Among the many noteworthy key findings revealed in PwC's just-released report on its 2017 Annual Corporate Directors Survey of 886 public company directors (84% men/16% women) are those relating to how - and the extent to which - the current investor and public policy focus on board diversity and board refreshment are playing out in the boardroom. Watch for our focused report on this always-informative survey in next week's Society Alert.
Key findings per PwC's release include:
- Director discontent with peers is on the rise. Almost half (46 percent) of directors say at least one colleague should be replaced. And yet, only 15 percent said that a member of their board was provided with counsel or was not re-nominated as a result of the board assessment process.
- Directors grapple with achieving – and even defining – diversity. While directors say that board diversity is valuable and the vast majority say their boards are taking steps to increase diversity, they don't all see benefits beyond the boardroom. More than 40 percent say board diversity does not improve company performance and more than half of directors say their boards are already sufficiently diverse. Surprisingly, almost one in six of respondents (16 percent) think diversity on their board has had no benefit.
- Divided on racial diversity: Despite essential dialogues surrounding race taking place nationally, nearly a quarter (24 percent) of respondents say racial diversity is "not at all important" in achieving diversity of thought. And while it represents the minority, a troubling (almost 10 percent) of directors say their boards have no racial diversity – and do not need it.
- Men and women are split on the evolution of diversity: Women and men view gender diversity in the boardroom differently. Women are more than twice as likely to say it is happening too slowly, but men are six times more likely to say there is too much of a focus on gender diversity.
- Tenure affects diversity perspectives: Newer directors are significantly more likely to value both racial and gender diversity on the board than colleagues who have served on board for 10 or more years. Eighty-four percent of board members with shorter tenure (five years or less) say that racial diversity is important compared to 65 percent of board members with tenures of 10 years or more.
- Environmental issues struggle to break through in the boardroom. ESG broke through with broad and newfound investor support in the 2017 proxy season. However, almost one third of directors (30 percent) indicate they do not have and do not need expertise in this area (the highest such response in any category). Additionally, 40 percent say environmental issues should not be taken into account at all in forming company strategy.
- Executive pay remains a pain point. The majority of directors (70 percent) at least somewhat agree that executives are overpaid. Two-thirds (66 percent) at least somewhat agree that executive compensation exacerbates income inequality.
- Shareholder engagement is creating returns – but are enough directors on board? Directors have adopted more positive attitudes on shareholder engagement and are now significantly more likely to think direct engagement positively impacts proxy voting (77 percent, up from 59 percent). However, 23 percent still say that directors should not be engaging with shareholders.
- Boards recognize IT and cybersecurity gaps. Directors overwhelmingly agree (72 percent) that their boards need more expertise in addressing these critical issues. Less than one-fifth of directors are satisfied with the current levels of expertise on their boards.
Our take: Note that the lack of alignment between the percentage of respondents saying that at least one of their fellow directors should be replaced and those saying a director was given counsel or not re-nominated does not mean that boards are failing to address board composition issues, i.e., just because 46% of directors said a fellow director should be replaced, doesn't mean that should be the case. In addition to the differences in perspective between newer and more tenured directors on this point (as discussed in the survey, and which we will cover in next week's Society Alert), consider any group environment and the related personal dynamics and human behavior when evaluating these results.
See also PwC's Top 6 Findings, these "deep dive" tools, our report on last year's equally informative survey, and numerous additional benchmarking resources on our Board/Governance Practices topical page.