WASHINGTON, Oct. 5, 2011 /PRNewswire/ -- As analysts and pundits await the latest jobs data from the Bureau of Labor Statistics to be released on Friday, corporate directors' confidence on most aspects of the economy declined across the board this quarter. This represents a significant change over the past year, according to results from the National Association of Corporate Directors' (NACD) Board Confidence Index (BCI), a leading indicator of the health of the economy as viewed through the lens of the boardroom.
NACD introduced its quarterly BCI in October 2010 to measure corporate directors' level of confidence in the overall economy as well as provide a board perspective on the state of specific industry sectors. The Q3 2011 NACD BCI, produced in collaboration with executive compensation consulting firm Pearl Meyer & Partners, reflects the views of 185 corporate directors about the state of the economy and their own organizations' plans for the future.
"In the past, directors have exhibited a more cautious view of the economy in the short-term. However, this caution was buoyed by a more optimistic view of the longer term—progress made in the last year, as well as expected growth over the next twelve months," said Ken Daly, president and CEO of NACD. "This quarter, the BCI tells a much different story."
Regarding hiring, NACD's BCI found that 39.4 percent of companies' employment activities last quarter resulted in a net gain. This is down from the Q2 2011 BCI figures that reported 48.1 percent of companies expanded their workforce.
Overall, though, the Q3 2011 BCI registered at 47.5, on a scale of 0 to 100. This marks a substantial decline since last quarter and a significant drop from last year's Q3 index score of 56.6. According to the BCI scale, scores above 50 are positive about the state of the economy, scores around 50 see little change, and those below 50 are negative.
In looking at general economic conditions, 46 percent of directors characterized the status as moderately worse compared to a year ago, while 49 percent of directors anticipated that the situation would be moderately better a year from now. Describing their respective industries in relation to the general economy, nearly half of respondents, 47.7 percent, feel either substantially or moderately better about their industries in the upcoming year.
Confidence in the overall economy's progress since one year ago dropped to 46, a 22 point decrease since Q2 2011 and a 31 point drop since the question was first asked in 2010. Boardroom confidence in the economy's state over the last quarter is a bleak 36, a 25 point decline since Q2 2011. When asked to forecast the general economic conditions next quarter compared to this quarter, directors registered a confidence index of 88, predicting conditions to remain steady. Looking ahead, boardroom confidence for the economy in one year registered at a paltry 55, just slightly more confident than believing no change will occur.
The NACD Board Confidence Index is based on five key indicators which are combined to provide a snapshot of the state of the economy from the boardroom's perspective. For each question, there are five reply options: substantially better, moderately better, same, moderately worse and substantially worse. Each option was assigned a point value: 100, 75, 50, 25 and 0, respectively. The point values are averaged for each question.
The results from the NACD BCI for Q4 2011 are scheduled for release in January 2012.
The National Association of Corporate Directors (NACD) is the only membership organization delivering the information and insights that corporate board members need to confidently confront complex business challenges and enhance shareowner value. With 11,000 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 NACDonline.org. To join, please contact Kelly Dodd at email@example.com or 202-380-1891.
About Pearl Meyer & Partners
For more than 20 years, Pearl Meyer & Partners (www.pearlmeyer.com) 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.
SOURCE National Association of Corporate Directors