Corporate directors of US companies are "out of step" with institutional investors on a number of environmental, social and governance topics, according to PwC's 2017 Annual Corporate Directors Survey.
The study was conducted this summer on 886 directors from companies across a dozen industries (75% with revenues over $1 billion). It found that despite increasing interest from major investors such as Blackrock and Vanguard on ESG issues including climate change, gender diversity and income inequality, these concerns were not reflected among corporate directors. Nearly a third (30%) of directors said they don't have or see a need for ESG expertise on the board, while 40% said they don't believe climate change should impact company strategy at all. Similarly, more than 40% of directors do not believe board diversity enhances company performance at all, and more than a quarter said they think there is too much emphasis on gender diversity, although it is unclear whether the response was relative to other forms of Board diversity. Interestingly, 55% of respondents said their boards need gender diversity or more gender diversity. Notably, female directors are much more likely than male directors to consider social or environmental concerns as part of strategy formation.
Other highlights of the survey include:
- Directors are increasingly dissatisfied with their peers, especially higher-tenured peers, with almost half (46%) believing one or more of their peers should be replaced.
- More than two-thirds (68%) said they have taken action in response to performance assessments of the board over the past year, an increase of 19% from last year.
- Directors give management teams high marks for communicating and responding to director input on strategy, but the majority (70%) said they agree, at least somewhat, that executives are overpaid.
- Only 60% of directors said their board "strongly challenges" management assumptions with regard to strategy oversight
- Directors are much more supportive of shareholder engagement than in the past, with 77% at least somewhat agreeing that shareholder engagement affects proxy voting, and 76% saying the board received valuable insights from engagement.