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How to reap the benefits of a shadow board

Author: ICAEW Insights

Published: 16 May 2024

A turbulent business environment is galvanising support for the concept of the shadow board. A new ICAEW guide explains how they work, how your organisation might benefit and the main considerations for setting one up.

At a time when companies face unprecedented disruption and uncertainty, the importance of diversity of thought and experience in the boardroom has never been more important. This is particularly true as organisations acknowledge that understanding the risks and opportunities presented by new technology and the emerging definitions of value are vital to long-term sustainable success.

But although gender, ethnicity and geographic representation are certainly on the radar, the lack of age diversity on boards is cause for concern. Despite the recognised benefits of diverse perspectives as part of the decision-making process, those younger voices are often conspicuously absent from the boardroom. 

According to the 2023 UK Spencer Stuart Board Index, the average age of FTSE 150 board members has crept up over the past 10 years, and now stands at 60.9 for non-executive directors and 54.9 on average for executive directors.

As ICAEW’s new guide explains, the purpose of a shadow board is to receive more diverse input from around the organisation – for example from younger employees in board meetings – to broaden the insights available to senior executives in the workplace and ultimately improve transparency, efficiency and accountability within a business. 

Shadow boards are typically made up of younger employees – millennial or Gen Z – representing a cross section of the business and the perspectives of that age group, and offer insight, feedback and ideas to senior decision-makers. Such boards tend to be most useful for younger employees, the demographic least likely to be heard in the boardroom given the average age of board members now exceeds 60.

Peter van Veen, ICAEW Director, Corporate Governance and Stewardship, says: “Shadow Boards can be a very useful resource of innovation for boards and their companies. Engaging a more diverse range of staff and experts though such boards provides insights and new ideas the main board may not otherwise receive.” 

For Nicholas Donnelly, Manager in EY Consulting’s Workforce Advisory arm and Co-chair of one of the firm’s shadow boards, the objective was to create an open and honest dialogue between the firm’s leadership team and colleagues of all age groups on the ground.

“It’s an opportunity to collaborate across teams and use the shadow board as a sounding board to make sure that decisions are informed by what people are feeling and thinking,” Donnelly explains. 

“You want the environment that you work in to be the best possible, you have ideas on how that could be and the shadow board is a vehicle to capture that and bring it into a structured bit of feedback.”

In addition to increased representation including involvement from staff outside of London, Donnelly says the energy and enthusiasm of shadow board members is palpable as they feel they can express themselves in a safe space.

At a time of conscious quitting and against a backdrop of rising climate awareness by younger employees in particular, use of shadow boards shows a commitment to valuing opinions from all levels of the workforce and helps to break down hierarchical barriers, with knock-on employee engagement, retention and even recruitment benefits.

Shadow boards also present an opportunity to plug skills gaps at both senior and junior levels and strengthen the quality and impact of decision-making. A Harvard Business Review study found that organisations that had adopted a shadow board before the pandemic were better able to deal with lockdowns and the overnight digital transformation. 

ICAEW’s Shadow Board guide explains the benefits to be reaped from establishing a shadow board and outlines the practical considerations to ensure that it delivers on its promised benefits.

Shadow boards – the recipe for success

  • Be very clear on what you are and what you are not. The role of the shadow board is usually to seek out and pitch ideas, but not necessarily to action them.
  • Shadow boards should over index in representation of more junior level colleagues. Such boards give a voice to those who need it most, such as junior colleagues who can be less likely to interact with senior leadership.
  • Don’t be rigid as to how feedback is gathered. Make use of different styles of meeting, from calls to in-person round tables to ensure feedback is gathered across offices (and even countries) depending on the makeup of your organisation. Note that some discussion topics might require smaller meetings with a more select group of people.
  • Be committed. Plan in advance when meetings will take place throughout the year and set up subsequent meetings with the main board in order to disseminate feedback.
  • Be flexible around meeting topics. If a meeting is more focused on horizon-scanning and identifying high-level trends, access to board papers might not be necessary. If the meeting falls around the time of promotion cycles make sure people have a space to voice topical views and concerns. This is all about making sure meetings are relevant and impactful.

Source: Nicholas Donnelly, EY Consulting

Benefits of shadow boards

This guide outlines what a shadow board is, how to establish one and the benefits for accountancy businesses.

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