Increased focus on governance driving the volume of board materials to new heights, reveals Thomson Reuters Annual Board Governance Survey
Survey exposes gaps in major corporations' ability to exercise adequate
corporate governance and risk oversight
LONDON, 08 February 2013 - The increasing weight of corporate governance, more
stringent regulatory processes and outdated Board structures are preventing
Boards from adequately engaging in and setting appropriate risk management
cultures within their organizations, according to a new survey by Thomson
Reuters.
As regulators demand greater risk oversight, the survey found a quarter of
Boards are not actively engaged in this process - often hampered by time
constraints and the significant pressures associated with reviewing an
increasing number of Board materials.
The Thomson Reuters survey covered more than 125 general counsel and company
secretaries across a wide-ranging cross-section of industries and geographies
globally. It builds on a survey of similar respondents conducted in September
2011 so presents year-on-year trends and developments. Key findings from the
latest report include:
* On average organizations prepare 92 board books annually; each an average of
116 pages. This amounts to over 10,000 pages per year, representing a 50%
uplift from the average of 5,940 pages reported the prior year.
* Several organizations surveyed prepare more than 300 board books per year,
close to six board books per week.
* An increased expectation of good governance drives Board members to seek
additional outside sources of strategic context and financial insights. Over
70% of respondents reported a need for competitor insights, financial
analytics and industry information. These are sought outside of traditional
board materials.
* Risk oversight by Boards varies substantially and there is a wide range of
behaviors. Nearly 25% of respondents state that their Boards don't actively
engage in risk oversight. This stands in stark contrast to the 55% of
Boards that actively set a risk culture and cascade its policy to
management
* Almost half of the respondents indicated that they never encrypt their Board
materials, and eighteen percent indicated that they only occasionally
encrypt their information
* Only thirty percent of respondents were confident that Board members destroy
all copies of Board-related emails and documents in accordance with document
retention policies
* Over half of the respondents indicated that they had been in a situation
where Board members had left sensitive documents in public places or had
heard of instances of sensitive Board materials being left in public places
"Corporate governance is becoming ever more complex due to the fluctuating
economy, increased regulatory requirements and greater regulatory scrutiny,"
said Mark Schlageter, managing director, Governance, Risk & Compliance, Thomson
Reuters. "This is placing increased responsibility on the Board of Directors and
greater demands on accountability and transparency. It is therefore essential
that Boards have all the strategic business and industry intelligence they need
at their fingertips to ensure they understand the entire picture when making
decisions and to have better risk oversight across their organization."
Greater volume of Board materials
Increased focus on board governance appears driving the volume of board
materials to new heights and is presenting a real challenge for Directors and
Company Secretaries alike. The challenge of producing and reviewing board books
is growing. On average, among respondents, 92 board books are created annually,
each with an average of 116 pages. This means that Company Secretaries prepare
and distribute an average of over 10,000 pages of confidential material to their
Boards every year. This number is more than 50% higher than the previous year's
survey.
An increased expectation of good governance drives Board members to seek
additional sources of strategic context and financial insights. Over 70% of
Directors reported a need for competitor insights, financial analytics and
industry information - all of which are sought outside of traditional Board
materials.
Need for better risk mitigation
Most major corporations surveyed were found to have significant security gaps
leaving sensitive board-level information open to information theft and hacking.
In particular, it was found that the majority of respondents are regularly
sending confidential board material to their members via courier or through
unsecure, noncommercial email addresses. In addition, the percentage of
respondents reporting board members' loss of computing devices or mobile devices
to misplacement or theft grew by nearly 100%. Two-thirds of board documents and
communications were also reported to be distributed through a variety of devices
and servers, up sharply from the corresponding 2011 survey.
Another vulnerable area is in risk oversight and regulation with a quarter of
respondents stating that their boards don't actively engage in risk oversight.
In addition, while over three quarters of respondents acknowledge that their
board seeks to remain up to speed on major areas of regulation, only thirty two
percent point to the board's adoption of policies, some of which were referred
to as "gold-plated".
Board security more critical
Board members are expected to deal with a wide range of issues at both a local
and global level and their responsibility for cross-border issues continues to
grow. As a result, the majority of board documents and communications are likely
contained across a variety of devices and servers (sixty eight percent this
year), up from fifty two percent in the 2011 survey. Board materials are also
put at risk by a common Board member practice of printing and carrying documents
originally sent electronically, futher exposing an organization to risk of theft
or loss of commercially sensitive documents.
The results also suggest that Directors are using an increased number of mobile
devices to access board materials and that most organizations are not tracking
all the various computing devices that Board members are using to retrieve and
save board documents. Private mobile devices dominate the use of mobile
technology by Boards. Over seventy percent of respondents indicated a BYOD
(Bring Your Own Device) reality at the board level, as organizations did not
supply Board members with mobile devices specifically for the purpose of board
communications. This is an area of considerable risk for Company Secretaries who
are not only charged with the creation but also the destruction of confidential
board materials.
A detailed report on the survey's findings can be found at:
http://accelus.thomsonreuters.com/boardgovernancesurvey
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