Study shows corporate boards short on CIO expertise
By Staff -- Manufacturing Business Technology, 2/1/2006 7:00:00 AM
Analysis from the research arm of New York-based Burson-Marsteller reveals the Fortune Global 500 have not fully embraced the strategic importance of the roles of the chief technology officer and chief information officer—i.e., CTO and CIO. This is reflected in the scarcity of representation at the highest reaches of authority: as CEOs and directors on corporate boards.
In contrast, India and China track more strongly, with the top 25 Indian companies 10 times more likely to have board members with CIO experience than the top 25 Fortune Global companies. In China, nearly one-fourth of the largest 25 companies have CEOs with CIO backgrounds, compared with none of the top 25 Fortune Global companies.
"The first wave of preliminary research we did was driven by news of CIOs in the media stepping up to new roles," says Idil Cakim, director of knowledge development, Burson-Marsteller. "We couldn't find much about them being on boards. We found that CEOs and boards were not that tech-savvy."
In 2004, only 8 percent of the Fortune Global 500 had directors with CIO experience—up 3 percent from 2003. A sampling of companies with CIO representation on their boards includes Electronic Data Systems, Canon, and DuPont; as well as Kmart, Office Depot, and Walgreens, according to the report, A Missing Competency: Boardroom IT Deficit."CIOs are not widely on boards," Cakim claims. "It's an interesting gap. They're expected to perform as part of the executive team, but their power or expertise relies on messages carried by other executives to reach all the way to the boardroom. They end up taking a back seat to decisions made at the highest level."
Marianne Broadbent, associate dean, Melbourne Business School, Australia, says lack of representation reflects, in part, the relative youth of IT as a top executive track.
"Some directors indicate the real issue is the average age and experience of board members," says Broadbent. "Many former CEOs have not been personally responsible for major IT-enabled business initiatives in their executive and line roles. This means this area is outside their 'comfort zones.' "
Broadbent adds that boards are "collections of individuals who don't want to expose their ignorance. Boards probe areas that they know about. Not enough are comfortable with reviewing issues around information and technology so these often are dealt with at a superficial level."
Representation on Fortune Global 500 boards contrasted with top Indian and Chinese companies poses future challenges, Cakim claims. Greater representation on their boards indicates, "They're preparing for the market in a different way. The presence of tech-savvy members on their boards and in executive suites suggests that they are better poised to compete in the future," says Cakim.
The contrast in numbers should prompt action, Cakim adds. "There's an abundance of experience in finance, management, and accounting in the boardroom of the Fortune Global 500, but that now needs to be complemented with technology expertise."
As the report concludes, "There appears to be a relationship between the board presence of a director with an IT background and higher returns." Companies that had CIO board representation "delivered annual returns of 9.2 percent above relevant indices."
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