Corporate Governance Challenges

by Boardmember, January 2010.

Today, corporate directors are facing some of the most difficult challenges experienced by U.S. companies in decades. The severity of the economic recession, the repercussions of the government financial bailout, and the resulting highly charged political landscape have all converged to make this a demanding time to serve as a public company director.

The economy
Directors surveyed for the 2009 What Directors Think research shared the actions their companies have been taking in response to the economic challenges at hand. Cutting expenses was the most prevalent response: 72% say they are reducing staff levels and 62% say they are cutting or deferring capital expenditures (Figure 1). On a more positive front, only about a third of directors report postponing planned expansion or divesting or closing business units. Roughly half the directors say they are using the economic situation as an opportunity to look for good acquisitions. Overall, 60% of directors think boards need to devote more time to discussing the impact of the economic situation compared to the past (Figure 2).

Another optimistic finding shows that despite the turmoil in the markets and economy, more than half the directors surveyed do not feel these events have placed a strain on the relationship between the board and management (Figure 3). This is a positive finding, given the need for boards and managements to overcome obstacles and to work in tandem to develop successful strategies for future growth and stabilization. A primary challenge for boards will be increased regulatory oversight, which nine out of 10 directors agree will occur as a result of the economic downturn (Figure 4)…(continue reading)

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