PwC launched the second installment of its 2014 Annual Corporate Directors Survey this morning. This week’s segment, “Governance trends shaping the board of the future: Board priorities and practices,” discusses the multiple directions from which directors face scrutiny: investors, regulators and other stakeholders.

Board’s interaction with activist shareholders

Nearly one-in-three directors say their board has interacted with an activist shareholder (and held extensive board discussions about activism) during the last 12 months.

  • An additional 14% of boards have not had activist interactions but have extensively discussed this topic.
  • Mega-cap company boards are twice as likely to interact with activists as small-cap company boards.

The report data reveals that boards are reassessing their practices in the face of this pressure.

  • 62% want at least some additional boardroom time and focus, and almost one in five want much more time and focus.
  • 65% and 46% of directors are at least somewhat concerned with these CEO/median employee pay ratio disclosure and shareholder proposals for proxy access, respectively.
  • Directors strongly prefer internal CEO candidates, but only 27% have much confidence in their company’s CEO talent pipeline. And nearly one in five believe their company’s CEO talent pipeline is not adequate.
  • Especially over the past year, much of this pressure has emerged from the activist shareholders community
  • Self-evaluation has yielded conflicting results. 91% believe their self-evaluation processes are at least somewhat effective while 70% say it is at least somewhat difficult to be frank in their self-evaluations. Further, almost two-thirds of directors believe self-evaluations are at least somewhat a “check the box” exercise.

directors Activist shareholders

The full report can be accessed here and the press release is below for your reference. PwC will release its next segment of the 2014 survey, which focuses on Information technology and cybersecurity, on Tuesday, September 23.

Governance Trends Shaping the Board of the Future – Board Priorities and Practices

Second segment of PwC’s 2014 Annual Corporate Directors Survey sheds light on changing governance landscape

NEW YORK, September 16, 2014 – Evolving trends in board priorities and practices, as well as activist shareholders becoming even more active, were among the issues directors expressed their views about in PwC’s 2014 Annual Corporate Directors Survey. In the summer of 2014, 863 public company directors responded to the survey, and of those, 70% serve on the boards of companies with more than $1 billion in annual revenue.

“We structured this year’s survey to gauge director sentiment on a number of key governance trends shaping the board of the future,” said Mary Ann Cloyd, Leader of PwC’s Center for Board Governance. “As directors continue to face scrutiny from investors, regulators and other stakeholders, board practices remain in the spotlight.”

Rise of activist shareholders: Director sentiments

In today’s release, PwC highlights director sentiments related to these particular trends:

  • Directors want to spend more time on strategy: 62% want at least some additional boardroom time and focus, and almost one in five want much more time and focus. They also want to give more attention to the IT issues that are closely linked to strategy; 65% of directors want at least some increased focus on cybersecurity and 47% want more attention on IT strategy.
  • Topping the list of director concerns regarding proposed and recent regulatory and shareholder initiatives are the CEO/median employee pay ratio disclosure and shareholder proposals for proxy access: (65% and 46% of directors are at least somewhat concerned with these topics, respectively). Mega-cap company directors are three and a half times more likely than small-cap company directors to express substantial concern with shareholder proposals for proxy access.
  • Directors strongly prefer internal CEO candidates, but only 27% have much confidence in their company’s CEO talent pipeline: And nearly one in five believe their company’s CEO talent pipeline is not adequate.
  • The vast majority of directors favorably view board and committee self-evaluations: 91% believe their self-evaluation processes are at least somewhat effective.  However, a majority of directors have a difficult time speaking their minds – 70% say it is at least somewhat difficult to be frank in their self-evaluations and nearly one-in-five think it’s very difficult. Further, almost two-thirds of directors believe self-evaluations are at least somewhat a “check the box” exercise.
  • More than seven-in-ten directors describe their board leadership as very effective in gaining and maintaining the respect of other directors and obtaining board consensus:  However, less than one-third say their leadership is very effective in anticipating emerging trends.
  • Nearly one-in-three directors say their board has interacted with an activist shareholder (and held extensive board discussions about activism) during the last 12 months: An additional 14% of boards have not had activist interactions but have extensively discussed this topic. Mega-cap company boards are twice as likely to interact with activists as small-cap company boards.

For more information or to download all survey findings on board priorities and practices please visit: www.pwc.com/us/directorssurvey.

In addition, 2014 survey data on board performance and diversity is available for download at: Governance trends shaping the board of the future—Board performance and diversity.