A majority of directors on the boards of Canada's largest companies say they do not know a lot about social media but expect it will be a significant issue for their boards in the next three to five years.
The survey of directors shows many are behind the curve on understanding social media trends, appearing to underestimate its current importance in business or arguing it is not important for industrial and resource companies. But it also finds a strong majority realize that social media is a critical development that requires their attention, and feel the benefits of social media outweigh the risks.
The survey of 171 Canadian directors was conducted in the spring and summer this year by consulting firm Korn/Ferry International in partnership with Vancouver-based governance consultants Patrick O'Callaghan and Associates. Social media includes an array of online communication tools such as Facebook, Twitter or LinkedIn.
Among the findings, only 21 per cent of directors say social media is significant for their boards today, but 74 per cent say it will be significant within three to five years.
Jeff Rosin, president of Korn/Ferry in Canada, said the findings suggest many directors underestimate the importance of social media as a communication tool already, which is reflected in their own low levels of usage personally.
"I do think that low percentage is just a virtue of their own discomfort. If we were to do this study three to four years from now, we reckon we'd have very different perspectives from these folks," Mr. Rosin said. "And to their credit, they at least acknowledge that going forward this is going to have far greater relevance and they cannot be in a position where they don't appreciate the impact."
Over half of directors said they believe social media is an important tool that "can provide many opportunities," and 55 per cent said the potential benefits outweigh the risks. On a personal level, 28 per cent consider themselves very knowledgeable about social media, but 55 per cent said they have "some awareness" but not a strong grasp on the topic, and 17 per cent say they have minimal knowledge.
Those numbers are echoed in statistics on directors' own use of social media, with 57 per cent saying they never use it for personal networking and 32 per cent never use it for business networking. Only 10 per cent say they are active users.
The study says directors don't need to use social media themselves to provide effective oversight at a board level, but their lack of familiarity "has bred a lack of confidence on the subject."
Mr. Rosin said he was surprised by how many directors rated themselves as having little knowledge, but actually demonstrated good knowledge when quizzed further in the survey. On the other hand, he said the survey data may present an overly rosy picture of director knowledge because some directors opted not to participate because they said they knew nothing about the subject.
The study found a divide between industry types, with directors on boards of retail or consumer-focused firms more likely to agree companies need a social media presence, while those on boards of industrial or resource companies were less likely to agree.
Board governance consultant Patrick O'Callaghan said some non-consumer companies are actively using social media to communicate with employees, communicate about social responsibility issues and follow activist groups, and to communicate with shareholders or analysts. He said U.S. regulators even allow companies to release news by social media.
He said the statistics suggest directors will need more education about social media issues in the next few years through more exposure to senior management responsible for social media practices or from younger employees who are active users.