Deloitte/Society of Corporate Secretaries and Governance Professionals Survey: Boards Seek Industry Experience in New Directors
Shareholder engagement drives corporate governance change
NEW YORK, Jan 9, 2013 — A new report issued by the Deloitte Center for Corporate Governance and the Society of Corporate Secretaries and Governance Professionals indicates the top attribute sought in new directors is industry experience, as board subject matter knowledge comes to the fore. In addition, more corporate board members are engaging directly with shareholders. Other shifts in board practices include an increased length and frequency of board meetings and more actively reviewed CEO succession policies.
These are among the findings from the “2012 Board Practices Report: Providing insight into the shape of things to come.” Based on the responses of nearly 200 corporate secretaries, the report focuses on more than 15 board practice areas among public, private and nonprofit organizations. It explores topics such as risk oversight, board use of technology, corporate responsibility, shareholder engagement and board and committee structures.
“The report shows that board members are really working on enhancing their interactions with each other and with shareholders, which goes along with wider trends related to facility of communication,” said Maureen Errity, director, Deloitte Center for Corporate Governance, Deloitte LLP. “There’s no longer the sense that boards operate behind closed doors.”
The board and company executives at organizations of all sizes reported interaction with shareholders, according to survey respondents. Approximately one-third of small- and mid-cap companies (38 percent and 33 percent respectively) reported meeting with up to 5 percent of their shareholders, while 44 percent of large-cap companies reported meeting with more than 20 percent of their shareholders. Board members have also engaged in direct contact with shareholders. At 55 percent of large-cap companies, at least one director met with a shareholder. At small-cap companies, even more, 58 percent, had at least one director meeting with a shareholder; only 27 percent of mid-cap companies had at least one director-shareholder meeting.
The report also shows nearly half (47 percent) of all respondents stated that industry knowledge is the most important trait they look for in new board members – almost double most other desired skills. Amongst public companies, that number rose to 51 percent, with C-level experience as the second most desired attribute (37 percent) for board members, followed by international business exposure (30 percent).
“What we’re seeing in practice and in recent academic research on corporate boards is that subject matter knowledge of independent directors is correlated with better performance and some investors are showing increased focus on this aspect of board composition,” said Ken Bertsch, president and chief executive officer of the Society. “Our survey suggests that U.S. boards also increasingly are taking account of industry experience in choosing new directors.”
Additional key trends affecting the corporate governance climate, according to the report, include:
About the 2012 Board Practices Report
Deloitte analyzed responses from nearly 200 corporate secretaries who are members of the Society of Corporate Secretaries and Governance Professionals. Respondents represent 158 public companies, categorized as large-, mid- and small-cap and financial and nonfinancial companies and 37 nonpublic entities.
Deloitte’s Center for Corporate Governance fosters dialogue and knowledge sharing and develops thought leadership on governance issues to help advance collaboration among corporations, board members, the accounting profession, academia and government. Timely, relevant and balanced governance information is available on the Center for Corporate Governance website at www.corpgov.deloitte.com.
The Society of Corporate Secretaries and Governance Professionals, Inc. (the Society), is a professional association founded in 1946, with about 3,000 members who serve over 1,200 public, private and nonprofit companies. Responsibilities of members of the Society include advising corporate boards of directors, their audit, compensation and governance committees and executive management regarding corporate governance and disclosure. More information is available at www.governanceprofessionals.org
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