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PwC study compares the governance perspectives of directors and investors

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PwC US has released a report that examines the views of corporate directors and institutional investors on current corporate governance issues – finding that perspectives largely depend on "whose shoes you are in."

"We prepared this report to compare the responses of these two groups and identify areas where viewpoints are shared or differences exist," says Mary Ann Cloyd, leader of PwC's centre for board governance. "We hope this information helps directors, investors and management teams better understand where their views are similar and where they differ."
 
In the summer of 2013, PwC conducted two surveys to gain insights from key corporate governance constituents: one survey sought the insights of public company directors and another of investors. Nine hundred thirty four directors responded to PwC's 2013 Annual Corporate Directors Survey, 70 per cent of who serve on the boards of companies with more than USD1bn in annual revenue. At the same time, 65 institutional investors with more than USD2trn of aggregate assets under management responded to PwC's 2013 Investor Survey.
 
Directors and investors both believe that compensation consultants are "very influential" over board decisions on executive compensation (41 per cent and 37 per cent, respectively). And, both groups had similar views on the influence of institutional shareholders, rating them "very influential" at 22 per cent and 18 per cent, respectively. However, investors are 38 percentage points more likely than directors to believe that CEO pressure has a "very influential" effect on board decisions about compensation. 
 
Seventy per cent of directors indicate that some type of action was taken by their company in response to say on pay voting results; 82 per cent of investors believe some action was taken. But investors believe that directors should reconsider their companies' executive compensation plan at relatively lower levels of negative voting. One in five investors says that 11-20 per cent negative shareholder voting signals a need to revisit compensation, compared to only 13 per cent of directors. 
 
Forty-seven per cent of investors and 64 per cent of directors say recent legislative, regulatory and enforcement initiatives have increased investor protections "not very much" or "not at all"; very few (two per cent and four per cent, respectively) believe they have helped "very much." At the same time, a third of directors and almost one in five investors think the costs to companies of such increased activities have "very much" exceeded the potential benefits. Eighty per cent of investors and three fourths of directors also conclude these initiatives have increased public trust in the corporate sector "not very much" or "not at all."
 
Twenty-eight per cent of directors say the ability of boards to provide effective oversight has increased in the last twelve months, compared to 19 per cent of investors. Similarly, 33 per cent of directors say that board effectiveness in overseeing risk has increased compared to 27 per cent of investors.
 
Nineteen per cent of investors indicate the board should reconsider re-nomination of a director if he/she receives between 11 per cent and 15 per cent negative shareholder support, compared to only 8 per cent of directors. However, an identical percentage of directors and investors believe directors should rethink re-nomination at negative voting thresholds of 16-20 per cent and 21-30 per cent.

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