NACD Board Confidence Index Reflects Flattened Expectations for U.S. Economy in 2012

Directors' long-term optimism offset by short-term economic malaise

News provided by

National Association of Corporate Directors

Jan 05, 2012, 09:50 ET

WASHINGTON, D.C., Jan. 5, 2012 /PRNewswire/ -- The latest Board Confidence Index (BCI) released by the National Association of Corporate Directors (NACD) indicates that since Q4 2010, directors' confidence in continued growth in the U.S. economy has dropped by more than ten points. Whereas in 2011 directors characterized their outlook for general economic conditions as a moderately positive 71, in Q4 2011, those numbers dropped to 59, signifying "no change" for the future.

Despite increases in many leading indicators from Q3 2011, directors surveyed in Q4 2011 continued to express skepticism when asked to reflect their general confidence in the nation's current economic conditions. The latest NACD BCI results indicate, however, that directors remain more confident of their own industry conditions versus the general economy.

"In 2011, we saw a number of financial and regulatory changes that significantly affect business operations, both inside and outside of the boardroom, and these may be having a dampening effect," said Ken Daly, president and CEO of NACD. "The state of the economy is of critical importance to our members and in an election year will be even more of a focus to the broader public. The NACD BCI will continue to serve as an important measure of business confidence, providing insights into the economy as viewed by the leaders in America's boardrooms."

The NACD BCI is based on a survey of corporate directors conducted by NACD in collaboration with compensation consultancy Pearl Meyer & Partners. For the Q4 2011 report, 118 directors from a range of companies participated.

"While directors' confidence in the overall economy remains neutral," said David Swinford, president and CEO of Pearl Meyer & Partners, "the BCI index also found they are becoming more confident that their executive compensation plans are better aligned with corporate performance."

In terms of the overall economic outlook, the latest NACD BCI report shows that 60 percent of directors surveyed characterize current economic conditions as the same as the last quarter. When asked to forecast the general economic conditions of the next quarter, 56 percent of companies anticipate the same circumstances.

The NACD BCI found that 53 percent of companies plan on retaining the same number of employees in the next quarter, while just below 30 percent have plans to expand the workforce.

NACD's quarterly BCI assesses confidence in the overall economy's progress based on directors' responses to five key indicators. The responses are combined to provide a snapshot of the state of the economy from the perspective of the boardroom. For each question, there are five reply options: substantially better, moderately better, same, moderately worse and substantially worse. Each option is assigned a point value: 100, 75, 50, 25 and 0, respectively. The point values are averaged for each question.

To view the latest BCI data, please visit www.NACDonline.org/BCI. For more perspective on how the Q4 BCI results will impact corporate pay practices, go to www.pearlmeyer.com/boardconfidenceindex.

About NACD

The National Association of Corporate Directors (NACD) is the only membership organization delivering the information and insights that corporate board members need to confidently confront complex business challenges and enhance shareowner value. With more than 11,000 members, NACD advances exemplary board leadership. NACD is focused on creating more effective and efficient boards through director-led education and peer forums to share ideas and leading practices based on 35 years of primary research. Fostering collaboration among directors and governance stakeholders, NACD is shaping the future of board leadership. To learn more about NACD, visit www.NACDonline.org. To become an NACD member, please contact Kelly Dodd at [email protected] or 202-380-1891.

About Pearl Meyer & Partners

For more than 20 years, Pearl Meyer & Partners (www.pearlmeyer.com) has served as a trusted independent advisor to boards and their senior management in the areas of compensation governance, strategy and program design. The firm provides comprehensive solutions to complex compensation challenges for companies ranging from the Fortune 500 to not-for-profits as well as emerging high-growth companies. These organizations rely on Pearl Meyer & Partners to develop programs that align rewards with long-term business goals to create value for all stakeholders: shareholders, executives, and employees. The firm maintains offices in New York, Atlanta, Boston, Charlotte, Chicago, Houston, Los Angeles and San Jose.