FTI Consulting, Inc./Corporate Board Member Survey Shows Directors are Feeling Regulatory Heat

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Aug 16, 2010, 01:05 ET

NEW YORK, Aug. 16 /PRNewswire-FirstCall/ -- The 10th annual legal study by Corporate Board Member and FTI Consulting, Inc. (NYSE: FCN) shows executive compensation and governance and compliance among the most pressing concerns for directors and general counsel.

The survey reports that directors' top three concerns are executive compensation (41%), governance and compliance (38%), and mergers and acquisitions ("M&A") (34%). General counsel ("GC") rated governance and compliance (49%), managing outside legal fees (48%), and executive compensation (36%) as their top three areas of importance.

Respondents' concern over governance and compliance is not without foundation. This year saw Congress take a broad brush to many corporate areas perceived to be lacking in oversight. The near collapse of the financial markets in 2008 combined with the public's outcry over excessive corporate executive salaries, bonuses, and the absence of claw backs has caused regulators and lawmakers to turn up the heat on corporations of all stripes, eventually culminating with this summer's colossus Dodd-Frank Wall Street Reform and Consumer Protection Act.

"As we all know, CEO and executive compensation is top of mind in the media and among policymakers, and rightfully so," says Neal Hochberg, senior managing director and leader of FTI's Forensic and Litigation Consulting segment. "Clearly, compensation packages in some companies are disconnected from business performance."

Directors and general counsel surveyed certainly saw this coming: 63% of GCs said their 2010 workload would increase in the area of regulatory compliance, while 58% reported the area of executive compensation would create a greater workload.

With this new onus on compliance, many directors and general counsel indicated they expected to turn to outside assistance this year for the aforementioned areas as well as labor/employment issues, M&A, intellectual property, and disputes. In fact, 100% of general counsel reported they would need to hire outside counsel in 2010. Two-thirds of general counsel indicated such service would be needed to deal with the intricacies of executive compensation.

The vast majority of directors (87%) agree with general counsel that outside legal counsel will be needed, especially for key areas such as governance and compliance (74%) and M&A (66%).

"The reality is, GCs and directors are confronted with increasingly challenging concerns, which require specialized skills," says Mr. Hochberg. "GCs, for example, will have a hand in everything from contract disputes, regulatory compliance, and internal investigations to governance, risk management, and intellectual property disputes. It is simply not reasonable, or even possible, to have extensive expertise in all of these areas."

On a positive note, directors appear to be satisfied with their current in-house legal counsel's ability to manage corporate ethics (93%), human resources issues (92%), Foreign Corrupt Practices Act matters (90%), and management of outside counsel (87%).

Additional highlights

The following are additional highlights from the 2010 study:

Even with the adoption by the SEC of expanded executive compensation disclosure rules, the majority (66% of directors and 67% of GCs) do not believe they need to change their company's current policies and philosophies regarding executive compensation.
Eighty-eight percent of directors and 92% of GCs expect government regulation and oversight of business to increase in 2010.
When questioned about the factors that are most significant when choosing outside counsel, both directors and GCs are most concerned with the firm's track record in specific areas followed by the firm's reputation.
Given Proxy Rule 452's elimination of brokers' voting of discretionary shares, as well as RiskMetrics' ability to recommend withhold votes, 28% of those directors surveyed say directors should be concerned about being re-elected. However, 43% disagreed, and 29% were unsure.

For additional findings or to download a PDF version of the complete report on the Corporate Board Member/FTI Consulting, Inc. 2010 Legal Study, please visit www.boardmember.com or www.fticonsulting.com.

About the Study

During January 2010, directors and general counsel of publicly traded companies received a survey exploring board of director level legal issues. Email surveys were sent to 8,500 directors and surveys were mailed to 2,252 general counsel.

About FTI Consulting

FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,300 employees located in most major business centers in the world, we work closely with clients every day to anticipate, illuminate, and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, strategic communications and restructuring. More information can be found at www.fticonsulting.com.

About Corporate Board Member

Corporate Board Member is the leading information resource for senior officers and directors of publicly traded corporations, large private companies, and Global 1000 firms. The quarterly publication provides readers with decision-making tools to deal with the corporate governance challenges confronting their boards. Corporate Board Member further extends its governance leadership through an online resource center, conferences, roundtables, and timely research. The magazine maintains the most comprehensive, up-to-date database of directors and officers serving on boards of publicly traded companies listed with NYSE Euronext, NYSE Alternext U.S., and The NASDAQ OMX Group Inc stock exchanges. www.boardmember.com