Russian non-execs concerned about governance and regulation, says Director 360° survey
An international survey of non-executive directors conducted by the Deloitte international network for its Director 360º publication, shows that boardrooms are shifting their focus away from fighting the effects of the global financial crisis, to focus on growth and performance improvement. Russian directors, questioned for the first time in this year’s survey, are keeping a close eye on the heavy regulatory burden and ever-present issues of corporate governance.
Moscow, 30 June 2014 - According to Deloitte’s international survey of non-executive directors, Director― 360°: Growth from All Directions, one of the most notable trends of the last year was the shift in focus from anti-crisis measures to a concentration on company growth and performance improvement. From it’s position as the key concern in 2013, the global financial crisis dropped to sixth place among the concerns identified by board members, mentioned as an issue by fully 23 percent fewer, this year, than in the last survey
After strategy, performance ranked second among issues discussed most by boards (up by 18 percent), closely followed by company growth and shareholder value/investors (up by 13 percent and 11 percent respectively). Said Dan Konigsburg, managing director of the Deloitte Global Center for Corporate Governance: “These results may indicate that boards are moving away from austerity policies and are focusing more on company performance and operations and the creation of long-term sustainable growth.”
Emerging cyber security threats feature on the agenda in only half of the boardrooms surveyed. Fully 49 percent of the non-execs surveyed say they do not currently discuss cyber security risks as part of their technology agenda. More than a quarter, (27 percent) report that they do not discuss technology risks at all.
Konigsburg expressed his shock at the results: “In light of all the recent news surrounding security incidents and data breaches, it is surprising that we are not seeing an increased number of boards discuss the security risks facing their companies. Failure to take preventative measures to protect against breaches in security poses a huge risk to organizations. Such risks can adversely expose organisations to internal control deficiencies and reputational risks; that may ultimately result in lost revenue.”
The Director 360°: Growth from all Directions survey provides the perspective of 317 boardroom non-executive directors at public and private companies across 15 countries and regions.
The survey has been conducted annually since 2011; it is the first time Russia participated in the survey (23 participants). The most notable difference of the Russian subsample in the global perspective is critical attitude to corporate governance regulation framework and investor rights protection.
Key survey results for Russia
Corporate governance. Russian directors were critical about standards of corporate governance, regulatory practices and the level of investor rights protection in Russia Some 39 percent of respondents said corporate governance was inefficient (against a world average of 12 percent),and 78 percent believe that the corporate governance framework in the country is ineffective at protecting sharewholder rights (against a world average of 30 percent).
Board efficiency. Russian directors were generally critical of boardroom practices. For example, 61 percent of respondents think that procedures for the assessment of board performance are ineffective (the global average is 27percent).
Priorities on the agenda. Russian boardrooms were focused predominantly on ongoing operations, so whilst the directors held strong views on the issues of risk management, regulation, corporate governance and compliance they nevertheless were not among the top five most discussed issues. Further out, participants expect that long-term goals and sustainable development will start to feature on the agenda.
Board composition and engagement with major shareholders. Most participants from Russia noted the need to include additional independent directors in their boards (66 percent) and increase the impact and transparency of large shareholdings (91 percent).
Oleg Shvyrkov, Head of the Center for Corporate Governance at Deloitte CIS: "Russian respondents were open about the deficiencies in Russian corporate governance practice and highlighted their priorities for bridging the gaps. The survey, suggests that they are looking for increasing regulatory efficiency, and improvements to the rules governing the composition and procedures of the boards and their engagement with major shareholders."