Directors Split On Communicating Governance Issues
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Directors Split On Communicating Governance Issues

There is a dichotomy in the boardroom between directors who believe it's appropriate to communicate about governance issues directly with stakeholders and those who do not.

Holmes Report

There is a dichotomy in the boardroom between directors who believe it's appropriate to communicate about governance issues directly with stakeholders and those who do not, according to new research from PwC US's 2013 Annual Corporate Directors Survey.

The consulting firm says directors are changing the way they communicate with institutional and retail investors, analysts, proxy advisors, employees and regulators. With the continued focus on compensation, boards also spend more time on this topic and increasingly respond to say on pay voting results.

"The evolution of corporate governance has caused directors to reconsider their relationships with stakeholders," says Mary Ann Cloyd, leader of PwC's center for board governance. "However, while some boards believe direct engagement on corporate governance, executive compensation and director nominations is part of their role, others think director communications in these same three areas is inappropriate."

Just over 30 percent of respondents say it's "very appropriate" to communicate about corporate governance issues, and about a quarter say the same regarding executive compensation and director nominations. But communicating about these same three areas is deemed "not appropriate" at approximately the same or slightly higher levels.

Still, nearly half of respondents say their boards have no policy, or a policy that's not useful, addressing director communication protocols. Considering the increasing frequency of stakeholder interactions, PwC says, “it's not surprising that about one-quarter of those without such a policy believe they should have one.”

This year, 70 percent of directors say their boards took action in response to say on pay voting results – an increase from 64 percent in 2012. The most frequent change was enhancing proxy statement compensation disclosures (47 percent compared to 41 percent last year). However, only 3 percent of directors say their company actually reduced compensation during 2013.

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