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Analysis

2016 Board Practices Report

A transparent look at the work of the board

​This 10th edition of the Board Practices Report, a collaborative effort between Deloitte LLP’s Center for Board Effectiveness and the Society for Corporate Governance (Society), presents findings from a survey distributed to the public company members of the Society during the latter part of 2016. The survey covers trends in over 15 areas of board practices and hot topics, and included 99 questions. These topics include cyber risk, shareholder activism, and diversity, among others.​

2016 Board Practices Report

The 2016 Board Practices Report: A transparent look at the work of the board, provides extensive data on current issues and trends in a wide variety of corporate governance areas, including some of the most pressing issues companies face in the current environment.

Key topics include:

  • Board refreshment and composition
  • Risk and strategic oversight
  • Audit committee practices
  • Shareholder rights, engagement, and activism
  • Cybersecurity
  • Top areas of board focus

Download the full report of survey findings, or read on for an overview of results.​

Key findings

Board refreshment and diversity
Boards, investors, regulators, public policy makers and others are increasingly focused on the mix of directors in the boardroom, with a particular focus on diversity, including gender, race, ethnicity, generation/age and thought. They are also focused on processes related to refreshment.

Shareholder rights
Majority voting in uncontested director elections, a continual proxy season hot topic, is the standard at 72 percent of companies, up from 63 percent since 2014 according to the survey. Fifty-four percent of companies allow shareholders to call special meetings; 41 percent of those companies require an ownership threshold of 25 percent, while about a quarter of the companies have a 10 percent or less threshold.

Risk and strategic oversight
Respondents ranked cyber as the number one risk their boards are focused on, followed by finance/legal risks and product risk. Slightly more than half (54 percent) of respondents reported that the audit committee has primary responsibility for cybersecurity oversight.

Audit committee practices 
Two-thirds of committees meet via conference calls to discuss earnings releases, while 22 percent review earnings releases at live meetings. About 80 percent of committees regularly hold an executive session with the external and internal auditors, 61 percent have regular executive sessions with the CFO, and 44 percent hold regular executive sessions with their general or other in-house counsel.

Shareholder engagement and activism
Activism is a key risk management issue for many boards. Forty-two percent of the boards receive education on shareholder engagement/activism and investor relations, and 55 percent are updated on shareholder concerns and other sentiment more than once a year.

Cybersecurity
Almost two-thirds reported their boards have a high level of awareness of cybersecurity specific to their companies. With cyber ranked as the number one risk the board is focused on, it is no surprise cyber security/cyber risk was the number one topic of education for audit committees and among the more common topics of full board education.

Sustainability
Investors are increasingly focused on sustainability practices, evidenced by the rising number of shareholder proposals related to climate change and human rights, including proposals calling for greater disclosure regarding the management of sustainability-related risks and opportunities. Nearly 60 percent of companies provide some form of sustainability disclosure, with 42 percent providing a formal report. Twenty-eight percent of companies incorporate specific sustainability related goals in company strategy; nine percent more are considering it.

Top areas of board focus
When asked where they expect boards will spend the majority of time in 2017, strategy as a clear front runner, receiving 80 percent of responses. This was followed by risk oversight, board composition, cybersecurity and M&A. There was very little variation among market cap or industry.

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About the report

This is the 10th edition of the Board Practices Report. It presents findings from a survey distributed to the public company members of the Society. A total of 189 individuals participated in the survey. The survey covered over 15 areas of board practices and hot topics, and included 99 questions. Survey results are presented by market capitalization, by financial services and nonfinancial services industries, and by all companies in total.

This report and its accompanying questionnaire were developed with the Deloitte Center for Board Effectiveness. The data provided in response to the survey were analyzed anonymously and the results cannot be attributed to a specific company.

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