Key concerns for today's boardroom directors include the call for transparency of information delivered to shareholders; the growing pressures on director accountability for certain key processes and decisions; and the need to address and satisfy multiple constituents inside and outside the company. The issues are not new—they've historically been a part of the director's job description. But new regulations and standards, along with heightened media attention, make them much more explicit.
Information transparency and director accountability are closely linked. New SEC regulations require companies to provide significant new financial information and greater transparency, especially around executive compensation. The board's responsibilities include setting the level and kinds of executive compensation. Shareholders, employees and the media are closely watching the new executive compensation disclosures and will use them to assess how realistically directors are aligning executive pay with performance.
The related stock option backdating investigations and enforcement actions undertaken by the SEC at some companies are causing many directors, even at companies untouched by the issue, to wonder whether other risks simply haven't hit their radar screens—prompting the question, "How do you know what you don't know?"
Directors also are accountable for the audit committee’s role as the employer of the external auditors. Responding to concerns over the cost of 404 internal control reporting, the SEC and the PCAOB have recently issued ways to streamline how management and auditors comply with this much-debated Sarbanes-Oxley requirement.
A third concern that could have a personal impact on some directors is the potential new SEC rules that enable shareholders to place director nominees on company proxies. The ruling could lead to fundamental changes in director elections and, on occasion, to heightened boardroom contention if advocates of specific, controversial points of view become sitting directors. Here, again, the issue is not entirely new, but is becoming more explicit.
How PricewaterhouseCoopers Can Help You
Discharging a director's responsibilities in today’s environment of heightened accountability and transparency, substantial compliance requirements, shareholder activism and media scrutiny is a challenge. PricewaterhouseCoopers can help you understand the issues and meet the demands of your vital role as a director. We would be pleased to discuss these issues with you and, in whatever ways are helpful, deliver to you and your board colleagues the full resources and experience of our firm.
