Corporate board directors

Directors see election and economic headwinds on the horizon

Directors are assessing the November elections and what different results would mean. According to our October 2024 Pulse Survey, 76% of directors say the US regulatory environment poses a moderate or serious risk. And regardless of who wins the election, 81% agree or strongly agree there will be more regulation.

Directors also have concerns about the health of the economy, and two thirds (66%) say there will be a recession in the next six months. Eighty-four percent say changing operational priorities to prepare for such an event is either somewhat of a challenge or a significant challenge. Board members should prioritize agile decision-making to help their companies adapt quickly to potential regulatory changes and economic shifts after the election.

Directors see a risky regulatory landscape

Directors already had a heightened sense for risk before adding the election into the equation. Board members tell us cyber risks (78%) and geopolitical uncertainty (78%) are moderate or serious risks, and 76% say the same about the US regulatory environment. The election is adding another layer to the risk discussion. While directors believe there’s an equal or similar risk between the two presidential candidates on some policies, they also recognize differences when it comes to tax, climate and trade.  

Depending on the sector your company operates in, you may have vastly different strategic risks under a new administration. While even the most experienced boards can’t see around every corner, they should strive to remain agile, stay current in the face of election uncertainty and prepare for different outcomes that could disrupt or accelerate current trends.  

What you can do

• Plan to be surprised. Given the uncertainty around the election, do scenario planning now to get a greater understanding of how each candidate’s platform could impact your business over the next four years.  

• Don’t wait for the next board meeting to engage. Proactively reach out to management to gain their perspective on potential election and economic risks. 

• Seize the opportunity to reset your approach to corporate governance. Foster stronger relationships with the C-suite and management, advocate for enhanced reporting on risks and fill knowledge gaps by welcoming new members with needed experience.  

The election may impact capital allocation decisions

Under either administration, at least 78% of all executives expect to either maintain or increase their current levels of investment in the areas we asked about. There are slight differences in planned investments under a Harris or Trump administration. 

Directors (55%) say their company’s investments in sustainability would increase under Harris compared to the 39% who say the same under Trump. Fourteen percent say their company will decrease sustainability investments if Trump wins. Sixty percent say they would increase investment in their compliance and regulatory efforts under Harris versus 37% under Trump. These results signal that boards likely anticipate that the Biden-era sustainability tax incentives and credits will remain under a Harris administration. The results are also an acknowledgement that, regardless of the policies of each party, companies will need to devote resources to compliance efforts given new global disclosure regulations.

Fifty-seven percent of directors say their company would increase investment in hiring under a Trump administration compared to 47% who say the same for Harris. Ten percent say their companies may decrease hiring efforts under a Harris administration. This is a potential sign that directors think their companies may take a wait-and-see approach until there is greater clarity about how Harris administration tax and economic policies would impact their business. Fifty-nine percent also anticipate their companies investing more in capital projects domestically under Trump versus 47% for Harris.

What you can do

• Help with capital allocation decisions. You can play a crucial role in guiding management on capital allocation decisions. Armed with your knowledge of strategy and risk, engage company leaders on how to effectively deploy capital to projects that can drive long-term value.  

• Understand sustainability risks and opportunities. Investing in sustainability initiatives can help companies benefit from tax credits and other incentives. They’re also increasingly important to some investors and consumers.

Boards continue to beat the drum: Better and enhanced reporting, please

Even the most seasoned boards struggle to keep up with developments on global regulations, geopolitical conflicts, leading technologies and emerging risks. A key way directors stay informed is through the reports they get from management. To effectively oversee strategy and risks, they need consistent and insightful reporting. 

We asked directors about the quality of the information they receive from management on 11 key topics. The results show a clear demand for more detailed reporting, including areas from sustainability and geopolitical uncertainty to the labor market and more. The biggest gap in what they want and what they’re getting is around deals strategy. Boards need transparency on management’s deals choices and alternatives so they can help provide objectivity on a business unit’s value.

What you can do

• Insist on enhanced reporting. Challenge management to provide holistic and tailored reports on strategy and risks that can help inform boardroom discussions.  
• Think holistically about operations and performance. Request more thorough reporting that includes not only strategic initiatives and financial implications, but also tangible examples of successes and failures across the enterprise. For example, ask for case studies of recent projects, detailing what worked and lessons learned. 
• Be vigilant about upskilling on evolving topics. Ask questions to learn more about evolving, complex topics and look for opportunities to attend specialized training sessions to gain a better understanding of topics impacting the company and the industry.  
• Get more involved in portfolio strategy reviews. Make sure management is conducting thorough portfolio reviews on a regular basis and provide regular feedback during the process. This participation can help bring objectivity in assessing your company’s portfolio against the core strategy and keep the process moving.