Tag Archive: 2011 Public Company Governance Survey

The Competitive Advantages of Diverse Boards

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In recent years, diversity in the boardroom has gained prominence on international governance agendas. Many corporate directors, C-suite executives and shareholders recognize the unique competitive advantages that diverse boards provide across a wide range of competencies.

Despite some advances incorporating women and minorities into boardrooms, the United States still has work to do when compared with the rest of the world. According to NACD’s 2011 Public Company Governance Survey, 67.5 percent of the nearly 1,300 U.S.-based public company directors polled saw no change in the number of female directors added to their boards in the last three years.

At least 10 European countries, including France, Norway and Spain, have imposed quotas to ensure that women make up, in some cases, at least 40 percent of corporate board seats. A new study finds that among those nations, France is on track to soon surpass the U.S. when it comes to cracking the proverbial glass ceiling. France’s leap from only 7.2% of board seats held by women in 2004 to 20.1 percent (compared to 20.8 at U.S.-based Fortune 200 companies) was largely attributed to a quota law passed in 2010. While the U.S. may not need to adopt a quota system, all boards should proactively work to diversify the composition of their boards to better prepare themselves to meet future economic challenges.

To keep up with the complex and rigorous demands facing modern boardrooms, U.S. companies should remain aware of the competitive advantages of a board that draws directors from a broad talent pool rather than one whose directors’ skill sets, experiences and competencies may be too similar.

Further complicating the issue, a recent Bloomberg article discusses the impact these latest diversity quotas may have on U.S. organizations, noting that “European companies may soon be looking for hundreds of female directors,” leaving a vacuum for top talent in the United States. According to the article, “U.S. women executives said they are eager to take their experience overseas,” leaving boards of U.S.-based companies in the wake.

As a steward of exemplary board leadership and exceptional corporate governance, NACD believes that diversity in the boardroom should be viewed as a business imperative. With its Board Composition Planning Programs, NACD offers a wealth of resources to ensure that a company’s board composition is appropriately aligned with its strategic needs.

NACD defines diversity broadly, and our programs and resources encourage director diversity from a cognitive perspective. The bottom line is that cognitive diversity in the boardroom translates to intellectual diversity. With broad diversity of director and board composition comes expanded and enriched skill sets and experiences that will likely benefit companies that want to stay ahead of the curve.

As we look forward to 2012, boards should be prepared to implement new strategies that outline the essential criteria which they will look for in succession planning, taking into account how the composition of their boardroom meets the strategic needs of the company in the years ahead.

NACD Survey Reveals Most Up-To-Date Trends on Corporate Governance

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Exemplary boardroom leadership means advancing a company’s best interests while also maintaining a responsible and accountable corporate culture. Whether shareholders are seeking to remove directors or third parties are questioning corporate responsibilities, obtaining a consensus on best governance practices is a key asset for corporate leaders. Knowing what their peers are doing can help boards assess their decisions instead of working in a vacuum.

As companies prepare for and react to the unique external events that will shape their corporate climate in the months and years to come, they can benefit from external benchmarks for their corporate governance practices.  However, in a year marked by a troubled economy and sweeping legislative reforms, standards for best practices in governance often become increasingly murky.

NACD helps boards tap into the latest trends and issues for boards with our 2011 Public Company Governance Survey. The survey offers a comprehensive review of the most up-to-date governance trends, incorporating input from almost 1,300 individuals from public company boardrooms. In addition, the information gleaned from respondents is enhanced by the inclusion of data from 2,400 proxy statements compiled by Institutional Shareholder Services.

The survey provides insights on a wide range of issues, including shareholder communications, CEO succession planning, director competence, and directors’ response to new proxy disclosure requirements. In addition, it features a special section on executive compensation, which is broken down into 24 industry sectors. Among the key survey findings this year:

  • The board’s role in overseeing strategic planning, corporate performance and valuation are top priorities for the majority of respondents.
  • Nearly 70 percent of respondents characterize their company’s long-term strategy as “balanced,” with moderate risk and moderate expected reward.
  • Directors believe that their current governance structures and practices enhance their ability to effectively and efficiently fulfill their duties.
  • Most boards have not formalized their CEO succession plans.
  • Nearly one-third of respondents feel the current disclosure requirements for corporate governance are “excessive and should be reduced.”

Data gleaned from this latest survey is also used to create the comprehensive NACD Custom Board Benchmarking Report, which provides boards with the opportunity to conduct an in-depth analysis of their current structures, practices, strategies and policies in comparison to their industry and peer group companies.

To purchase a copy of the latest Public Company Governance Survey, visit http://www.nacdonline.org/Store/ProductDetail.cfm?ItemNumber=3854.