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The Deloitte Director 360 survey reveals shareholder scrutiny forecast to increase over the short term

January 2013 – The level of shareholder scrutiny on corporate governance practices will increase over the next few years.  This is according to the global Deloitte Director 360: Degrees of Progress survey.  The survey, now in its second year examines a range of corporate governance issues including board composition, regulation, diversity, and risk oversight in a survey of 288 directors in 19 countries. 

Dan Konigsburg, Deloitte Touche Tohmatsu Limited Managing Director in the Deloitte Global Center for Corporate Governance, comments: “It is not surprising that global directors expect the level of scrutiny from shareholders to increase. Companies across the globe are facing on-going change in both global and local business environments as well as the roles and responsibilities of board directors.  The uncertain economic climate continues to weigh heavily on boardroom agendas. The survey results reflect anxiety that is being felt over increasing levels of shareholder activism as countries emerge from the financial crisis.  Over the next few years, we expect to see shareholders continue to exert their influence to ensure boards are looking out for the best interests of the company.”

Highlights from the survey include:

Executive remuneration has become overly complex 
Nearly half of global respondents (49 percent) felt that the drive in many countries to link pay with performance, in a way that considers long and short-term, financial and non-financial performance, carries with it the danger that remuneration plans and policies become difficult to understand.   And, while remuneration of board members remains very different across jurisdictions, 52 percent of directors agreed that their pay was appropriate.

Boards involvement in the organisation’s strategic plans varies
More than 88 percent of all directors currently engage in active discussion on strategic plans and objectives. There was found to be varying degrees in the level of board involvement – some were architects of strategy alongside management, and others limited their involvement to endorsing management’s strategies. 

Board level diversity still a priority 
Diversity was seen by nearly half (47 percent) of the directors surveyed to enhance the board’s ability to consider issues from a wide range of perspectives and to develop more balanced global business strategies.  Despite the recognition of the importance of diversity, 34 percent of respondents were reluctant to recruit directors from outside their home country. Some of this discrepancy may be because international experience can be hired, or consultants can be brought in when needed rather than adding a new director to the board.

Regulatory changes set to impact board’s area of focus
The introduction of significant governance regulation, such as the Dodd Frank Act in the U.S. and the European Commission Green Paper in the EU, over the last two years has contributed to over 85 percent of directors in almost all jurisdictions to forecast that boards will be impacted by regulation.  There is a belief among some directors interviewed that if the regulatory environment continues to increase in complexity, there may be a reluctance to join boards in the future.

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Kerry Naidoo
Deloitte & Touche
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