According to the latest study conducted by PricewaterhouseCoopers LLP and Corporate Board magazine, nearly 50 percent of directors sit on just one public company board, and 78 percent sit on one or two.
by David Vance
October 25, 2006
According to the latest “What Directors Think” study conducted by PricewaterhouseCoopers LLP and Corporate Board magazine, nearly 50 percent of directors sit on just one public company board, and 78 percent sit on one or two.
The more than 1,300 survey respondents were directors who serve on the boards of the top 2,000 publicly traded companies listed on the New York Stock Exchange (NYSE), Nasdaq Stock Market and the American Stock Exchange (ASE).
“Directors appear to be limited in the number of boards they serve so they can give proper attention to each board,” said Catherine Bromilow, a partner with PricewaterhouseCoopers and U.S. leader of its Corporate Governance Group. “But this trend poses a two-edged sword. In the past, we were concerned directors were serving on too many boards. Now the question becomes whether there is sufficient cross-fertilization to leverage knowledge and learn – especially if directors are sitting on just one.”
In terms of board evaluations, they have been increasing in recent years, and T.K. Kerstetter, president of Corporate Board Member, said this is indicative of all boards’ implementation of NYSE requirements regarding evaluations.
“Those boards that conduct their board evaluation seriously versus looking at it as just a compliance task of their listing requirements have found it to be a very valuable tool,” Kerstetter said.
In regard to having their performance formally evaluated, 86 percent said it is done so on a regular basis, and of that group, 59 percent said the evaluations led to the board taking action or implanting a plan that arose from the evaluation.
“The fact that six in 10 boards took action after an evaluation is evidence that this scrutiny of their own actions is necessary,” Bromilow said. “Companies need to take the process seriously. While it’s important for organizations to conduct evaluations on a regular basis, they face real risk if they identify changes needed but don’t make those changes.”
The survey also revealed nearly 70 percent said their executive sessions are very useful to the board, and they think the CEO understands their value. A little more than 20 percent said they think the sessions are of use to the board, but they are not sure whether the CEO appreciates them. Seven percent said the sessions are not very valuable to the board, while 1 percent said not only are they not valuable, they have put a strain on the relationship between the board and CEO.
In regard to international affairs, 52 percent of the respondents said China is the most-discussed emerging market, followed by India (35 percent) and Brazil (21 percent). While 22 percent said they had traveled to China in the last year, 52 percent said their companies do not compete or significantly invest in Chinese companies, nor do they outsource or sell to China.
“Boards are beginning to realize the importance of focusing on the world outside of the United States,” Bromilow said. “As one of the more promising and influential economic markets, China is surely worth special attention.”