Poll: Directors Limited in Board Memberships

October 23, 2006 (PLANSPONSOR.com) - Almost half of directors (47%) sit on only one public company board, while a total of 78% sit on one or two, according to the results of a new survey.

A press release about the survey by PricewaterhouseCoopers LLP and Corporate Board Member magazine said the survey also found almost nine out of ten responding boards (86%) report that their performance is regularly formally evaluated. Of that number, nearly six in 10 boards (59%) took action or implemented plans as the result of the evaluation.

Not only that, the survey found, but 59% of boards employ their internal general counsel to perform this evaluation, while only 15% use an outside attorney and another 14% use either an internal officer or outside adviser, the release said.

“Directors appear to be limiting the number of boards they serve so they can give proper attention to each board responsibility,” said Catherine Bromilow, a partner with PricewaterhouseCoopers and  US leader of its Corporate Governance Group, in the release. “But this trend poses a two-edged sword. In the past, we were concerned directors were serving on too many boards. Now the question becomes whether there is sufficient cross-fertilization to leverage knowledge and learn – especially if directors are sitting on just one.”

Other survey results included:

  • More than half the respondents (51%) said institutional investors influence their board the most, while 26% selected analysts, 15% chose ISS and rating agencies, and the remaining said it is the plaintiffs’ bar and activist hedge funds that most influence the board (4% and 3%, respectively).
  • Most directors are either “not at all concerned” (41%) or only “somewhat concerned” (40%) about the impact of hedge funds on their company. However, 29% are “concerned” and 46% are “somewhat concerned” about the impact of hedge funds on capital markets more broadly.
  • Sixty-nine percent of respondents said they find their executive sessions to be very useful to the board and believe the CEO clearly understands their value; while 22% find them useful to the board but are unsure whether the CEO appreciates them. Seven percent said they are not particularly valuable to the board, while 1% say they are not valuable and have actually hurt the CEO/board relationship.
  • Fifty-seven percent of directors are not ready to hold board meetings online. Some 72% said their board does not have a secure Internet location where they can access documents; of those, 56% said they do not even want one.
  • Directors are not seeking more control over the board agenda; 90% said they are satisfied with the control they currently wield over what is scheduled for their board meetings.
  • Fifty percent of respondents reported that their board is “very effective” in standing up to management, while 38% insisted they are “effective” and the remaining 11% said they are “somewhat effective” in standing up to management.
  • Six out of ten respondents (60%) said they would like to see their board spend more time discussing the competition.

The fifth annual survey measured the opinions of over 1,300 directors serving on the boards of the top 2,000 publicly traded companies listed on the New York Stock Exchange, NASDAQ Stock Market and the American Stock Exchange.