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News < Back Sarbanes Oxley : Governance : Survey Serving on the Audit Committee Rated the Most Difficult Task
“Boards are realizing they need to sharpen their focus on their primary responsibilities—understanding what they need to do, how to do it successfully, and what pitfalls to avoid,” said Catherine Bromilow, a partner with PricewaterhouseCoopers and U.S. leader of its Corporate Governance Group. Directors rate serving on the audit committee as their most difficult responsibility. And audit committee meetings last three to four hours for 59 percent of responding boards. “The time audit committees are spending in meetings reflects the scope of responsibilities on their plates. It also reflects the scrutiny they're under—from regulators, securities analysts, institutional investors and others. And it shows how seriously they're taking their central responsibilities of overseeing the integrity of the financial statements and the audit process,” added Bromilow. While audit committee membership was rated most difficult, directors rate service on the compensation committee as the next most difficult job. That may well be due to dealing with the new 2007 proxy disclosures on compensation. While last year 88 percent of directors welcomed the new executive compensation disclosures in proxies, this year only 76 percent feel those disclosures were positive. The survey also reveals that finding the "right" CEO is another top-of-mind issue in the boardroom. Thirty-five percent of directors are not satisfied with their company’s management succession planning. Of the 35 percent, 52 percent indicate management succession is not a regular item on the board meeting agenda. “While compensation continues to receive most of the publicity, this survey supports the premise that risk management and CEO succession are the biggest challenges for corporate boards today,” said TK Kerstetter, president and CEO of Board Member Inc., which publishes Corporate Board Member and Bank Director. “And with all that’s going on with the regulatory agencies and Congress, look for shareholder access to the boardroom to surface in a major way in 2008.” Despite today’s risk atmosphere, the survey shows a decline in the number of directors who believe that the level of risk has increased. When asked for how their view of risk had changed in the previous 12 months, only 35 percent of directors report their risk increased—a significant change compared to its peak at 73 percent in the 2005 survey. Despite the advent of majority voting, pressure for increased proxy access, and more focused director evaluation, most respondents (85 percent) report no change in the level of collegiality in the boardroom. While only approximately 10 percent of directors believe the majority voting rules will significantly impact company boards in the near future, almost 30 percent believe the rules will have a significant impact in the longer-term. Other key findings of the survey include: • Ninety percent of directors believe board members should attend director education seminars, although only 40 percent have a formal budget for education. • Sixty-seven percent of directors believe U.S. company boards are having trouble controlling the size of CEO compensation. In selecting what is most likely to curtail the rapid growth of CEO compensation, 41 percent say the board and compensation committee will take a firm stand to promote change. Another 31 percent say stockholders and institutional investors will apply enough pressure on companies. • Forty-two percent of directors believe that the fact a few respected CEOs are working without employment contracts could become a trend. • CEOs still control the board agenda. Fifty-six percent of directors report the CEO is responsible for approving board meeting agendas while 27 percent believe a non-executive chairperson holds this responsibility. Twelve percent said the lead director should approve the meeting agenda and the remaining one percent said the responsibility lies with the general counsel or board secretary (four percent reported “other”). "Directors have made significant strides in the past few years, addressing the many new expectations placed upon them," said Bromilow. "And while they recognize the progress they've made, they also know there's more work to be done—particularly in areas that continue to present challenges." The sixth annual survey measures the opinions of over 1,000 directors serving on the boards of the top 2,000 publicly traded companies listed on the New York Stock Exchange, NASDAQ Stock Market, and the American Stock Exchange. The 2007 survey findings are highlighted in Corporate Board Member’s November/December “What Directors Think” issue. Additional findings and analysis will be published in a supplement mailing. PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Corporate Board Member is a leading information resource for senior officers and directors of publicly traded corporations, large private companies, and Global 1000 firms. The bimonthly publication provides readers with decision-making tools to deal with the corporate governance challenges confronting their boards. Corporate Board Member further extends its governance leadership through an online resource center, conferences, roundtables, and timely research. The magazine maintains the most comprehensive, up-to-date database of directors and officers serving on boards of publicly traded companies listed with the New York Stock Exchange, NASDAQ Stock Market, and American Stock Exchange. Headquartered in Brentwood, Tenn., with editorial offices in New York, Corporate Board Member is published by Board Member Inc. and is the sister publication of Bank Director magazine, a leading information resource for officers and directors of financial institutions. For more information, visit www.boardmember.com. 
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