Although half (50%) of Luxembourg’s boards of directors believed they had an adequate balance regarding how they address short, medium and long term objectives, a similar proportion (43.9%) recognised they still struggle balancing focus on longer vs. shorter term objectives during their Board meetings. As for environmental, social and governance considerations, almost all boards in the Grand Duchy (90%) had plans to devote more energy to these matters in 2022. As two-thirds (67%) planned to do so despite feeling they lack the full range of expertise needed to adequately address these sustainability considerations, this will need to be coupled with upskilling of their Boards or even review of Board composition.
These figures are from “The State of the Luxembourg Boardroom 2021” survey conducted by the Luxembourg’s Institute of Directors (Institut Luxembourgeois des Administrateurs (ILA)) and governance technology firm Diligent. Overall, the report gives a picture of a Luxembourg business leadership community that is broadly aware of the multiple challenges it faces, but with awareness that more could be done. This is important, as boards of directors set the tone and direction of policy for Luxembourg business.
Of the boards surveyed, nearly 93% believed they have adequate governance and risk frameworks in place to face their key challenges, and three-quarters (75%) discussing and evaluating key business strategy annually. This points to a sector willing to confront known challenges, as well as having systems in place to deal with unexpected events.
There is also awareness of the need to be a good corporate citizen, alongside the need to create good products that will sell. The top three ambitions for boards were “to be a sustainable business over time,” “increase operational efficiency and maximise profit,” and “be a role model for reliability and quality.” There was also awareness of the need to achieve and maintain board diversity, with 91.8% having agreed that this increases board effectiveness.
Carine Feipel, ILA Chair said: “A lot goes on behind the scenes of an effective board, and much of that effectiveness relies on the supporting structure that a good governance framework provides. A relevant and appropriate framework that has been clearly defined and well documented is essential for providing the basic guidelines for decision-making and ensuring board discussions are productive and flow smoothly.”
Jane Wilkinson, ILA Think Tank Committee member and co-author of the survey said: “It is ILA’s intention to repeat this survey on a regular basis to highlight evolution in corporate governance practices, and also to highlight emerging topics which should be on every board’s agenda.”
Edna Frimpong, Head of Diligent Institute said: “Our report has revealed the high degree of professionalism in Luxembourg’s boardrooms, which translates into widespread awareness of the on-going challenges faced by local companies.”
A series of Coffee Chats will follow the publications of the benchmark report, where more in detail findings will be discussed, mark your calender!
25 February 2022
ILA Coffee Chat: Deep Dive on "The State of the Luxembourg Boardroom" benchmark report, focus on Board Effectiveness and Strategy
11 March 2022
ILA Coffee Chat : Deep Dive on "The State of the Luxembourg Boardroom" benchmark report, focus on Diversity"