Boards of directors are increasingly prioritizing their role in the oversight and governance of human capital. They’re focusing on developments in labor markets, skill shortages, succession planning, retention, employee wellbeing and costs. And they’re watching new technologies such as AI, quantum computing and geopolitical risks. They view these efforts as critical to effective business judgment and necessary to company strategy and creating competitive advantage.
Following the global pandemic and the Great Resignation, tightening labor markets, inflation and recession concerns, remote work and technological disruption, effective boards today view addressing people issues as fundamental to strong stewardship – how companies create and preserve long-term value.
A survey of global board members conducted by WTW and Nasdaq found that board members view human capital as a high-priority topic. WTW's 2024 Global Directors’ and Officers’ Survey Report also found that boards and executives see employee health and safety as a top organizational risk. More than 90% of S&P 100 companies have broadened their compensation committee's charter to include broader human capital management. This may include succession planning, leadership development, broad-based compensation and benefits programs, and diversity, equity and inclusion efforts. Human capital governance is now also a core element of the enterprise risk management framework in a growing number of organizations.
With thanks to a collaboration with Directors & Boards and WTW’s Don Delves and Ken Kuk, effective boards take the following actions regarding human capital governance:
The dynamic business landscape requires boards’ increasing focus on human capital governance and risk. Effective boards recognize that addressing human capital issues is fundamental to long-term value creation. By leading strategic discussions, clarifying accountabilities, considering relevant metrics, involving the right stakeholders and maintaining a clear distinction between governance and management, boards can ensure that human capital management aligns with the company's overarching priorities. This holistic approach enhances organizational resilience and drives competitive advantage.
A version of this article originally appeared on Forbes on September 16, 2024.
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