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The Corporate Director Podcast
What Directors Think 2026: AI, M&A and the next era of board oversight
00:40:17
In this episode of the Corporate Director Podcast, Diligent Institute’s Kira Ciccarelli sits down with Melanie Nolen, Head of Research at Chief Executive Group, to unpack the latest findings from the long running What Directors Think survey of U.S....
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- [00:00]
Melanie Nolan
Foreign.
- [00:09]
Podcast Announcer
Welcome to the Corporate Director Podcast where we discuss the experiences and ideas behind what's working in corporate board governance in our digital tech fueled world. Here you'll discover new insights from corporate leaders and governance researchers with compelling stories about corporate governance strategy, board culture, risk management, digital transformation and more.
- [00:35]
Dottie Schindlinger
Hi everybody and welcome back to the Corporate Director Podcast, the voice of modern governance. My name is Dottie Schindlinger, executive director of the Diligent Institute and I'm joined once again by my amazing co host Megan Day, strategy leader here at Diligent. Megan, how are you doing today?
- [00:51]
Megan Day
I am doing great, Dottie, and you know, ready to rant today on a very interesting piece of data coming out of Agenda for those not familiar. One of the leading publications for board governance news and and research. And we just saw one of the biggest waves of board turnover in probably forever. Nearly five times more directors stepped off US public company boards in 2025 compared to the year before. And that goes against everything I've come to know about board members in succession.
- [01:31]
Dottie Schindlinger
Okay, so Megan, you sent me this article. I had a chance to read it and first of all, do I, do I get like partial credit for years ago? Having said, I feel like this job is crummy and eventually we're going to start to see directors stepping off in droves. Was I right?
- [01:46]
Megan Day
I mean it's interesting, they talk about a number of different factors, you know, M and a huge contributor companies are contracting, merging, going private. Those board seats go away. Shareholder activism is also, you know, has been for a long time. There's been a lot of settlements, more than in recent years involving negotiation around board seats and those things. But I don't know you, I think there is something about sort of performance scrutiny being higher than ever. Even drivers like retirement ages that like organizations have relatively recently started to, to put in place even you know, tighter processes around nom gov and assessment that we have long talked about on this show.
- [02:33]
Dottie Schindlinger
Well, certainly that's you know, all the different things that are playing it. Also, it also mentioned in this article that there were a handful of directors who left because they wanted a better work life balance or they were, they took a different job. Like they got, they got hired into a C suite role and decided to drop their board seat, which I find kind of fascinating. I mean again, look, there's a lot going on here so we can't just pin it on one thing. I think, you know, there's a few things. One, of course being M and A, we saw a huge uptick in M And a activity not too surprising, you lose directors because often you collapse the board, right? So you, you have two companies, you merge, you have two boards, you have to merge them into one board. Some people are going to step off that. That's just kind of the way that works. But it is also interesting to note that we have more directors aging out now. And frankly, that's kind of just the way the demographics fall. I mean, you look at the baby boom generation being the largest generation for a very, very, very long time. A lot of those directors are now getting to their top age limits. You know, a lot of boards still have age limits in place and some people are stepping off. So that's not so surprising. It's all the stuff in between that really interests me. It's the stuff where people are leaving by choice as opposed to having to leave because of some natural attrition or some evolution of the company or something like that. And that feels new to me. That feels like, I mean, especially if you go back, look at their chart, the chart that they have in this article. And by the way, we'll put a link to this great article on the podcast page. You know, back in 2020, the net change of number of directors was almost 600 positive. And now you've got almost 400 negative five years later. I mean, that's, that's really interesting. That's very interesting to me. So, Megan, I'm glad you, I'm glad you grabbed this one.
- [04:17]
Megan Day
Do you feel like it's a one year spike or are we entering some sort of new era where this type of turn turnover is going to be the new norm?
- [04:27]
Dottie Schindlinger
Well, it's a question, isn't it? Because there's certainly a trend line. Yeah, it's, it's, it's a good question because I mean, if you look at this chart, there's a clear trend line. I mean it, you know, you had 600 net positive in 2020. You only had like 250 net positive in 2021. Then starting in 2022, it's negative and it gets really steeply negative in 2025. Like it was down less than 100 in 2022, 2023, 2024, and then boom, 2025 hits and there's a, there's a stampede for the door.
- [05:01]
Megan Day
The other thing where my mind goes, because, just because this is my role on this podcast, it brings me back to this like dystopian book that I read last year in which the world is basically controlled by four companies and we each live in A quadrant that.
- [05:17]
Dottie Schindlinger
Wait, so that was called like the New York Times, honestly? Yeah, yeah, it's interesting, Megan. Well, you know what, it'll be interesting to see if this continues for 2026, if we see the same kind of trend line, or to your point, if it's just a one year spike. I wonder if next year we still see a decline, but not quite as precipitous a decline. I would be willing to bet a lot of this had to do with the uptick in M and A activity.
- [05:42]
Megan Day
This year, which they're predicting for 2026 too.
- [05:45]
Melanie Nolan
So.
- [05:46]
Dottie Schindlinger
Fair, fair point. So, yeah, I mean, I don't know, Megan, it. To me, it's all part of a broader conversation that we've had a couple times in the podcast about what is going to happen to the public markets anyway. I mean, you're seeing so, so many companies delay or just never go out do their IPOs because they're, they're perfectly fine and happy and can raise plenty of capital as a private company, you're seeing lots of public companies make the decision to go private because being public is harder and involves more scrutiny and this, that and the other reason. And the number of public companies is shrinking and their average length of lifespan is shrinking. I don't know what happens from here. I mean, to me it sort of feels like at some point, at some point, isn't the SEC going to turn around and go, we got to do something about all these private companies and we have to have a way to protect investors. I mean, there's a thriving private investment market now. Thriving? Thriving.
- [06:44]
Megan Day
Oh, it's thriving.
- [06:44]
Dottie Schindlinger
At some point. At some point, don't you think we need to have a couple of protections in place for investors in the private market? She said with a question mark at the end of her sentence. Oh, that sounds like naive optimism to me, Megan. But maybe. But maybe.
- [07:01]
Megan Day
Well, maybe. What I wouldn't give to know what the average board member is thinking these days.
- [07:07]
Dottie Schindlinger
What a good segue, Megan. Well done. I'm so glad you asked that question because we had the opportunity to have an interview with our very own producer, Kyra Ciccarelli, who also happens to be the head of research for Diligent Institute and one of the co authors of this year's what Directors Think report with Corporate Board Member magazine. She had the opportunity to speak to the key author, Melanie Nolan. And so let's give that interview a listen and then we'll come back and we'll ask Kira some questions about what directors think.
- [07:42]
Kira Ciccarelli
Joining us on the corporate Director podcast today is Melanie Nolan, Head of Research at Chief Executive Group. Melanie, thanks for joining us on the show again. I can't believe it's been a whole year.
- [07:51]
Melanie Nolan
I know it feels like time is just flying by, but thank you for having me, Kira. I always have such fun time with you, chatting about all the data we do every year.
- [08:00]
Kira Ciccarelli
Absolutely. So before we dig into our main topic for the day, for some of our listeners who may not be familiar, why don't we start by having you just give our audience a quick intro and. And tell us a little bit more about your role at Chief Executive Group.
- [08:12]
Melanie Nolan
Sure. So I am Chief Executive Group Research Director, which means I oversee all of the quantitative research that we do across the leadership team. That means beyond boards, we also include CEOs, CFO, CHROs, basically decision makers at US businesses. Our research here is absolutely benchmark driven, meaning we conduct research with the purpose of producing data that the board and the C Suite can use. We do this often during the year and we try to touch on a wide variety of topics that, you know, they tell us they're struggling with, whether that is regulatory changes, macro issues, workforce matter, governance concerns. We really cover all the issues that could impact the C Suite. We develop our surveys here to make sure that we uncover the core of these challenges and how companies are overcoming them. What they've tried, what's worked, what hasn't with their planning. And the idea is to bring back considerations and ideas to the board and the C Suite community to help them with their business.
- [09:16]
Kira Ciccarelli
Great. And to that point, every year, corporate board member conducts a survey of US public company directors called what Directors think. This is a project that we've been thrilled to collaborate with you on at Diligent Institute for the last five or six years now. I think it's been at least, although I know you've been conducting the survey for a lot longer than that. So tell us a little bit more about the survey and its history and some of the basics of the 2026 edition.
- [09:39]
Melanie Nolan
Yeah, absolutely. And yeah, you're right, it's been six surveys together, so seven years in total. We've been working together, but what directors think is a lot older than that. It's probably one of our longest running surveys dating back to 2002. It is probably also one of our broadest in terms of scope. So typically our surveys here touch on one issue at a time. For instance, we're surveying CFO's right. As we speak on the challenges they face with rising health care plan cost. So they are Often one topic surveys, but what directors think is entirely different. So it covers all aspects of governance. We dive into much of what goes on inside the boardroom. Their top concerns, priority issues, biggest opportunities, who's sitting at the table, who should be sitting at the table, how directors are allocating their time, where they go to for education. I mean, it runs the gamut. So one thing that's really interesting about the history of what directors think is that we try to repeat some of the questions every year to get trend lines on how all of this is evolving over time. And it's super interesting to see how boards get up to speed on emerging issues because as you can imagine, since 2002, there's been a lot of things that have popped up on the board agenda that weren't there to begin with. Just an example of that. For the past decade or so, you know, cybersecurity has been one of the top concerns for directors, if not the top concern for directors. So this year, all of a sudden, we're seeing it down the list of issues that are keeping them up at night, which is one of the questions we ask. And I just love finding these nuggets of data that show that something is changing. And that was one of the big findings for me this year. But to see it down the list, not because it's no longer a concern, by the way, but just because there are other bigger concerns on the table.
- [11:27]
Kira Ciccarelli
Absolutely. And I love having this piece come out every year in January because it's just such a nice, timely piece of coverage to really set up the year ahead. And I know at the institute we use it as kind of a bellwether where we're maybe going to take our research next. So because it's so wide ranging and because it's got this year forward looking outlook, we're able to get a really nice look at what some of the big priorities are. And like you said, that trend data is really, really crucial as well to kind of see how different topics have been trending on the agenda over the last few years. And there's a lot changing and a lot to keep track of. So from there, I think we can pivot into the key findings. And I know every year one of our big marquee questions is about organizational priorities for 2026. So tell us what topped the list this year.
- [12:16]
Melanie Nolan
Yeah, of course, I don't think it's going to come as a surprise to anybody to find growth as the top priority this year, as it is usually most years. I think the big difference is what kind of growth directors and their leadership teams are looking at. And this year the top priority is growth through M and A. Specifically last year was growth as well, but it was growth through new products and innovation. So a little bit of a pivot here, though. It is still growth, we can argue. But M and A is definitely taking a lot of space in our survey this year. It's not only a top priority, it's also the second area where companies are expected to fly focus their capital allocation just behind AI and tech integration. And interestingly though, even if M and A is the top priority this year, directors are still placing AI conversations as more of a priority for the board than M and A talks. So I think that we have to be careful on the questions the way they're asked. The top priority here we're asking directors, what's the top priority for your organization? M and A, and what's the top priority for your board to discuss? Then that was AI.
- [13:26]
Kira Ciccarelli
Right. And I always love looking at the confluence of those questions. Right. What's the organizational priority versus what the board wants to talk about next? And I hit this point pretty hard last year. I remember them bringing in the third piece, which is what are they having the most trouble overseeing? So seeing what overlaps there and where some of the differences are is really interesting. I know. I was particularly interested to see growth through M and A be that number one organizational priority because we recently fielded a survey on transaction readiness a little bit earlier in 2025, I guess in Q2 of 2025 into Q3, and we were definitely seeing M and A a little bit lower on the list there as far as looking at different ways companies were trying to grow and what kind of their primary ways to do that were going to be. So I think seeing M and A maybe surge a little bit in terms of priority order has been interesting. And you mentioned a little bit there, AI and deploying AI across the business. So I think one of the biggest takeaways from the results this year was that intense focus around AI deployment. I know you touched on some of them a little bit briefly, but what were some of the biggest AI findings in the survey this year?
- [14:38]
Melanie Nolan
Oh, no, that AI was everywhere in the survey. It came through nearly every question we asked. It was second among the most pressing issues for boards to address. It was second for 2026 strategic priorities. It's first in capital allocation for the year. And perhaps the most surprising to me is AI expertise is now the fourth most sought after qualification for new directors to join a public Company board. It is, I think the topic right now, looking at the survey results has permeated every part of the business. Finance, HR strategy, IT, R&D, legal. I mean, it's everywhere on the table. And I think that two things, when I'm looking at the data, two things surprised me here a little bit. The first one is I'm happy to see that it's viewed as an enterprise or strategy issue, not a tech issue. When cybersecurity became a concern on board agenda a decade ago or so, it was more of a tech sector siloed issue. Clearly that's not the case here with AI. So that's really interesting to view it that way. But I think most important in the data what we're seeing is that even though directors are viewing AI as an opportunity, they're not viewing it so much as a risk. There were less than a quarter, I think it was 19% if I recall, who said they view AI as having the potential to upend their business model. And then I think about the same number, perhaps a little bit more, perhaps about a quarter say that they include AI related risks in their scenario planning exercises. So I think that there's an interesting gap that showed up in the results here about AI that it is so everywhere in the conversation, but not as much as a risk. And that's interesting to explore from Mino.
- [16:21]
Kira Ciccarelli
Yeah, that is really interesting. I know that together you and I have been asking questions about AI on what directors think and on the director confidence index surveys, I think maybe as far back as 2020, 22 or 2023. So it has been fascinating watching directors view of the technology fluctuate and where it's kind of ranking on the priority order. And are they thinking more about the risks, are they thinking more about the opportunities? What are they thinking about when it comes to integration? And I think we're seeing that play out in surveys that we've conducted in other regions as well. So definitely fascinating to monitor to that point. You said that directors maybe aren't viewing AI as in more of a risk lens at the moment. So what are some of the biggest risks directors are keeping their eyes on in 2026 and how are they saying that risk oversight is evolving as a result?
- [17:11]
Melanie Nolan
Yeah, I think that the risk question is also one, just like the opportunity one or the priority one, it's one that you need to be careful about how it's worded. So we asked them what the biggest risk to their growth strategy, I believe. So we asked them what the biggest risk was to the strategy and not necessarily the biggest risk happening to the business. And on that note, a sudden downturn in the US Economy was by far the number one top risk that could derail the strategic plan for the year. 55% chose it as their top risk. And behind that, way behind that 31% was the second item on the list. And that was a black swan event. So we're talking about very concrete risks that, you know, directors have seen before and they know that it can definitely derail plans. So I think that it's not necessarily a surprise to see it there ahead of everything else. I'm not necessarily discounting the other risks on the table. I think that. But I think that they can deal with a lot of the other stuff if this at least goes well.
- [18:12]
Kira Ciccarelli
Yeah, it's sort of a, a little bit of a retrospective answer. I think we got out of directors this year, so I think we saw what wild swings in economic policy can do for director confidence and for what, how it can upend their business and their strategy. And I think black swan event is undoubtedly informed by our experience with the pandemic in the last five years. So I think definitely a little bit of a take stock moment from directors when they answered that question in particular this year, pivoting a little bit. We also ask a lot of questions in the survey about how boards think they can improve both in composition and in process. So what were some of the key findings this year in that regard? And how are boards maybe trying to become a little bit more future proof?
- [18:56]
Melanie Nolan
Yeah, that's so interesting. It feels like I say this with every question you ask me, but I find it fascinating. But yeah, I mean, based on my experience, directors have always been opposed to having specialists on board, if we can call them that, like those with a very narrow path in their careers. They've always thought members with broad business acumen, industry knowledge, a CEO or a C suite background of some sort of. Those have always topped the list of the most important attributes to sitting on a public company board. Basically, a member needs to be able to talk about every aspect of the business. And those, those attributes have always been at the top of the list, and they still do this year. But AI expertise is the one that surprised me again because it's showing up right there in fourth place, right behind those three critical, you know, no negotiating aspects of a board member's background and it's outpacing every other area of specialized knowledge. And I find this interesting because to me it's, it screams not that directors are wanting Some an AI expert, whatever that means, to sit on their board, but that they're needing more education on this matter. They're not right now with their composition, where they're not allowed or not allowed, not able to speak to those issues as well as they would like to. And I think that just shows that they're looking for somebody who can work also bring that knowledge to the boardroom. Not just that knowledge, but that and then the whole C Suite experience and industry and business acumen.
- [20:29]
Kira Ciccarelli
Yeah, it's interesting, and I'm glad you called that out, because I like to think of those three traits that you just mentioned that typically take the top spots. And what directors are looking for in their next board member is more of a yardstick. So it's not necessarily about whether AI expertise ever takes that number one spot. Right. But it's how it's performing in relation to things like C Suite experience and industry experience and things like that. So to see it that high up, I do think is incredibly noteworthy. Zooming out just a little bit as well. We also worked together on a quarterly poll survey of US Public company directors on their confidence in the economy and kind of regional business conditions. And I know that we conducted our Q4 edition to kind of cap the year off just a couple weeks ago in late December. How do those findings align with what we've seen come out of what directors think?
- [21:21]
Melanie Nolan
Well, I think they align very well. The beauty of the Director Confidence Index is it's short, it's quick, and it's really timely. So we do it four times a year, which means that we have more timely pulse of what changes. And so we'll often take data points from what directors think and revisit them throughout the years, especially if something's happened in relation to something they had already flagged as a risk or an opportunity or something of the sort. Not wishing that on anybody. But if, if there was a downturn in the US Economy, would be a good time to go with the Director Confidence Index and say, okay, hold on, you know, what are you doing about this? What's the next step? And did you prepare for it because you had flagged it as a top risk? So we're assuming that there are some plans being laid out for what if this happens, what's our next move? So I think the Director Confidence Index is a great source of fresh data. And then, of course, we had asked them about AI, as you mentioned, several times in the past, if I'm to pull something from there, that was reflected also in what directors think is the way the directors themselves use AI. So they're definitely advocating for the business digging into how can we drive value from this and how do we integrate it across the business? But how are they doing it in the boardroom? How are they using AI for their own board work? And I think that that's still something that's lacking in the data. We're finding that they're not using it that much. Maybe a couple of dashboards or board books here and there, that's data driven. But there is great potential for them to use AI to help their oversight. Dig deeper into the vetrics. And I don't know if this is something that's a risk matter of AI not looking at the data correctly or the correct set of data, or if it's a matter of getting the right tools, the right training, the right data flow from the leadership team. I really don't know what the issue is here, but definitely there is several of our data points that show that boards rarely use the benefits of AI to their advantage in the oversight process.
- [23:26]
Kira Ciccarelli
Right. And it's such a great point. One of the things that stuck out to me the most in our most recent issue of the Director Confidence Index was we hit our five year anniversary of running that survey. So we started fielding it in late 2020 and we asked directors what has changed in that amount of time as we were kind of reflecting on how long we've been running the survey for. And it's really just the scope of the issues under their purview and the amount of things that you have to be able to oversee and link together and connect it back to your strategy and understand what the impacts might be in addition to all the other parts of their jobs as directors. Right. And I think linking that to their experimentation with AI is so important. And I really think the next couple years are going to be very eye opening as far as what can the technology do both for businesses as a whole and how directors are going to have to grapple with the oversight of AI use at their businesses. But also that other piece of how are they themselves going to be using the tools and how can they use it to improve their oversight capabilities given that the job has become so expansive. So lots of fascinating stuff. Any other findings from the survey that surprised you or that you think we should touch on that we haven't already?
- [24:45]
Melanie Nolan
Actually, there is one thing that just is nagging me about findings. It just strikes me as an easy win. But directors have been consistently telling us now for, I don't remember how many years? But they wish they spent less time on management presentations and PowerPoints and basically rereading the board book on site. And they want more time to just discuss what's in it, discuss the strategy, ask questions, probe further. And I have trouble every time we ask this question and these answers come up. I still don't understand why this has not been remedied. It seems like an easy thing to do and maybe I'm completely wrong, but again, this year we saw the same results. We asked them what could improve their oversight process, more frequent or more structured risk discussions, clearer linkage, as you mentioned earlier, between risk oversight and strategy setting, improved management reporting and even they even said enhanced use of AI powered data and technology tools. So it seems to me that this is an overhaul internally and such an easy thing to check off the list to improve the oversight process. And I don't understand what's keeping it from happening.
- [25:55]
Kira Ciccarelli
Yeah, it is interesting. That's something that we do see year after year and every time we ask about it, that's what comes up. And then I think sometimes in other questions we find that directors are asking for more data. They want more data or they want better data. So maybe that's contributing to why things start to feel more like a readout and less like a strategic discussion. But I agree with you and I think we saw in one of the questions we asked about whether or not the board meetings themselves were more retrospective, more balanced or more Forward looking. Only 12%, I think, characterized their meetings as mostly forward looking. And then when we followed up on that in the next edition of the Director Confidence Index, we found that boards on average do want their meetings to lean more forward looking rather than backward looking. So definitely a gap there and maybe something AI can help out with and try and get that presentation time down a little bit tighter.
- [26:53]
Melanie Nolan
The one thing I am hearing from directors a lot on this is they don't necessarily, when they say they want more data, they don't want a data dump. I mean they don't want just leadership to throw data at them and figure it out. They just want better data. So I think that that's where AI can come in and help clean it up and link, connect the dots, so to speak.
- [27:11]
Kira Ciccarelli
Yep, that's a good point. So where can people go to find the full results?
- [27:15]
Melanie Nolan
So there's a lot of places it's going to be on boardmember.com under the research section. It's also going to be in the first issue of Corporate Board Member magazine where we take a different take at it where it's a lot more editorialized with director interviews, speaking to the data. And then we're going to host two webinars on this. The details will be on the recording page, if I'm not mistaken, Kira. But we're going to host two webinars because there's so much to dive into that we couldn't fit it all into one. So, you know, and then throughout the years we're going to be releasing articles, very short pieces that tackle one topic at a time. And the findings from the survey.
- [27:54]
Kira Ciccarelli
Yep, absolutely. So we will be sure to link to all of that research on the podcast page where you'll be able to listen to this episode as well. And as Melanie said, get ready to be sick of the what directors think results because we will be talking about them a lot. There's a ton in the survey, There's a ton that we didn't get to in this interview and there's a ton in the report and in the magazine coverage as well. So looking forward to all of that coming out throughout Q1 and beyond as well. So before we head out, Melanie, just a couple questions that we'd like to ask all of our guests here on the show. What do you think will be the biggest difference between boardrooms today and 10 years from now?
- [28:29]
Melanie Nolan
Well, I mean, if you think about it, companies have dropped the 10 year plan and to the five and now down to the three, four year. I mean, I don't know that I can predict, but boardrooms are going to be like 10 years getting harder. It's getting harder. I don't even know if I can say what's going to be like five years from now. One thing I have noticed gradually is the degree of responsiveness, responsiveness that's required today. So I'm not so sure that serving on four, five, six boards now and having a day job makes sense for most directors. So I doubt that in the future, unless we find a new way of doing business and governance, I don't think that sitting on more than two boards is going to be commonplace anymore.
- [29:09]
Kira Ciccarelli
Got it. I think that as far as making your predictions go and not being able to look quite so far out as 10 years, I think that's a pretty good one. And I agree with you. What is your current passion project?
- [29:20]
Melanie Nolan
Oh, that's interesting. I am just starting to learn German. My goal is to speak as many languages as I humanly can and this will be my fourth. And I studied linguistics in college and have been rekindling with that I find the root of languages fascinating and it's the first time I will venture out. So I'm French, so French and Spanish were given. English came because, well, it was a second language in my country. But German is going to be the first language out of the Latin root. And so it is a little bit of a challenge, but I am really, really passionate about it.
- [29:57]
Kira Ciccarelli
That's so exciting. How are you doing it? Are you taking a class? Are you?
- [30:01]
Melanie Nolan
I'm starting out with duolingo. I did, I did Babel last year and it just didn't go very far. I got, I don't know, the style of learning wasn't for me. I think the duolingo, the interaction with AI, again, here it is. But I find it really, really easy to follow and learn and ask questions. So, yep, that's how I'm doing it for now.
- [30:25]
Kira Ciccarelli
I'm about 1400 days into an Italian duolingo exercise, so I've just been keeping the streak up every day. It's a good motivator. Just for fun. Used to take it in high school. So the duolingo is like a slow but steady wins the race type of approach. Um, I do feel like I'm picking stuff up.
- [30:44]
Melanie Nolan
Yeah, you can put 15, 20 minutes, 30 minutes in each day. It's nothing, it just goes. But then you're actually doing the work and progressing. Next thing you know, you're up a level. So, yeah, no, it's super interesting to do it that way. I do intend to get a tutor eventually, but I need to advance further before I get to that point.
- [31:02]
Kira Ciccarelli
Fair enough. Well, good luck with language number four.
- [31:04]
Melanie Nolan
Thank you.
- [31:05]
Kira Ciccarelli
We've been joined by Melanie Nolan, head of research at Chief Executive Group.
- [31:18]
Megan Day
Great interview. Always thought provoking stuff. And welcome back to the show, Kira. We're happy to have you here.
- [31:26]
Kira Ciccarelli
Thanks for having me. And congratulations on 175 episodes. We haven't commented on that yet.
- [31:31]
Dottie Schindlinger
Yeah, wow. You know what, it's true. We made a big deal out of 150 and now 175 just feels like, yeah, it's more another day. Yep, there goes Thursday.
- [31:41]
Megan Day
So, Kira, I have to call out something that you said in your, your interview with Melanie that really stuck with me. And this is around the information that boards really need and when it's just more versus when it's the right information. And what I think we are just in this a little bit of growing pains period, as there's just the opportunity to have so much flying in your face. But how do we make sure. That we solve what, as Melanie says, kind of it seems like the easiest problem to solve. That's very fixable.
- [32:15]
Kira Ciccarelli
Yeah. I mean, so we talk about it a little bit in the interview, but the one constant over all the time that we've been working with corporate board member on what directors think is directors are constantly telling us that they want more time for strategic conversation and they want less presentation in their board meetings. At the same time, though, as risks expand, as the amount of issues under their purview expand, I think it can be hard on the management end to feel like you're really keeping the board informed and at the same time make sure that you're leaving space for that strategic conversation. And I think that kind of ties into a lot of threads about potential AI use cases that we saw come up in the report. So definitely very interesting.
- [32:56]
Dottie Schindlinger
Well, I want to ask you a little bit more about the AI thing too, because you had a chance to talk about it at length with Melanie and there was a lot of AI in this report. Right. I mean, it was sort of the kind of the undercurrent behind every single question that was asked in the report. But I wanted to ask you, you know, at the top of the show, we talked a little bit about this report from Agenda and the number of directors exiting boards. And I know that one of the big skill sets that boards are looking for in incoming directors is AI expertise and AI knowledge. Do you think those two things are linked in any way? What do you think?
- [33:27]
Kira Ciccarelli
Yes.
- [33:28]
Dottie Schindlinger
Okay.
- [33:28]
Kira Ciccarelli
And I'm really glad you brought that up, and I'm really glad that we brought that Agenda article and that research into the conversation, because I think. And we would probably need to do more research to figure this out. For sure. I would love to conduct some interviews around it, but my suspicion is maybe some directors are just throwing in the towel because they're seeing the risk landscape evolved. The last year was absolutely not an easy one. I think we heard that loud and clear from pretty much every corner of the business world, particularly in the U.S. so I wonder if for some directors who are maybe having served on their board for close to 20 years at this point, if they're just saying, I'm not learning AI, I'm sorry, what a.
- [34:10]
Dottie Schindlinger
Very elegant and diplomatic way to say that, Kira Ciaccarelli. But honestly, I. I know. I have to say I kind of understand the feeling. There are definitely days where I feel like saying unsubscribe, and that's where I want to get off the bus.
- [34:25]
Kira Ciccarelli
And I think maybe for Some directors. The agenda article mentioned this. PwC's annual corporate director survey. Every year, an outrageous percentage of directors say someone. They think someone on their board should go. So maybe those directors are just saying.
- [34:39]
Dottie Schindlinger
Fine, you know what? That would be amazing. Okay. Honestly, that would be such an amazing outcome if next year, that's it.
- [34:47]
Kira Ciccarelli
We'll have to see. We'll have to see, we'll have to see.
- [34:50]
Dottie Schindlinger
Finally, finally, they listened to the PwC report and said, yeah, you know what? We're gonna. This year, they're gonna get them off the board.
- [34:56]
Kira Ciccarelli
I also think a lot about the numbers that we saw in 2023 and 2024. I haven't checked the numbers for 2025 yet, but about CEO turnover on public companies as well. And maybe that was a little bit of a canary in the coal mine. I think a lot of the pressures that you brought up, I think we saw that play out with CEO turnover. We saw succession planning come up pretty high on the list of agenda items and priorities and what directors think last year. And now I wondered if that's trickled up or trickled down to the board.
- [35:26]
Dottie Schindlinger
Well, and let's not forget, it's also been an incredibly active couple of years in terms of shareholder activism. I mean, there's been a lot, a lot, a lot, a lot happening in that space. So I feel like there's just pressure, pressure, pressure coming from every quarter. And, you know, maybe, maybe this is a. To use that same euphemism. A lot of people are like, this is my stop. This is where I get off the bus. Because it just. I think I've. I'm done. I'm good. I think I'm gonna step off here. I mean, it happens. I think it definitely happens. All right, Kara, I wanna also ask you, you know, you get to do this report every year. You get deep into the data. Is there any data point that you was like, just something you loved, you found particularly delicious, but just didn't make it in the report? Cause it just didn't quite fit.
- [36:08]
Melanie Nolan
It wasn't.
- [36:09]
Dottie Schindlinger
It wasn't that big of a deal, but it was something that really, you. You liked.
- [36:13]
Kira Ciccarelli
Did it make it into the report? Well, maybe I'll go with something that we didn't get to talk about in the interview, which is we asked a lot of questions about AI and compliance in the survey this year that I thought was really, really interesting. And you'll be able to read more about the findings in the full white paper. But AI was another through line in basically all of the questions that we asked about compliance. So when it came to what could kind of improve your oversight of compliance related matters, having more access to AI powered tools came up pretty high on that list. AI risk was also the like most underestimated risk as far as compliance concerns went, that the board said, I think this is something people are going to forget about or leave out, us included, and we probably shouldn't do that. So I think the compliance and AI survey data was pretty interesting to me this year and this was the first year that we've been able to ask some questions like that.
- [37:10]
Dottie Schindlinger
So do you think unbalance this year versus last year, directors are feeling more excited about the opportunity that AI presents or more cautious about the risk it presents, or more concerned that we're just actually at the top of a bubble that's about to burst? What are your thoughts?
- [37:27]
Kira Ciccarelli
It's interesting, I feel a little bit of all of those things and I'll tell you why I think it has been in the U.S. we've been asking questions about AI for two or three years now and it's been fascinating watching it ebb and flow on the priority order. And also on like what directors think the top risks are. I would say in the US it seems like we are in a little bit more of an opportunistic phase, I'll say, as opposed to a risk one. We talk about that a little bit in the interview. Directors are kind of ranking AI risk a little bit lower than some other things like black swan events or sudden downturns in the US economy. And they're thinking about AI with more of this opportunity lens in Asia Pacific, though that was not the case when we asked them a similar question just a couple months ago. They're thinking about AI very much in a risk lens. So I think it comes in waves and it's very much dependent on region and on what the regulatory landscape looks like where you are. But I would say for the US swinging a little bit more optimistically these days.
- [38:33]
Dottie Schindlinger
Interesting. Well, Kira, I'm so glad you got an opportunity to do this interview with Melanie and thank you so much for joining us on this rant. I think it's always great to pick your brain a little bit and find out kind of what's behind the report, what's behind the data. So thanks so much for taking the time to do this.
- [38:47]
Kira Ciccarelli
Of course, this is one of my favorite episodes of the year, so always happy to hop on.
- [38:52]
Dottie Schindlinger
Well, that wraps up another episode of the Corporate Director podcast, the Voice of Modern Governance. Like to say a few special thank yous first and foremost to our data wranglers Melanie Nolan and Kira Ciccarelli, podcast producers. Also Kira Ciccarelli, Steve Clayton and Laura Klein, our sponsors for the show, including kpmg, Wilson Sonsini and Meridian Compensation Partners. And most especially, thank you to Diligent for continuing to support this show. If you like our show, please be sure to give us a rating on your podcast player of choice. You can also listen to our episodes and see more from Diligent Institute by going to diligent.com resources. Also, if you serve on a nonprofit or public sector board, tune in to our sister Diligent podcast, Leading with Purpose for expert conversations on governance, risk and compliance that makes an impact for mission driven organizations. Thank you so much for listening.
- [39:41]
Podcast Announcer
You've been listening to the Corporate Director Podcast. To ensure that you never miss an episode, subscribe to the show in your favorite podcast player. If you'd like to learn more about corporate governance and tools to help directors do their job better, visit www.digent.com. thank you so much for listening. Until next time.
- [40:10]
Melanie Nolan
Sam.