PwC Research Finds Gap Between Investor and Corporate Director Views on Planning for Major Security Breaches and Overcoming Board Diversity Challenges

Report compares director and investor perspectives on key trends shaping corporate governance and the board of the future

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PwC US

Dec 18, 2014, 10:17 ET

NEW YORK, Dec. 18, 2014 /PRNewswire/ -- Nearly three-quarters of institutional investors responding to a PwC US survey believe that it is important for corporate directors to be discussing their company's crisis response plan in the event of a major security breach, yet only half of directors have had those discussions.

A new report released today by PwC compares findings of two surveys conducted in the summer of 2014. The first, PwC's 2014 Annual Corporate Directors Survey, revealed the insights from more than 860 public company directors, 70 percent of whom serve on the boards of companies with more than $1 billion in annual revenue. At the same time, institutional investors with more than $11 trillion in aggregate assets under management responded to PwC's 2014 Investor Survey.

Corporate directors and institutional investors both identify strategic planning, risk management and succession planning as top areas for board focus in the coming year. However, the two groups have notable differences in opinion when it comes to areas such as obstacles to increasing board diversity and the need for director communications about their board's composition.

"We structured both surveys to focus on certain trends that are shaping corporate governance and which we believe will impact the board of the future," said Mary Ann Cloyd, leader of PwC's Center for Board Governance. "This report compares director and investor responses in order to identify where they share views or have different perspectives. We hope that this information will be used by directors, investors and management to help close the expectations gap."

Significant findings include:

Investors are much more skeptical than directors about impediments to replacing underperforming directors. Ninety-four percent of investors say there are obstacles to replacing underperforming directors, compared to only 53 percent of directors. Investors perceive a close relationship between the CEO and the underperforming director as the greatest challenge. Directors who say that impediments exist most frequently cite their board leadership's discomfort addressing the issue.
Investors are more skeptical about overcoming board diversity challenges. Eighty-five percent of investors believe there are impediments to increasing gender diversity compared to just 14 percent of directors. Investors and directors also disagree about what the greatest challenges are; investors say the top impediment is directors not wanting to change their current board composition to create a position for a diverse candidate, while directors say it is a lack of awareness of qualified candidates.
Board composition and performance are receiving increased scrutiny. Both investors and directors sense this trend and express even more concern about lower levels of voting support for director nominees than last year. Not surprisingly, investors think directors should be even more concerned than they currently are about shareholder support. Forty-eight percent of investors say the board should become concerned if a nominee receives a negative vote of 20 percent or higher; only 31 percent of directors take that view (versus 36 percent and 28 percent last year, respectively).
Investors are 64 percentage points more likely than directors to believe that CEO pressure has a "very influential" effect on the board's decisions about executive compensation.
Ninety-five percent of directors say they understand their company's risk appetite at least moderately well, compared to only 61 percent of investors who believe they do. More than nine-in-ten directors say their board understands the company's ability to prioritize the most important risks at least moderately well, compared to 58 percent of investors who believe this is the case.

Other notable comparisons:

Both investors and directors acknowledge the trend toward increased communications between the two groups.
Investors are more than three times as likely to believe board composition is an "important/very appropriate" topic for director-investor communications.
Investors want directors to focus more on certain aspects of information technology than they currently are – including preparing for possible communications about security breaches.

For more information or to download the complete report—"What Matters in the Boardroom 2014: Director and Investor Views on Trends Shaping Governance and the Board of the Future"—please visit: http://www.pwc.com/en_US/us/corporate-governance/publications/comparing-director-investor-boardroom-governance-trends.jhtml.

In addition, data and analysis from PwC's 2014 Annual Corporate Directors Survey can be viewed in full and downloaded here: http://www.pwc.com/us/directorssurvey, and PwC's 2014 Investor Survey data results can be viewed in full and downloaded here: http://www.pwc.com/us/en/pwc-investor-resource-institute/publications/investor-influence-corporate-boards.jhtml.

About PwC's Center for Board Governance

PwC's Center for Board Governance is a group within PwC whose mission is to help directors effectively meet the challenges of their critical roles. This is done by sharing governance leading practices, publishing thought leadership and offering forums on current issues.

For more information, please visit http://www.pwc.com/US/CenterForBoardGovernance.

About PwC's Investor Resource Institute

PwC's Investor Resource Institute seeks to add value to investors' decision-making processes by sharing PwC's insights and educational materials regarding markets, industries, and corporate governance. To learn more, please visit: http://www.pwc.com/us/InvestorResourceInstitute.

About PwC US

PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms, which has firms in 157 countries with more than 195,000 people. We're committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US.

PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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SOURCE PwC US