September 18, 2012

The Latest Governance Surveys

Last week, PwC issued it 2012 Annual Corporate Director Survey – and Shearman & Sterling issued its “2012 Trends in Corporate Governance of the Largest US Public Companies.”

PwC’s survey findings include:

Board Composition and Behavior
– Questioning board performance. Nearly one-third of directors believe someone on their board should be replaced. Diminished performance because of aging and lack of expertise were cited as the two primary reasons.
– Finding new directors. When seeking new board members, 91 percent of directors say they take suggestions from other directors, with 11 percent considering investor input for candidates. A quarter consider racial and gender diversity as “very important.”
– Reconsidering board leadership. About half of boards that have a combined CEO and Chair position are already discussing splitting the role at their next CEO succession.
– Self-evaluations prompt changes. Two-thirds of directors (66 percent) made changes during the last 12 months as a result of their full-board or committee self-evaluations.
– Continuing director education. Over half of directors (52 percent) believe some form of annual board education should be required. Of those with this belief, over 40 percent had less than four hours of outside training last year, and 21 percent did none at all.
– Time commitments increase. More than half of directors say the amount of time they spent on board work rose last year. Two-thirds of those increased their hours over 10 percent, and one-fifth more than 20 percent.

Executive Compensation
– Voices that influence compensation. Directors rate the following groups as “very influential” or “influential” when it comes to their boards’ decisions about executive compensation: 86 percent cite compensation consultants, followed closely by the CEO (79 percent), and then institutional investors (54 percent).
– Responding to say-on-pay. In the second year of say-on-pay, 64 percent of companies took some action to address voting results: 41 percent modified compensation disclosures, 29 percent made compensation more performance-based and 23 percent worked more closely with proxy advisory firms. Two percent of directors indicated that their companies decreased executive compensation.
– The influence of proxy advisory firms. Over 60 percent of directors estimate that proxy advisory firms have more than a 20 percent influence on proxy voting at their company. Almost half of directors rate quality of the firms’ work as “fair” or “poor.”

Strategy Oversight
– More time wanted on strategy. Strategic planning topped the board’s “wish list,” with over 75 percent of directors saying they want to devote more time to it, up from 60 percent of directors who wanted to do so last year.
– Getting the right information. Two-thirds are satisfied with the customer satisfaction research management provides, while nearly 72 percent are satisfied with information about employee values and satisfaction. However, a number of boards do not receive any information about either customers or employee satisfaction (20 and 16 percent, respectively); and 21 percent are dissatisfied with competitive intelligence.

Podcast: Whether the Conflict Minerals Rules Will Work

In this podcast, Dan McGroarty of American Resources Policy Network provides some insight into whether the SEC’s new conflict minerals rules will ultimately lead to the goal that Congress envisioned when it mandated the rulemaking in Dodd-Frank, including:

– How do you think the SEC’s recent conflict minerals rulemaking will impact corporate practices in using these minerals?
– What do you think companies should do in reaction to the rulemaking?
– How might activists proceed from here to target companies that still use minerals in countries with major human right violations?

For next Thursday’s conflict minerals webcast, the panel will not spend any time going over the actual rules – they’ll presume you’ve read some of the numerous memos (or maybe even the SEC’s adopting release). Instead, the panel will go over these 10 pressing questions on everyone’s mind.

The Second Deal Cube Tourney: Round One; 15th Match

As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:

Star Wars JEDI Spaceship (infamous Enron entity)
Saw Blade on Tree Stump
Two Clear Cell Phones
Diamond-ish (ISS going public)

Online Surveys & Market Research

– Broc Romanek