Industry Disruption, Changing Global Conditions, and Cybersecurity Threats Top List of Corporate Directors’ Concerns

WASHINGTON, Nov. 30, 2017 -- The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 17,000 board members, today released its 2017–2018 NACD Public Company Governance Survey, an annual survey that looks through a board lens into the chief areas of concern for corporate directors. Industry disruption, business-model disruption, changing global conditions, and cybersecurity threats topped the list of concerns in this survey of 587 corporate directors representing 520 public companies.

Asked which five trends they foresee having the greatest effect on their companies in 2018, fully 58 percent of respondents identified significant industry change as one of the trends, pointing to technology disruption, industry consolidation, and shifting regulations as key drivers of this change. The following trends also ranked among the top five:

• Business model disruption – 46 percent
• Changing global economic conditions – 46 percent
• Cybersecurity threats – 38 percent
• Competition for increasingly scarce talent – 36 percent

In addition to citing cybersecurity threats as a top concern, the survey revealed that boards are less confident about cyber-risk preparedness than they were a year ago. Only 37 percent of board respondents feel confident or very confident that their company is properly secured against a cyberattack, compared to 42 percent last year.

“A close look at this survey reveals that today’s directors are facing unprecedented challenges, demands, and expectations that amount to a new mandate for boards,” said Peter Gleason, president and CEO of NACD.

Part of this new mandate includes rethinking board recruitment. Directors indicate that industry experience is the most desirable attribute when they review board candidates, but with disruption in full effect, boards will have to reassess whether industry experience is the best driver of future success. There is room for improvement among existing directors as well. Seventy-one percent of directors indicate that their boards must better understand the risks and opportunities that affect performance and drive strategic choices over the next 12 months.

Notably, one concern decreased significantly from last year, perhaps in light of the Trump administration’s focus on repealing or softening federal regulations. Respondents’ concerns about the impact of the regulatory burden dropped from 58 percent in 2016 to just 29 percent this year.

The publication highlights a number of other key findings from the survey:

Shareholder Activism Exacerbates the Short-Term Performance Pressure Felt by Boards.
The impact of short-term performance pressure continues to be acutely felt by boards and management teams. Consistent with last year’s findings, 74 percent of respondents report that management’s focus on long-term strategic goals has been compromised by pressure to deliver short-term results. Respondents whose companies received a direct approach from an activist investor reported even more pressure to deliver short-term results, undermining their focus on long-term value creation.

Board Understanding of Corporate Culture Doesn’t Extend Beyond the Tone at the Top.
Eighty-seven percent of directors report that they have a good understanding of their companies’ tone at the top, but only 35 percent of directors say they have a good understanding of the mood in the middle, and just 18 percent of them indicate they have a good grasp of the health of the culture at lower levels of the organization.

Boards Want to Improve CEO-Succession Planning Practices in 2018.
Fifty-eight percent of directors indicate that improving CEO-succession planning is a critical board improvement priority for 2018, up from last year when 47 percent of respondents reported this as a key priority. There was also a large increase in discussing CEO and executive-team succession with institutional investors, from 8 percent of boards in 2016 to 19 percent this year.

The 2017-2018 NACD Public Company Governance Survey of 587 corporate directors representing 520 public companies was conducted June through August, 2017 by NACD, with additional board governance analysis of the Russell 3000 provided by Main Data Group, a business unit of Pearl Meyer, a strategic partner of NACD in executive and director compensation matters. Visit www.nacdonline.org/survey to download your copy of the report. 

About NACD
The National Association of Corporate Directors (NACD) empowers more than 17,000 directors to lead with confidence in the boardroom. As the recognized authority on leading boardroom practices, NACD helps boards strengthen investor trust and public confidence by ensuring that today’s directors are well prepared for tomorrow’s challenges. World-class boards join NACD to elevate performance, gain foresight, and instill confidence. Fostering collaboration among directors, investors, and corporate governance stakeholders, NACD has been setting the standard for responsible board leadership for 40 years. To learn more about NACD, visit www.NACDonline.org.

Contact: Susan Oliver [email protected] 703-216-4078