from Fourth Quarter 2009
Corporate Board Member/PricewaterhouseCoopers
The ravaged economy, a hands-on administration, and activist shareholders are producing big changes in how board members do their job, as the annual survey by Corporate Board Member and PricewaterhouseCoopers makes clear. Just as clearly, some frustrations remain constant (the need to get a handle on CEO pay and the wish for a greater role in setting strategy, for example). But directors are more open to shareholder involvement than might be expected. For instance, a surprising 92% of the 1,021 surveyed say they’re prepared to answer questions about their company’s strategy at annual meetings.
More directors than ever are rethinking their job—how they can effectively govern a company or, in a growing number of cases, whether they should even try. Underlying all this is an increasing sense of risk, something that threatens both the survey respondents and the companies they serve. The sampling of survey results below begins with how risk is affecting directors’ lives and how they assess their ability to recognize and manage it.
Risk is a Growing Fact of Life
How has your personal risk as a director changed in the past 12 months?
Increased 69%
No change 30%
Decreased 1%
Some risks are tough to name...
What keeps you up at night?
Unknown risks 59%
...while others are identifiable.
Do you think regulators are more likely to investigate your company?
Yes 71%
Do you think there'll be an increase in shareholder suits?
Yes 65%
Do you worry about your CEO's ability to manage challenges?
Yes 25%
Directors have identified various red flags...
Which danger signals would you rank as important or very important?
Restating earnings 95%
Missing strategic performance goals 92%
Multiple whistleblower incidents 88%
Dissatisfied customers 85%
Difficulty in lining up finance 82%
Employee lawsuits 72%
...feel confident of their ability to manage risk...
Can board members monitor a company's risk adequately?
Yes 88%
Do you have a risk committee?
Yes 85%
Do you need one?
No 75%
But 66% do say they'd like to spend more time as a board discussing risk management.
...and say mangement is helpful.
Does your board get adequate information about the company's risk?
Yes, and it has in the past 36%
Yes, and that information has gotten better 45%
No, but management is taking care of the deficiency 17%
No, I would like more information 2%
Many directors aren't sure they're safe...
Does your directors' and officers' liability plan protect you against
| | Yes | No | Not sure |
| Fraud | 86% | 3% | 11% |
| Shareholder suits | 82% | 4% | 14% |
| Catastrophic loss | 68% | 7% | 25% |
| Bankruptcy | 66% | 7% | 27% |
...which pushes some away from board service.
Have you ever turned down a board position because the risk was too great?
Yes 46%
No 54%
Have you resigned a directorship or considered doing so?
Yes 29%
Those who answered yes cited
Time constraints 11%
Personal liability 6%
Lack of fulfillment 5%
Personal reputation 2%
Other reasons 6%
Continued...