WASHINGTON, Oct. 14 /PRNewswire/ -- The directors of public companies can only be described as barely optimistic about the economy and the business climate, but are more upbeat about their own company's future, according to the first NACD Board Confidence Index presented by Heidrick & Struggles International, Inc., in conjunction with Pearl Meyer & Partners.
While consumer and CEO confidence levels have been measured for decades, NACD's Board Confidence Index provides the view projected through a boardroom lens for the first time. Importantly, the NACD Board Confidence Index reflects the growing influence of boards on corporate strategy, performance, and risk management, as well as on capital spending, employment and hiring, and growth.
The Index, measuring boardroom confidence in the third quarter 2010, revealed an overall confidence level of 56.6 – just above the mid-point – reflecting a somewhat optimistic outlook for the economy. One hundred and fifty-five directors of public companies across the U.S. responded to the survey.
"Today's public company board directors are an increasingly influential constituency because their input on corporate strategy, risk management, and regulatory oversight reverberates throughout the larger economy," said Kenneth Daly, president and CEO of NACD. "It's imperative that the opinions of active directors from public company boards be gauged and that their voices be heard."
The majority of directors – 72 percent – believed that general economic conditions are better than they were one year ago. However, when comparing current economic conditions with those of the second quarter of 2010, 43 percent felt that conditions had not improved and 31 percent said they were uncertain about whether conditions had improved.
Daly will reveal the full results of the Board Confidence Index at the NACD's Annual Corporate Governance Conference, which opens this Sunday, October 17, in Washington, D.C., and at the NACD Directorship 100 Forum, on Tuesday, November 9, in New York City.
The Board Confidence Index also gauged directors' opinions on the then-proposed Dodd-Frank Wall Street Reform and Consumer Protection Act, revealing that 60 percent said they were not in favor, 32 percent were in favor, and 8 percent were uncertain. The most common concerns about the legislation were "say-on-pay" rules, the elimination of broker voting, and proxy access.
NACD will update the index quarterly to provide directors with their peers' perceptions of current business conditions.
To read the complete story on the first Board Confidence Index, visit www.NACDonline.org/BoardConfidenceIndex.
Heidrick & Struggles Managing Partner Theodore L. Dysart believes that a view of how public company board directors are feeling is essential in order to track trends that could indicate future economic activity. "At the end of the day, even the CEO has to go to the board to deploy capital and make an investment," Dysart says. "Over time, the Board Confidence Index should become a leading indicator of what's to come in other economic indicators. The decisions on where and how companies allocate capital begin in the boardroom."
"Building for the future starts with the board of directors," says David Swinford, president and CEO of executive compensation consulting firm Pearl Meyer & Partners. "Board opinion matters because directors provide significant input into business strategy and approve management's recommendations. If directors are confident in the future, they will invest, and to the extent that they are cautious or skittish, it will be reflected in their decision making," continued Swinford.
About the Board Confidence Index
The Board Confidence Index of 56.6 was calculated based on five key indicators. During the month of August, 1,000 directors were asked to answer several questions. Per question, there were three reply options: Yes, No and Uncertain. Assigned to each option is a point value: 100, 0, and 50, respectively. The point values are averaged for each question. Based on the scale, scores can be interpreted as follows: scores above 50 are positive about the state of the economy, scores around 50 are uncertain, and those below 50 are negative. Of the 1,000 directors asked by email to answer the survey, 155 responded. NACD plans to update and publish this index every quarter to provide directors with their peers' perceptions of current business conditions.
The National Association of Corporate Directors (NACD) is the only membership organization delivering the information and insights that corporate board members need to confidently navigate complex business challenges and enhance shareowner value. With more than 10,000 members, NACD advances exemplary board leadership. NACD is focused on creating more effective and efficient boards through director-led education and peer forums to share ideas and leading practices based on more than 30 years of primary research. Fostering collaboration among directors and governance stakeholders, NACD is shaping the future of board leadership. To learn more about NACD, visit www.NACDonline.org.
About Heidrick & Struggles
Heidrick & Struggles International, Inc., (Nasdaq: HSII) is the leadership advisory firm providing senior-level executive search and leadership consulting services, including succession planning, executive assessment and development, talent retention management, transition consulting for newly appointed executives, and M&A human capital integration consulting. For almost 60 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide. Today, Heidrick & Struggles' leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. For more information about Heidrick & Struggles, please visit www.heidrick.com.
About Pearl Meyer & Partners
For over 20 years, Pearl Meyer & Partners has served as a trusted independent advisor to Boards and their senior management in the areas of compensation governance, strategy and program design. The firm provides comprehensive solutions to complex compensation challenges for companies ranging from the Fortune 500 to not-for-profits as well as emerging high-growth companies. These organizations rely on Pearl Meyer & Partners to develop programs that align rewards with long-term business goals to create value for all stakeholders: shareholders, executives, and employees. The firm maintains offices in New York, Atlanta, Boston, Charlotte, Chicago, Houston, Los Angeles and San Jose. To learn more about Pearl Meyer & Partners, visit http://www.pearlmeyer.com/.
SOURCE National Association of Corporate Directors (NACD)