Last Monday, directors opened their email inboxes to find a disappointing employment report in NACD Directors Daily. In March, the U.S. economy added 120,000 jobs, far below economists’ projection of 210,000. This marks the first month since December that job increases failed to meet the mark of 200,000. While the unemployment rate dropped from 8.3 percent to 8.2 percent, it is speculated that this was largely the result of more people choosing to stop actively searching for jobs. While slightly more positive, NACD’s Board Confidence Index (BCI) also shows slow growth in employment.
Surveying directors on their confidence in the first quarter of 2012, the overall BCI score rose nearly six points to 60.6. Although an improvement over its Q3 2011 low of 47.5, the BCI is yet to reach its peak—achieved in Q1 2011—of 64.9. This growth is achieved through a consistently improved outlook for the long-term future of the economy, as well as progress made in the past year. Directors tend to be less confident in short-term economic conditions.
The boardroom is not unfounded in its hesitancy to predict the state of the economy in the coming months. The JOBS Act was recently signed into law, the future of the health care reform legislation is under debate, and most companies are in the midst of proxy season. Not to mention the list of proposed and final rules expected to come from the Securities and Exchange Commission and Public Company Accounting Oversight Board.
Thirty-six percent of directors responded that their company’s hiring practices resulted in a net gain in the last quarter. This is a 5 percent increase over Q4 2011. However, the amount of directors who plan to expand their workforce in the next quarter declined by nearly 15 percent.
Produced in conjunction with Pearl Meyer & Partners, this quarter the BCI introduced two questions that will provide significant benchmarks in the coming months. When asked if their CEO is on track to meet incentive plan performance objectives for this fiscal year, 74 percent of directors said their CEO was on schedule. Twenty-two percent noted their CEO was behind schedule. Furthermore, 60 percent of directors are confident their CEO will meet these incentive plan goals.
To read more about the BCI, click here.