Differing views on risk, board diversity and director replacement

PwC study shows 73 percent of investors see CEOs as ‘very influential’ on executive pay, compared with 9 percent of directors

Investors and directors differ sharply in views on impediments to gender diversity and replacing underperforming directors as well as on the urgency of issues such as cyber-security and risk appetite, according to research by PwC.

A PwC report analyzing the results of two surveys shows 94 percent of investors believe companies face obstacles in replacing underperforming directors, while only 53 percent of directors felt likewise. At the same time, 85 percent of investor see obstacles in increasing gender diversity on boards, while only 13 percent of directors agreed.

Ninety-five percent of directors say they understand their company’s risk appetite at least ‘moderately well,’ yet only 65 percent of investors believe it. And almost three quarters of investors say directors should be discussing a crisis response plan in case of a major security breach, while only half of directors are holding such discussions.

The research also shows that 73 percent of investors believe CEOs are ‘very influential’ in a board’s decision about executive compensation while only 9 percent of directors said the same. Twenty-seven percent of shareholders say institutional shareholders are ‘very influential’ in the decisions and 17 percent of directors said the same.

‘We structured both surveys to focus on certain trends that are shaping corporate governance and which we believe will impact the board of the future,’ Mary Ann Cloyd, leader of PwC’s Center for Board Governance, says in a press release. ‘We hope that this information will be used by directors, investors and management to help close the expectations gap.’

Investors and directors, however, were in somewhat closer agreement on matters of investor/director relations, the results of the survey show.

Forty-six percent of directors say corporate earnings are a ‘very appropriate’ or ‘somewhat appropriate’ topic of discussion in direct meetings with shareholders, while 54 percent of investors say the same. Shareholder proposals are an appropriate topic for 81 percent of directors and 88 percent of shareholders.

At the same time, a quarter of directors say direct communications between directors and investors has increased in the past 12 months, 41 percent say it stayed the same and 33 percent say it decreased. Some 48 percent of investors say it increased while 24 percent say it stayed the same and 27 percent saw a decrease.

SOURCE

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