Study: Directors Really Spreading Their Wings

March 9, 2005 ( - Corporate boards are more influential and have greater independence from management than many may have thought, according to a new Mercer Delta Consulting survey.

A news release said the survey by the University of Southern California found that:

  • 93% of directors surveyed felt their board was independent of management ‘to a great’ or ‘very great extent’
  • 95% said that board members voice opinions that conflict with the CEO’s view
  • 73% said CEOs have less control over their boards ‘to some extent’ or to a ‘great or very great extent’
  • 92% of directors indicated that they had influence over the meeting agenda.

Not only were directors spreading their own wings, they still felt good about their board operated and directors’ ability to work with management:

  • 92% said that the board works well with senior management
  • 95% reported boards receive enough information to carry out their responsibilities
  • 96% indicated that the CEO keeps the board informed about significant matters affecting the company.

“The past year was a crucial milestone in terms of the practical application of the governance reforms put forth in 2002,” said Dr. David Nadler, chairman, Mercer Delta Consulting, a global management consulting firm, in a news release.. “These results reflect our own experience with boards, which is that many of them are not only doing the hard work to change their structures and comply with governance requirements, they are going beyond basic compliance and striving for optimal board effectiveness.

While the results reflected significant board progress, some issues still require attention, according to Mercer Delta. Of note, one third of directors do not rate themselves as effective or very effective at key roles such as planning for CEO succession (31%) and shaping the long-term strategy of the company (36%).

In terms of shaping long-term strategy, eight in 10 of directors reported that their boards were spending more time on monitoring and less on strategy to some or a great extent.

The survey found that there is a continuing trend towards the designation of a board member to provide leadership to the independent directors. Three quarters (75%) of those surveyed indicated that their board now has tapped a director to play this role. Of those who have a Lead or Presiding Director, more than a third (36%) rotate the role on an average of once every 16 months. The most common roles for a Lead Director, Presiding Director or Non-Executive Chair are: chairing executive sessions (64%), communicating with the CEO between meetings (55%), and leading the Board in the event of a crisis (41%).

The amount of time that directors spend each year on board issues has increased from an average of 180 hours in 2003 to 188 hours in 2004. In 1999, directors reported spending 156 hours on average.

Wth respect to board evaluation, 71% of directors considered their process to be effective or very effective and 70% thought the same of their committee evaluation process. Eight in 10 considered the CEO performance evaluation process to be effective or very effective but only 43% thought that they had an effective process for evaluating individual directors (notably, 19% didn’t have a director evaluation process).

The findings of the study are based on responses from 221 directors of Fortune 1000 companies in the US (average revenue $9.9 billion). The survey, which University of Southern California researchers have been conducting annually for the last decade, monitors the main changes taking place in boardrooms.

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