PricewaterhouseCoopers Report Focuses on Top Challenges for Lead Directors Today: Helping Pilot the Company Through Choppy Seas

NEW YORK, April 15 /PRNewswire/ -- A new report released today by PricewaterhouseCoopers LLP (PwC), "Lead Directors: A study of their growing influence and importance" highlights that as we look to the future, lead directors will be expected to delve further into shareholder and governance issues, be more involved in risk management, drive succession planning to ensure the process produces top leaders, and strengthen the independence of the board.

Respondents from 16 sectors with revenue ranging from $4 billion to $100 billion were surveyed on four categories: background information, role and responsibilities of a lead director, views on the lead director concept, and the future.

Advising directors in a time of crisis is one of the key focus areas of the study. Approximately one-third of lead directors who responded to the survey indicate that their company has experienced a business crisis in the last three calendar years. Of 22 identified areas where their companies have had a crisis, respondents reported the majority of internal crises were associated with CEO succession/resignation (22 percent) and diminished revenues (22 percent). A majority of respondents also reported crises in external areas involving third parties in association with issues with major customer, supplier, or financial counterparty (17 percent) and proxy contest or activist shareholder (17 percent).

"Since its inception, the lead director role has grown in importance and influence," said Erik Skramstad, PricewaterhouseCoopers Advisory partner and Forensic Services U.S. practice leader. "A lead director is particularly helpful in focusing the board's talent and wisdom when difficult situations arise: management performance and succession, risk management, mergers and acquisitions, and a host of other internal and external matters."

"Ranking their personal attributes, lead directors put integrity at the top of the list, followed by judgment and ability to collaborate with the CEO -- all valuable characteristics, especially in a crisis," continued Skramstad.

At the companies surveyed, 67 percent still have a combined position of board chairman-CEO despite increasing pressures from stakeholders and regulators to split these functions. Some commentators have asserted that with effective lead directors becoming increasingly active in managing the board, there will be less pressure to appoint an independent board chairman.

A few key statistics from the study include:

• Lead directors are apparently sensitive to serving on too many boards, an oft-made criticism recently, with the majority (60 percent) serving on only one or two other public company boards. Twenty percent of lead directors are not directors of any other companies.
• Companies show a distinct divergence in the length of service for lead directors, with 45 percent responding that they have created an indefinite term and 35 percent a one-year term.
• The most critical issue for the lead director when dealing with CEO-related matters is succession planning. Although issues of executive compensation have captured headlines in the business press recently, lead directors surveyed found CEO compensation to be the least important of the five issues listed.

"A new voice -- the lead director -- is emerging to provide leadership to the board and company as many fundamental assumptions about the role of the board and its relationship to the senior leadership of the company are being challenged and revisited," added Skramstad. "Clearly, the board is going to have to be more informed about the aspects of the company's operations, risks, strategies, regulatory requirements, and ethical standards."

To access the full report, "Lead Directors: A study of their growing influence and importance", please visit http://pwc.com/us/forensics.  

About PricewaterhouseCoopers Forensics Practice

PricewaterhouseCoopers' professionals focused on Forensic Services provide confidential, international resources to investigate fraud or help clients manage and mitigate risk as well as identify and analyze vulnerabilities -- whether in one country or worldwide. Our global capabilities and the experience of our investigators -- many of whom have held senior-level positions with major prosecutorial and law enforcement agencies around the world -- can be leveraged to support investigations that extend across borders or that affect multinational organizations.

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