Director Involvement to Ramp Up

August 21, 2002 ( - Employers and investors alike can look for more direct involvement from company directors on significant issues.

That’s the bottom line of a recent survey by PricewaterhouseCoopers (PWC), which also found that half of US respondents and a third of those in Europe have already or plan to change their board’s audit committee procedures to facilitate the added director involvement.

US respondents listed the following areas in which they believe their board will have more input:

  • identifying and managing risk, 57%
  • the company’s business structure and transactions, 55%
  • auditor independence, 55%
  • the Code of Conduct, 47%
  • liquidity issues, 37%
  • related party transactions, 36%
  • off-balance-sheet financing, 33%
  • review of quarterly earnings, 32%
  • analysts, investors, and the media, 27%

The added board involvement is a good thing because, the senior executives told PWC, the individual directors have a wide range of areas of expertise.

These include acquisitions, strategic alliances; joint ventures; corporate strategy; executive compensation and incentives; financial reporting; risk management; and feedback on operating plans.

Overall, more than 90% of executives gave their board good marks for knowledge of the key aspects of the company’s business.

However, in the US, a majority rated their board as very knowledgeable in just three areas – strategic direction, financial challenges facing the company, and overall performance.

Operating Procedures

Corporate boards may be getting more active, but the audit committees will also function differently, according to the PWC survey. Audit committees have or will undergo these changes, US respondents reported:

  • more-frequent audit committee meetings, 32%
  • longer audit committee meetings, 31%
  • additional education of audit committee members, 26%
  • changes in audit committee composition, 15%
  • changes in the committee’s charter, 15%.

145 U.Sging Directors, and 97 in Western Europe were interviewed in 2Q02.CFOs and Managin145 U.S. CFOs and Managing Directors, and 97 in Western Europe were interviewed in 2Q02.g Directors, and 97 in Western Europe were interviewed in 2Q02.