A friend giving a talk on digital transformation and digital cities asked me recently if I had any statistics on how many corporate boards understand the importance of having specific technology experts as board members. My first reaction was to think that this demand would be very easy to answer. I assumed there would be plenty of statistics on this topic, since new technologies are having a critical strategic impact on so many companies.
To my surprise, I could not find much data on this topic. The only relevant sources I found were a 2015 SpencerStuart report quoting that nearly ten percent of S&P 500 companies have established a technology committee, a 2016 Accenture study that reports only six percent of the directors overseeing the world’s biggest banks have any technology experience and a more recent Accenture point of view on female directors and technology that showed 9 percent of maleand 16 percent of female directors had professional technology experience. Those numbers were much lower than I expected, especially the banking statistics. I looked at the Accenture report in more detail. The study tallied the number of directors with either senior technology experience (such as Chief Information Officers) or senior experience at a technology company (such as non-executive directorships) in 109 global banks and found that just six percent fulfilled this criterion. The US and the UK scored highest with 15.7 percent and 14.3 percent and the French banks scored just 3 percent. 43 percent of the 109 banks analyzed have no directors with professional technology experience.
Such low percentages surprised me because banks and insurance companies are part of the large group of industries being most impacted by new technologies; on-line banking, all digital banks, social-media consumer marketing, bitcoins, to name a few examples. Financial institutions are now actively leveraging technologies to create value and differentiate themselves from the competition. These technologies are greatly impacting their business models and operations. They are in part becoming software developers and network operators, investing large portion of their budget in technology-related projects. Technology project management, software delivery, cyber-security and business continuity are some of the key risks they encounter, all related to technology.
The facts that even banks only have an average of six percent of board members with technology experience, that statistics are scarce on this topic, and my own experience as a corporate director lead me to conclude that many companies do not have enough technology expertise on their boards. Companies that develop new technologies for a living, such as Google and Apple, would be an exception to that rule, as supported by the Accenture point of view, showing more than 40 percent of directors with professional technology experience in tech companies.
One can argue that not all companies need technology expertise, for example companies where technology is more an enabler than a strategic tool, but even there I would maintain that technology savviness on any board greatly contributes to success. One can also argue that boards can choose to get advice from outside consultants or from management. But with the growing strategic importance of new technologies, the rapidly accelerating pace of the introduction of disruptive technologies, and the increased specificity in the skill set required to understand and incorporate complex new innovations, it is clear that using outside experts alone is not sufficient. Securing a critical level of internal board understanding and foresight on technologies is necessary to meet fiduciary duties. It ensures that directors correctly grasp the information required to make key business decisions. It allows boards to have robust discussions about technologies and strategies, to correctly oversee the IT budget and portfolio decisions, to drive innovation, and to predict the future of the business and adapt with informed agility in this rapidly changing environment.
Does your board have enough technology expertise? Do you have other statistics on this topic to share? Why are there so few technology experts on boards? Is technology expertise part of your board competency matrix?