How Boards Can Enhance Technology Oversight to Unlock Potential

Securing the expertise needed for effective oversight

Some directors tell us that having a technology expert on the board can elevate the entire board’s understanding and discussion of technical material. However, they emphasize the importance of directors’ speaking the language of business first and question the shelf life of technology expertise gained through executive experience. What we have heard from institutional investors is that adding a technical expert to the board may not be the best approach. Instead, they focus on how boards access external expertise and upskill through ongoing education. Boards make decisions collectively, not individually, and are liable as such. Boards should discuss the knowledge and experience needed for oversight, how to achieve it, and the role of ongoing training and external advisors.

Framing questions

• • • What expertise does the board have to oversee the company’s technology strategy and risks? To execute the responsibilities of a stand-alone technology committee?
    • Who are the technology experts on the board, and do they facilitate full board competence and discussion? How do they contribute to broader business discussions?
    • What is the bandwidth of existing committees? What resources and expertise do they need to meet evolving technology oversight needs?

Optimizing and communicating board oversight

Enhancing board oversight of technology involves several tactical considerations. Different committees may focus on different aspects of technology, making coordination essential when executives discuss related topics with multiple committees. Committee charters should clearly delineate specific oversight responsibilities. Some boards use a regularly updated matrix of responsibilities to coordinate, while others find success with alternative strategies to keep committee work clear and aligned. Regular evaluation of these operations is crucial. Boards should also consider how their oversight approach is communicated through proxy statements and other channels. Investors tell us that technology oversight, particularly of AI, is becoming a key focus of their stewardship efforts.

Framing questions

• • • How do committee responsibilities related to technology potentially overlap? How is committee work coordinated?
    • How do the charters define each committee’s technology-related responsibilities? How are those responsibilities reflected in the calendar and agendas?
    • What other external disclosures could clarify the board’s approach to technology oversight for investors and other stakeholders?
    • How is the board regularly evaluating the effectiveness of its technology oversight and committee structure?

In addition to these discussions, boards may also use the EY Center for Board Matters framework for board effectiveness as a tool for assessing and enhancing the board’s oversight of technology.

Technology leaders want boards to engage strategically, clarify risk tolerance and offer oversight without micromanaging. Recent insights from our discussions with chief information officers, chief technology officers, chief development officers and chief information security officers highlighted four consistent expectations for effective board involvement in technology strategy.

1. Develop stronger relationships with technology executives and have more strategic discussion

Boards are looking for more strategic conversations with management, rather than just listening to presentations. Technology executives share this sentiment, wanting to move beyond key performance indicators to discuss critical issues that need attention and investment. Some executives pointed out the limitations of formal board meetings and suggested informal conversations outside of these meetings to better understand perspectives and foster deeper engagement. Others mentioned that creating a board technology committee has provided the necessary space for deeper engagement.

2. Recognize the IT executive as a strategic leader

Technology is the backbone of modern business, and CIOs and CISOs aim to move beyond their traditional roles as technology managers to become strategic leaders. They see their roles evolving like that of the CFO, becoming key players in strategic business decisions. To build a more effective partnership, IT executives are urging boards to shift their mindset and embrace this strategic perspective.

3. Set the technology risk appetite for the company and proactively discuss trade-offs

The board plays a crucial role in setting the company’s risk appetite and guiding executives on balancing risk and reward, both in the short and long term. By engaging in robust discussions on technology-related market disruptions, ethics, trust, capital expenditures and ROI, boards can align with management on the level of risk the company is willing to take to achieve its technology goals. This alignment provides that strategic decisions are made with a clear understanding of the potential sacrifices involved.

4. Maintain oversight without micromanaging

Technology executives worry that appointing a narrowly focused technology expert to the board could lead to micromanagement. While they recognize the benefits of having a tech expert — such as providing valuable feedback on board materials and asking critical questions to guide and challenge management — they stress the importance of these experts maintaining an oversight role rather than overstepping boundaries.