Public company directors are looking for new ways to gauge company culture, according to PwC's 2018 Annual Corporate Directors Survey. The study, which is conducted annually, surveyed 714 directors across a dozen industries, with 76% of companies represented reporting annual revenues in excess of $1 billion.
The survey found that while 64% of directors use "gut feeling" from interacting with management to gauge company culture and 63% use employee turnover statistics, only a minority of directors felt these were useful approaches (32% and 29% respectively). Other highlights of the study include:
- Culture. Although more than two-thirds (67%) of directors said they felt that compensation plans which drive bad behavior could cause problems with corporate culture, only 17% said that their companies have revised their plans in an effort to address the issue.
- Diversity. Although two-thirds (66%) of directors agree that companies should do more to promote gender/ethnic diversity, almost half (45%) said their company does a fair or poor job of developing diverse executive talent. With regard to board diversity, the vast majority (84%) said it enhances board performance, but 52% said it was driven by "political correctness" and 48% said that shareholders are too preoccupied with it (note that 81% of survey respondents were male).
- Refreshment. Directors had considerable concerns regarding the performance of their peers, with almost half (45%) stating they feel at least one director on their board should be replaced. The most common criticisms were that a director was overstepping the boundaries of his or her role or was reluctant to challenge management.
- There seemed to be a mismatch between what directors feel would be effective and what they thought their companies would be willing to implement. For example, 64% said director term limits would be effective but 74% said their board would not adopt term limits of 12 years or less, while 73% said mandatory retirement age policies were effective but 56% said their board would not adopt a retirement age of 72 or younger.
- These findings are consistent with a recent Spencer Stuart survey that found that low board turnover (8% in 2018) are preventing boards from adding directors with diverse skills to address today's problems. The survey found that one reason was that companies are increasing their director retirement ages.