Half of Directors Want a Board Member Replaced

PwC’s 2020 Annual Corporate Directors Survey asked directors how they felt about their peers, crisis management plans, diversity and environmental, social and governance (ESG) issues.

Half of surveyed corporate board members believe one of their fellow directors should be replaced.

PwC’s 2020 Annual Corporate Directors Survey asked directors how they felt about their peers, crisis management plans, diversity and environmental, social and governance (ESG) issues.

Although boards “show increased awareness and increased focus on areas that institutional shareholders have emphasized in recent years,” the survey found that only 39% of directors “support including diversity and inclusion goals in company pay plans.” In terms of ESG risks, although shareholders believe they will impact the company, “directors are not convinced that they’re connected to the company’s bottom line. Only 38% of directors say ESG issues have a financial impact on the company’s performance—down from 49% in 2019.” In your opinion, how many directors on your board should be replaced?

Last year when the coronavirus pandemic began to affect the U.S., the survey showed that 28% of directors say their companies “had not taken any steps at all to address a downturn. Fewer than half of directors (47%) say their boards had reduced capital expenditures. Forty-four percent had explored a sale or divestiture, but only one-third had reduced share buybacks, which would increase cash reserves or liquidity.” The survey also revealed that “only 37% of directors say that their board has a strong understanding of the company’s crisis management plan.” Even if a board has a plan in place, less than half of the directors share that plan with the entire board, leaving many directors unaware of what the future holds for the board and excluding them from the decision-making process.

The survey found that directors “continue to report dissatisfaction with the performance of some of their peers. Board refreshment still lags as leadership frequently avoids both the tough conversations with directors who should be replaced and the hard work of long-term board succession planning.” In addition, 49% of directors say that one of their board members should be replaced and 21% say that two or more directors should go. Just 12% report that their boards chose not to renominate a director.

Source: “PwC’s 2020 Annual Corporate Directors Survey: Turning Crisis Into Opportunity”; Governance Insights Center, 2020.