We recently debuted our “heard around the water cooler” series. Following is the first installment:
Director tenure topped the list of topics that board members of publicly traded companies are expected to discuss in 2014, according to the Boardroom Water Cooler survey conducted in January by PondelWilkinson Inc., a corporate public relations and investor relations consultancy.
Institutional investors are beginning to advocate the concept of “board refreshment,” as a groundswell of concerns surface related to directors who have been in place for significant periods of time.
“The conversation clearly has shifted from age-related bias to tenure,” said Laurie Berman, managing director of PondelWilkinson. “Age notwithstanding, there is growing belief that the longer a director has served, the less independent he or she becomes from management, which is contradictory to fundamental governance mandates.
“Perhaps for some of the same reasons that term limits exist for political leaders, we soon may see an enactment of board member term limits as part of the increasing democratization of publicly owned companies,” Berman said.
The second most popular topic around the boardroom water cooler is the Securities and Exchange Commission’s mixed vote in September 2013 in favor of requiring companies to disclose the pay gap between employees and the CEO.
Originally mandated four years ago by the Dodd-Frank Act, if the rule passes, public companies would have to disclose the median of the annual total compensation of all of its employees, excluding the CEO, against the annual total compensation of its CEO, and the ratio of the two amounts.
“This proposal follows closely on the heels of the ‘say-on-pay’ advisory votes already in place,” said Evan Pondel, president of PondelWilkinson. “However, since the SEC was not unanimous in its vote, the proposal will likely be subject to strong challenges. Its underlying theme closely tracks the momentum that is building in Washington and elsewhere around income inequality,” Pondel added.
Survey results also point to heightened 2014 boardroom discussions about:
- Cybersecurity and wrestling with increasing threats to intellectual property and information systems, such as the Target retail chain recently experienced;
- Big data and taking full advantage of emerging technology to drive profitable growth;
- Effective use of social media to enhance brand awareness, along with customer and shareholder loyalty;
- Interest rates and how management should take advantage soon of what may be historically low rates before it is too late, regardless of current financing needs;
- How best to comply with the newly required Form SD requiring disclosure beginning in May 2014 of the level of due diligence a company exercised to determine whether its products and products in its supply chain contain conflict minerals;
- Maintaining valuation after a robust 2013;
- How to deal with what may be a period of increased shareholder activism and a mindset that activists should be listened to, rather than avoided, and could actually bring good ideas; and
- The importance of listening to small individual investors as well.
The anecdotal survey was compiled by the firm’s staff, who queried public company directors, CEOs and CFOs, sell-side analysts and institutional and individual investors.