Here at NACD our annual governance surveys—public, private, and nonprofit—underlie nearly every aspect of the organization’s activity. From our Blue Ribbon Commission reports, to peer exchanges and our annual Board Leadership Conference, data collected from the thousands of respondents informs discussions, forums, topics, and future events. Beyond the boardroom, the trends, statistics, and perspectives captured in these surveys provide those in the C-suite, investors, and stakeholders with crucial information on the current state of corporate governance in the United States.
In the regulatory sphere, we use survey data to inform our comment letters and in-person testimony on behalf of boardrooms to regulators and lawmakers. Most recently, survey responses from NACD’s membership strengthened a December 2013 comment letter to the Securities and Exchange Commission on pay ratio disclosure.
NACD also uses the three annual governance surveys to create industry-specific one-page benchmark reports. Whether you use one of these or commission an NACD Custom Benchmarking Report, data broken down by industry, size, or both serves as an excellent starting point for boardroom discussions.
NACD is dedicated to providing directors with timely and pertinent content, but we need your input. As a thank you for participating in these surveys, NACD will send each participant a free electronic copy of the final report for each survey he or she takes. This is the sole opportunity for non-NACD members to receive a copy; once this window closes only NACD members and participants will be able to view the final report.
As the job of directors becomes more demanding, the level of resources needed to support the board also needs to change. This panel addressed what companies can do to ensure their boards have the tools they need to meet the evolving challenges of a dynamic business landscape. What kind of support do boards need to fulfill their oversight responsibilities? What is the current state of “resourcing the board?” Is it enough, or does it fall short? And what will boards need to support them going forward? This discussion covered the challenges of resourcing the board at small- and large-cap companies.
1. Finance expertise, industry experience, and leadership skills are the most sought after attributes for public company board members, according to the 2013-2014 NACD Public Company Governance Survey. Corporate governance acumen, technological skills, and IT ranked much lower.
2. The growth of social media has created “crowd knowledge,” where collective data and information stored on such sites as LinkedIn, Facebook, and Twitter, is pooled by many people online. The belief is that such knowledge can be better and more reliable than the knowledge of a few elite people. The convenience and depth of such sites make it easier to access knowledge about industries, companies, and their employees. One of the shortcomings of these social media tools, however, is that the information is unfiltered. Directors and management should bear this in mind when using those sites.
3. In today’s complex and dynamic world, directors need to have “depth and width.” This means directors need to have both in-depth knowledge about a certain area and broad knowledge about the company and its industry. One suggested way to support directors with such knowledge is for boards to have their own staff. Such a support team could give the board its own resource for company information, separate from the management team.
Directorship is a part-time job. Management is a full-time job. It is expected—and a fact—that there is an information imbalance. This panel discussed “asymmetric information risk” and how to overcome it. What can boards do to ensure they have the required information to provide effective oversight and advice? They can work with management to improve the quality and usefulness of the information they receive about the business and industry. How? By aligning interests and improving the relationship between management and board members. Having a culture that allows dissension and debate can also help. Additionally, discussing risk on a routine basis is critical. This asymmetry is, and will remain, a reality. Accordingly, it’s important for boards and management to work together so the imbalance is not an impediment to boards doing their jobs.
1. Directors must have a clear vision of what they need to know, how the information provided pertains to the strategic plan, and what they are going to do with that information.
2. Directors must be proactive in identifying and requesting the precise information they need in order to carry out their duties. Directors have a responsibility to obtain this information from a variety of sources, both internal and external to the company, and to use this information to enhance their understanding and provide value in the boardroom.
3. Directors should continually ask themselves the following: What is the conversation we should be having but are not, and what can we do to improve the conversation we should be having?