Is trust between boards and management in decline?

Is trust between boards and management in decline?

Is trust between boards and management in decline?

Data insights

Data insights

2 Jun 2024

2 Jun 2024

Based on more than 90 extensive interviews we had late last year with chairs, directors and senior managers across Europe, we think that may well be the case.

Based on more than 90 extensive interviews we had late last year with chairs, directors and senior managers across Europe, we think that may well be the case.

The signs of increasing distrust between boards and management, especially senior executives, that surfaced during our comprehensive external board review period seem counterintuitive at first. After all, one of a board’s fundamental responsibilities is to appoint the CEO, who then selects senior managers. And trust is clearly central to that process.

Nevertheless, trust can be undermined in a number of ways. For instance, responses indicated that once a board or individual directors lose confidence in an individual executive, they sometimes dig deeper than they need to. Executives can perceive that directors are meddling in the management domain, rather than staying within their governance role.

Also, some managers described their boards as being overly operational and not strategic enough. This sentiment is probably influenced by the fact that many directors are former CEOs or senior executives and are accustomed to being deeply involved in operational details.


Detailed analysis

Additionally, managers reported increased requirements from boards to produce extensive reports and data, indicating a high level of scrutiny and a demand for detailed analysis. But on the other hand, our interviews revealed that boards don’t see themselves as being excessively demanding. Instead, they occasionally noted that managers may be too diligent in their reporting, particularly during high-pressure periods. This misalignment suggests a lack of mutual understanding and possibly a breakdown in communication. In these situations, both the chair and the CEO must clarify and guide expectations as well as manage resources wisely.

During times of significant change, such as we’ve seen over the past few years, management may face an uphill battle to meet every demand from the board. This can make the board seem too critical from a management perspective while boards believe that getting more information from management is essential to fulfil their responsibilities to shareholders.

This shift, driven largely by global economic challenges and the need for organisational transformation, has pressured many management teams. They struggle to meet forecasts and develop strategies for future growth. Consequently, boards have become more detail-oriented and, in some instances, have adopted a more hands-on approach. This evolution has altered the atmosphere in the boardroom and the dynamics of collaboration among top-tier teams significantly.

At the end of the day, the board is there to help management shine, not run the organisation on a daily basis. There’s a fine line between asking pertinent questions and overloading management with unnecessary work. So, the board needs to self-regulate and fully understand the impact of the tasks that it assigns.


Mutual trust

Despite these early warning signs from our in-depth interviews, our latest platform data still shows a high level of trust between the board and management. In fact, in 2023, more than 95% of BoardClic’s users, i.e chairs and board directors, agree with the statement that there is mutual trust between the board and the management team—an increase from 93% in 2022 and 2021. Only 1.5% of respondents disagree with that statement.


Furthermore, 93% agree that the division of authority between the board and management is clear, with a surprisingly low share of 3% disagreeing. This improved from 88% in 2022, when more than 5% of users didn’t perceive the division of authority between board and management as clear. Having said that, 2022 results were doubtless affected by several significant events, including the pandemic and its aftereffects, Russia’s invasion of Ukraine, energy security concerns, supply chain disruptions and geopolitical tensions.


Two factors

We believe there are two factors that explain the apparent discrepancies between what we learned in our interviews and what our platform data from 2023 shows.

  1. The interviews are essentially a leading indicator of what our platform data will reveal for 2024.

  2. Individual responses from interviewed chairs, directors and management team members are more subjective than the collated data from thousands of responses on our platform.

Time will tell. But, regardless, it’s evident that higher-functioning boards tend to foster trust, letting executives feel comfortable in evaluating performance, effectiveness, composition and discussing mistakes. Traditionally, board reviews focused on directors' feedback on each other, the chair, and the board as a whole. Today, high-functioning boards seek management's perspective on director performance and consult auditors, key investors, or other stakeholders to gain a broader understanding of board performance.

The chair is central to facilitating a balanced and effective board-management relationship. It’s crucial for the chair to have thorough talks with management after board meetings. This leadership is key—because not every request from the board requires an advanced data analysis.


About this research

Our data is derived from nearly 2,000 board reviews conducted on the BoardClic platform. The platform includes feedback from 5,000 board members across 500 organisations in 50 countries around the world.

This specific dataset, which focuses on trust and authority in the boardroom, is drawn from board reviews that took place on the platform between January 1, 2021, and December 31, 2023. It reflects the opinions and attitudes of chairs and board members in listed companies, financial institutions, private equity and venture capital firms across Europe. In total, 3,209 individuals responded to the question about mutual trust and 3,362 responded to the question about division of authority.

Talk to one of our experts today to discover how BoardClic can help promote trust and alignment in your boardroom. Ready to experience BoardClic firsthand? Try it yourself at boardclic.com/demo.

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