and board misalignment on several critical issues, usually an indication of a growing underlying problem within an organization. Left unaddressed, this lack of alignment can lead to the board questioning management’s judgment, openness and transparency, as well as management feeling a lack of trust from the board of directors.
While there are glaring rifts, our survey also shows several areas of alignment worth noting. For example, both TMT C-suite and board members recognize the same threats to growth prospects in the next two to three years: new and emerging technologies and access to capital and/or liquidity. Talent recruiting, retention and skilling are also identified by both groups as major threats and priority areas.
In areas where we noted meaningful divergence, we see significant opportunity for TMT organizations to enhance director engagement with management and improve overall board oversight. To prevent these issues from metastasizing, we recommend that companies take these actions proactively:
- Sharpen focus on innovating and managing compliance risks.
- Expand succession-planning and leadership-development strategies to address new and emerging employee expectations, working models and other talent-management realities.
- Ensure that the board is aligned with management on organizational resilience.
- Self-assess board performance.
To learn more about the board governance survey, read the global report here.
