PWC released its Annual Corporate Directors Survey which provides insights into the board room. Corporate directors have faced significant changes over the last year. Those include the regulatory area where the SEC has continued to issue new rules under Dodd-Frank and from shareholders. PWC surveyed 860 public company directors during the summer of 2012 in assembling its survey. Of those directors 70% served on boards where the company has $1 billion in annual revenue or more.
Key findings from the survey include:
New board members:The key source for recruiting new board members is the recommendation of other directors (90%) with search firms second (67%) and management third (54%).
Composition of board:The overwhelming majority of directors (68.7%) believe that boards on which they serve does not have any member that needs to be replaced. Only a small minority (14.9%) believe that aging has lead to diminished performance of a member.
Director education: A slim majority of directors (52%) believe that board members should be required to attend annual board training. About one in five (19%) had no formal training.
Sources of education: Directors utilize a variety of sources for continuing education. When asked what sources they “always” rely on, the leader was publications aimed at directors (38%) followed by information from management (32.9%), CPA firms (21.5%) and law firms (12.2%). When the question was broadened to include those “always” relied on with those “sometimes” reviewed, the results differed with the largest group looking to CPA firms (56.1%) followed by law firms (54.9%), publications for directors (49.9%) and information from management (42.7%).
Time: A majority of directors (56%) have increased the time they spend on board work during the last year. A majority (67%) indicated that the increase was over 10% while one out of five said it was by 20%.
Strategy: Strategy is a key issue for directors. Virtually all (99%) say they discuss the viability of the strategy for the company at least one each year with about one third (36%) noting that they reviewed it twice per year. Nevertheless, most (75%) say they would like to devote more time to it in the next year.
Say-on-pay: There has been significant discussion about “say-on-pay” and similar issues. A large minority of directors (41%) state that their company has enhanced proxy statement compensation disclosures while a slightly smaller segment of the directors (36.4%) stated that no action was taken on the issue.
Risk management: Oversight of risk management is a critical factor for directors. Nearly all directors (97%) state that they are at least moderately comfortable with their board’s understanding of the risk appetite of the company. Most (91%) note that they are “moderately” comfortable with their understanding of emerging risks.
Fraud prevention: Enforcement officials have increased their efforts and there has been significant discussion about compliance which begins with tone at the top. Yet less than half of the directors surveyed (45.5%) indicated that the board held discussions regarding tone at the top.
Whistleblowers: The new SEC rules on whistleblowers appear to be a concern of corporate directors. About two thirds (66%) note that they have placed greater emphasis on employee awareness of ethics and compliance procedures. A significant minority (42%) indicate that their company has increased reporting of compliance related issues to the board.
The survey, titled Insights from the Boardroom 2012: Board evolution: Progress made, yet challenges persist is available here.