Survey highlights outside scrutiny on corporate directors

November 2, 2016

boardroomMany corporate board members say they are facing increased scrutiny from regulators, shareholders and consumers who have unrealistic expectations about directors’ capabilities to oversee corporate activity, according to recent survey results released by executive search firm Spencer Stuart.

Sixty percent of corporate directors say they see a disconnect between reality and the expectations placed on them, according to the 2016 Global Board of Directors Survey, which Spencer Stuart conducted in partnership with the WomenCorporateDirectors Foundation and researchers from Harvard University and elsewhere.

Spencer Stuart and its partners polled over 4,000 directors in 60 countries and released their results on board skills, priorities and processes Oct. 20. The group released survey results from the same survey related to economic and diversity issues in April.

All eyes on corporations

The increased scrutiny comes in a climate where regulators, shareholders and other stakeholders are demanding more accountability and transparency from corporations, the survey said.

Over two-thirds of corporate boards are trying to meet those expectations by implementing performance evaluations. Companies are also adding new directors with key credentials, including industry knowledge and financial and audit skills, according to the results.

A majority of respondents — 67 percent — said strategic experience is also highly important for directors. But in reality, only one-third of survey respondents said strategy expertise was a top requirement in their most recent board appointment.

Spencer Stuart and its partners said directors may be overlooking strategy expertise when they recruit new directors.

Although corporate boards are making changes, some directors say the demands from outside stakeholders are too much.

Of the survey respondents who said they see a disconnect between reality and expectations regarding the board’s oversight ability, a quarter of them said outside expectations of corporate boards far exceed reality, the survey said.

Sixty-four percent said outside expectations moderately exceed reality.

Economic concerns

In April, Spencer Stuart and its partners released other survey data about economic, diversity, talent and cybersecurity issues in corporate boards.

According to those results, an overwhelming number of corporate directors in North America and Western Europe are pessimistic about their companies’ growth prospects.

Sixty-three percent of survey respondents in those regions said they are uncertain about the global economic landscape, according to the survey.

The survey also noted that corporate tax rates are a particularly hot button issue in North America.

Cybersecurity trends

Globally, corporate directors are most concerned about regulatory, reputational and cybersecurity risks, the survey said.

Cybersecurity issues rank particularly high for North American boards and some are addressing the issue by reserving one seat for a director who has a strong digital or security background, according to the survey.

However, boards with cybersecurity experts should continue to be highly vigilant, Julie Hembrock Daum, head of Spencer Stuart’s North American board practice, said in the survey.

“The board should not isolate cybersecurity responsibility with just this one board member, but continue to view cybersecurity as a full-board priority,” she said.