“Cautiomistic” Directors in Q1
The new word is “cautiomistic.” Used to describe the economy, few are willing to describe their outlook as optimistic. While there are some positive signs, for every two steps forward the economy seems to move one step back. Each metric that may describe an economic recovery can be hedged with something equally pessimistic—increased employment opportunities and decreased consumer confidence, or rising corporate profits and the soaring federal budget deficit.
NACD’s most recent Board Confidence Index (BCI) mirrors this view of restrained optimism. First exhibited last winter, directors no longer feel the hesitancy that somewhat immobilized companies in autumn of 2010, but current business conditions have not yet improved to a level encouraging outright enthusiasm. The overall BCI rose to 64.9 in Q1 2011, a slight improvement over the previous quarter’s overall index of 64.4.
Despite this incremental improvement, directors are less confident about the future in the short run, as opposed to a year out. Waiting for final rules from the Securities and Exchange Commission on shareholder voting and transparency, proxy access, and the new whistleblower programs, it is no surprise that on the cusp of proxy season boardroom expectations for the next quarter dropped to 57 from 60 in Q4 2010.
It should be noted that the BCI is a snapshot, taken nearly a month ago. Since then, significant events have dominated the news. The economy has been shaken by the aftermath of the terrible natural disasters in Japan, the unrest and turmoil in the Middle East, and the near-shutdown of the U.S. federal government over budget debates.
While fewer consumers believed jobs were plentiful in March, directors were more optimistic. In Q1 2011, 48% of directors responded that their hiring remained the same, while a third said their companies’ hiring practices resulted in a net gain. Looking forward, more than half responded that their hiring practices would remain the same.