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Digitization on

Boards

CBS

March 2016

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Introduction

Digitization on Boards – Amrop 2016 study

Are Boards and Non-Executive Directors ready for the digital disruption?

The Technology & Media Practice Group within Amrop has analyzed the background of 1,280 Non-Executive Directors, which covers

Chairmen, Vice Chairmen, regular Board Members and employee representatives.

The study investigates to what extend Technology/Digitization is represented in the boardroom; the scope has been:

• The top ten stock listed companies revenue wise

• 11 countries (ten European and the US)

• 110 Boards have been analyzed

• The profile of 1,280 Board Members has been mapped

• Chairmen, Digital Board Members and non-digital Board Members have been interviewed across the countries.

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Introduction

Definition of a technology/digital profile:

A person (Board Member), with professional operating experience from a company within: Software, SaaS, hardware, infrastructure,

internet, digital, online, social media. He or she has worked in such a company within the past five to ten years as a minimum.

Alternatively a CIO, CDO or CTO in an operating role from other companies.

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Interview Factsheet

Proportion of technology/digital profiles in the

boardrooms

*All other companies excluding technology companies

Technology/digital profiles in the boardroom

Country Technology

companies All other

companies*

Denmark 58% 2%

Finland 67% 4%

France 0% 4%

Germany 55% 5%

Italy 8% 6%

The Netherlands 55% 7%

Norway 56% 4%

Spain 27% 2%

Sweden 30% 8%

UK 23% 3%

US 13% 7%

Total Average 36% 5%

Proportion of technology/digital profiles in the boardrooms

Technology companies All other companies

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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Interview Factsheet

Number of technology/digital profiles in the industries

Technology/digital profiles in the industries

Proportion of technology/digital profiles in the industries

(indicated in percentage)

Industry Technology

profiles

Total number

of Board

Members

Technology 66 181

Energy & Utilities 15 307

Financial Services 13 304

Industrial &

Manufacturing 11 227

Consumer Goods

& Retail 10 205

Life Sciences 2 30

Other 0 20

Professional

Services 0 6

Total 117 1,280

36.46

6.67 4.89 4.88 4.85 4.28

0.00 0.00

9.14

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Findings

• In average 9% of Non-Executive Board Members have a digital background.

• Only 5% of Non-Executive Board members in non-technology companies have digital competencies (Denmark 2%).

• Digital penetration is too low in critical sectors.

• Only four listed companies have an official Technology/Digital committee.

Based on this, we question if the Boards in non-technology companies are ready and prepared for the role

as a proactive sparring partner for the Top Management Team and digital disruption in general.

Digitization on Boards is still in its infancy

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Findings

• Disruption and innovation from within – important to build the Corporate Garage

• Developing a risk tolerant culture to stimulate digitization and disruption

• The role of the Nominating committee – it all starts here

• Managing online Security is a challenge for digital transformation

• Technology/digital committees can be a fast track to digital competencies

• Onboarding the Digital Non-Executive Directors is critical for success.

.

Key findings during our interviews with Chairmen and Board Members

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Leaders

For

What’s

Next

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Findings

Disruption and innovation from within – Building the Corporate Garage

• How can slow paced big companies innovate faster in the digital space.

• Building a ‘corporate garage’ and embracing a more open and innovative management style and less hierarchical structure. Trying to

integrate agile entrepreneurial behaviors.

• Creating new partnerships with new players and managing large infusions of new leadership talents. These are some of the topics, the

new digital Board Members can bring to the table.

• Digital Board Members described how they conducted the role as a digital catalyst . They are often seen as a role model for digital

innovation by the Management Team and talents in management levels below.

Key findings during our interviews

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Findings

The role of the Nominating committee:

In many European countries, the Nominating committee evaluates and appoints new Board members on behalf of the shareholders. If the

Nomination committee does not understand the importance of future digital agenda and is not able to see how this will impacts the

company, the Nomination committee will be roadblock for digitization of the Board. In our view, the shareholders and the Chairman of the

Board have an obligation to push for a competency based Board and one of the key competencies is digital experience and digital

understanding in business context.

Technology/digital committees

Several Boards are already familiar having committees and Advisory Boards to gain external knowledge, inspiration and innovation faster

and in a different more informal governance structure. In the digital space, this will be an opportunity for Boards to be at the forefront and

gain insights. In our study, four companies have official Technology/Digital committees. Two in US, one in Germany and one in Spain.

Two of the companies are within the technology sector General Electric (GE) and Deutsche Telekom. Walmart in the consumer industry

and Banco Santander, in the Financial Services industry. We are seeing an almost complete absence of this route into the digital eco

system across European countries and across industries.

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Findings

Developing a risk tolerant culture to stimulate digitization and disruption

• Too much focus on risk management, applying a tight governance structure combined with the fear of failure creates a culture, where

innovation and digital disruption has difficult circumstances. This is a risk in it selves.

• How can the Board manage the balance between sufficient level of risk management and the need for digital innovation.

• Striking this balance and changing the attitudes will be a key future task for all Board members, but especially the Chairmen.

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Findings

Managing online Security is a challenge for digital transformation

• Online security as a challenge online security breaches, theft of personal data, or commercially sensitive information and damage to IT

infrastructure are universal threats.

• They have a significant financial and reputational impact on companies.

• When we move to a digital and transformational way of working, it will create a security challenge.

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Findings

Onboarding the Digital Non-Executive Directors

• Many Non-Executive Board Members might think the new digital Board Member is a pure play digital profile in his/her early 30s, but

this is more the exception than the rule.

• They are 10-15 years younger than the average Board Member in Europe, they are used to a more agile environment faster pace and

more customer centric viewpoints.

• Beside their fresh digital experience and perspective, they often bring hand on experience with large transformations – both IT and

culture wise.

• The most successful digital profiles also have a broader international leadership experience and not afraid of challenging status quo.

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Leaders

For

What’s

Next