Posts Tagged ‘board diversity’

What a Difference Three Years Makes

February 14th, 2013 | By

The state of the economy was remarkably different the last time NACD issued a governance survey dedicated to nonprofit organizations. In 2009, companies were just starting to stage a recovery from the financial crisis, and action plans were in the formative stages. At that point, survey respondents indicated the areas of most critical importance to their board were “board leadership,” “ethics and social responsibility,” and “board effectiveness.”

Fast forward three years to the 2012–2013 NACD Nonprofit Governance Survey, which shows that nonprofit boards have altered structures to meet the economic climate. Across the board, nonprofits have shifted focus to areas directly related to performance and strategy. Today, survey respondents indicate the priority governance issues are those that drive results: “strategic planning and oversight,” “fundraising,” and “financial oversight/internal controls.”

In addition to a more performance-driven outlook, nonprofit organizations have also increased the number of diverse directors present in the boardroom. According to NACD’s 2012 Blue Ribbon Commission on the Diverse Board, this development is a logical step, as boardroom diversity is a business issue: a means to competitiveness. Nonprofits are therefore more than competitive—female representation is ubiquitous with 97.7 percent of respondents reporting at least one female director on their board. The percentage of boards with at least one minority director has increased nearly 20 percent since 2009 to 76.4 percent.

Nonprofit organizations are ahead of their public and private company peers with respect to boardroom diversity. For public companies, diversity is a focus of pension funds and other institutions, as noted in last week’s NACD Directors Daily. Groups such as the Thirty Percent Coalition are urging Russell 1000 companies to increase gender equality on boards specifically—setting a goal that 30 percent of board seats are held by women by 2015. To meet this, U.S. public companies would need to work fast—current reports estimate that just 12 to 16 percent of board seats are currently held by women. Furthermore, according to NACD’s 2012–2013 Public Company Governance Survey, 27.4 percent of boards have zero female directors.

For more information about the 2012–2013 NACD Nonprofit Governance Survey, visit NACD’s bookstore.

Going Private?

January 3rd, 2013 | By

In 2012, initial public offerings (IPOs) did not quite make the rebound analysts had predicted. In the year of the botched Facebook offering, just 128 IPOs were made. Although quadruple that of 2008, this marks a decrease from 154 IPOs in 2011. Last May, the Economist observed that this decline was part of a larger trend: the decline in popularity of the public company.

Since 1997, the number of U.S. public companies has fallen by 38 percent. Additionally, the average number of IPOs has declined from 311 per year between 1980 and 2000, to 99 per year between 2001 and 2011. In addition to companies actively not going public, in the last year several well-known businesses “went private,” such as Quest Software, CKE Restaurants, Burger King, and J. Crew.

In addition to the obvious distinctions of private companies—a lack of shareholders and adherence to regulation—NACD’s recently released 2012—2013 Private Company Governance Survey found many lesser-known differences. This survey features responses from over 550 individuals who serve private company boards. Some of the contrasts include:

Private company boards are smaller. On average, private company boards have 7.3 members—a decrease from 8.9 members in 2011. For the past several years, public company boards have consistently maintained an average of 8.8 members.

Public company directors are more likely to receive continuing boardroom education. In 2012, 82 percent of public company directors received continuing education in the last 12 months, compared to 57 percent of private company directors. This may be connected to company policy, however: 83.1 percent of public directors were reimbursed for education expenses, while only 54.5 percent of private company peers were.

Trend in the private company boardroom: D&O Insurance. Additional directors and officers liability insurance was obtained by just 15 percent of private company directors in 2008. In 2012, this figure jumped to 50.4 percent. In comparison, 42.8 percent of public company directors purchased additional D&O insurance in 2012.

Nominating and governance committees are much less prevalent at private companies. Similar to public company counterparts, audit and compensation committees are nearly ubiquitous at private companies. However, just 49.2 percent of private company survey respondents indicated that their board had a committee dedicated to nominating and governance.

Private companies employ different mechanisms to ensure director turnover. The most commonly used method of director turnover at private companies is director evaluation. Age limits and term limits are both used by nearly one-fifth of respondents. At public companies, the most prevalent mechanism to renew and replace directors is age limits, closely followed by evaluations. Term limits are used by just 6.5 percent.

Generally, private company boards maintain less diverse composition. Compared to 27.4 percent of public companies, 38.5 percent of private companies do not have any female directors. With respect to minority directors—based on race and ethnicity—70.3 percent of private companies have no such representation, compared to 51.8 percent of public boards.

NACD Chairman’s Address: Restoring Faith in Capitalism

October 15th, 2012 | By

After a visually stunning acrobatic performance by members of Cirque du Soleil, NACD Chairman and former U.S. Secretary of Commerce Barbara Hackman Franklin opened the 25th NACD Board Leadership Conference with a call to restore public trust in capitalism.

With conference attendees representing nearly all 50 states, all of NACD’s 22 chapters and 10 countries ranging from Kuwait to Jamaica, Franklin noted that “governance is indeed global.” However, her focus on capitalism was focused specifically on the American style of market capitalism. From a historical perspective, capitalism generally falls under attack following economic crises and scandals. The Enron and Worldcom scandals resulted in the enactment of the Sarbanes-Oxley legislation one decade ago. Today, directors are in the process of incorporating the many provisions to come out of the 2010 Dodd-Frank financial reform legislation.

In her speech, Franklin noted that public distrust of business executives is at an all-time high. As such, businesses are operating under the “new normal.” No longer are public companies expected to just make a profit for shareholders. According to the NACD chair, the smartest companies are paying attention to such areas as the environment, sustainability, and diversity.

Franklin listed five ways directors can support a restored faith in capitalism:
1. Be the best [directors] can be.
2. Stress the tone at the top: The critical ingredient for long-term ethical behavior is culture.
3. Build a strong board that values openness and candor.
4. Push for corporate social responsibility actions to be embedded in the company strategy.
5. Stay current: Continuing education for corporate directors is a necessity.

The time to act, according to Franklin, is now. If companies do not step up, the government will step in.