MIXING BOARDS AND CEOs

BOARDS: Amid all the hoopla about SOX, board independence and oversight, you would think relationships with CEOs might be getting strained. Interestingly, a compilation of detailed studies, surveys and other research shows the opposite may be true. To begin, we were heartened to see that 90% of CEOs said they still have a positive relationship with their board. This is good news when you consider that about half of all CEOs say their compliance costs have doubled over the past 3 years. Unfortunately, all that compliance and cleanup can have negative repercussions. Given the additional personal risk, the study found that 67% of CEOs felt it was more difficult to attract new board members. Sadly, 14% of CEOs even said they could not find enough qualified directors to fill open seats they already had. Before we get too gloomy, however, there are some positives. To begin, about 95% of CEOs say director education and depth of knowledge has increased. In addition, 83% said their directors were well informed about key company issues. Additionally, 83% said their board was an excellent source to get advice and insight on key issues and problems. Directors are doing well, as roughly 70% of CEOs said they are satisfied with the level of insight that their board provided. CEOs that report the best relationship with their boards say their directors establish clear parameters for shareholder success and risk tolerance levels. CEOs: Broader aspects of the study also focused on various issues CEOs expected to face in the next few years. One of the biggest, perhaps driven by the turbulent and highly competitive business environment, was management succession. Given the difficulty of attracting and retaining key executives, about 62% of CEOs said succession had become one of their greatest concerns. A large percentage of CEOs also said they felt it was imperative for their company to devote more resources to innovation. Roughly 34% of CEOs said innovation was a top concern and they plan to focus on creating new products, services and methods of delivery. CEOs also said speed to market with new products was becoming much more important, as was keeping up with new technologies. Many CEOs also said they were concerned about finding a way to stimulate innovation, boost creativity and enable entrepreneurship within their organizations. In addition, CEOs worried about industry consolidation, but were optimistic they would be able to seize upon opportunities for expansion. Many CEOs also said outsourcing non-core competencies had become critical to success and increased flexibility. Still others said one of their greatest concerns was facing non-traditional competitors. Finally, other critical issues CEOs expected to face included finding ways to support steady growth, consistent execution of strategy, customer loyalty, customer retention, profit growth, lack of pricing flexibility, adapting to change, industry consolidation, maintaining cost control and responding to competition.