PWC’s 2019 Annual Corporate Directors Survey of more than 700 public company directors produced results which may seem incongruous with concerns commonly heard in the press and the markets:
- 49% of respondents say that one or more directors on their board should be replaced, the highest level recorded on this survey.
- 43% of directors say it is difficult to express a dissenting opinion.
- 72% say boards are addressing board performance assessments, but those actions tend to be adding expertise or diversity rather than counseling or not renominating underperforming directors.
- The percentage of directors saying diversity is very important on the board has fallen by nearly 10%.
- 56% of directors say investors focus too much on environmental/social issues (50% of respondents think their board has a strong understanding of the ESG issues impacting their company).
Regarding executive compensation, directors believed that compensation consultants still had the most influence on executive pay as 88% of respondents rate that influence as moderate or significant. An important trend was the increased influence directors see from other sources. According the survey, the percentage of directors that felt institutional investors had at least a moderate influence increased from 42% in 2016 to 61% in 2019. Over the same period, employees' influence increased from 28% to 51% while CEO pressure increased in influence from 34% to 50%.
The survey notes that many boards have focused on building collegiality, but that focus is making it harder to express concerns about director performance, offer dissenting opinions, or come to grips with shareholders’ increasing influence over issues such as board diversity and ESG. Further, this collegiality imperative has made it more challenging to discuss the sensitive issues of executive pay as CEOs are typically members of the board.