Corporate Board Member/FTI Consulting Survey Identifies Key Legal Risks in 2013 for Companies
Managing and mitigating risk surrounding cyber security, IT strategy,
regulatory compliance, and concerns over leadership succession
operations top the list of worries for U.S. directors and general
counsel as revealed in the 13th annual Law and the Boardroom Study by
Corporate Board Member ®, an NYSE Euronext Company, and FTI
Consulting, Inc. (NYSE: FCN). The 2013 findings reflect a continued
escalation of concern over data security and IT risk, as well as the
onus on public companies with regard to new regulation stemming from the
Dodd-Frank Act. The survey also suggests that directors and general
counsel worry about the need for strong leadership continuity to manage
companies through many new and growing challenges.
In both this year’s and last year’s studies, one of the leading causes
for concern surrounds the area of data security and IT risk as they
continue to dominate a great deal of board-level discussion. Companies
are facing hacking, intrusions, and corporate espionage from both
internal and external sources; thus, their vulnerabilities are
continually changing.
“To help companies manage and mitigate this risk, they need to inventory
and map their IP assets, secure their data, and test their networks and
systems for gaps on a constant basis. Board-level concern is complicated
by the fact that IT infrastructure and underlying technologies are
fairly opaque to board members,” says Michael Pace, senior managing
director and co-leader of the FTI Consulting Global Risk and
Investigations Practice.
Only a third of general counsel feel “very confident” in their company’s
ability to respond quickly to a security breach and determine whether
confidential data had been compromised, and less than a quarter of
directors felt the same. “We work with companies to demystify technology
in addition to our core investigative, remediation, and prevention
work,” Pace says.
With regard to the areas that directors and general counsel believe will
comprise the majority of their time, executive compensation
overwhelmingly tops the list. This demonstrates companies’ commitment to
fully vetting executive compensation plans, peer analyses, and related
shareholder communication, as they head into the third proxy season with
mandated say-on-pay votes. Interestingly, the vast majority of directors
feel confident in their ability to manage compensation risk in 2013,
perhaps indicating that processes and policies put in place over the
last several years following Dodd-Frank legislation have become more a
part of the governance fabric than when they were first introduced.
“Say on pay introduced a structured process for shareholders to voice
their opinions and subsequently withhold votes against directors and or
compensation committees,” says TK Kerstetter, chairman of Corporate
Board Member. “It should come as no surprise that managements and legal
teams are spending extra time to ensure their organizations and
compensation plans are viewed favorably.”
To help directors increase their effectiveness, the survey asked what
type of information their board needs to be effective in 2013. The five
areas receiving the largest percentages of director responses were
succession planning and IT risk (tied with the most responses) followed
by strategic planning, crisis management, and competitive/marketplace
information.
While not ranked among the top five concerns for directors, social media
is an emerging issue that will continue to be a topic for debate in the
boardroom. It is interesting to note that director’s confidence in
understanding the risks around social media has diminished by 24 percent
- with only 16 percent of directors expressing they have a good
understanding of the risks associated with social media compared to the
2012 survey. “With the SEC’s recently released guidance on social media,
they have recognized that social media is a real and valuable disclosure
medium for communications with an important subset of stakeholders,”
according to Elizabeth Saunders, senior managing director and Americas
chairman of the FTI Consulting Strategic Communications practice.
Saunders adds, “It is critical that organizations have a social media
strategy and policies in place in order to manage crisis and—perhaps
more importantly—to capture the opportunities that social media
provides.”
For additional findings or to download a PDF version of the complete
report on the Corporate Board Member/FTI Consulting 2013 Law and the
Boardroom Study, please click here (http://www.fticonsulting.com/global2/critical-thinking/reports/law-in-the-boardroom.aspx).
To hear more in-depth analysis and perspective on this year’s study,
register for the Law in the Boardroom: Today's Top Legal and Governance
Concerns for Directors and General Counsel webcast on June 5th.
To register, please click here (https://cc.readytalk.com/r/139alsl3t8g6).
About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to
helping organizations protect and enhance enterprise value in an
increasingly complex legal, regulatory and economic environment. With
over 3,900 employees located in 24 countries, FTI Consulting
professionals work closely with clients to anticipate, illuminate and
overcome complex business challenges in areas such as investigations,
litigation, mergers and acquisitions, regulatory issues, reputation
management, strategic communications and restructuring. The Company
generated $1.58 billion in revenues during fiscal year 2012. More
information can be found at www.fticonsulting.com.
About Corporate Board Member
Corporate Board Member®, an NYSE Euronext Company, is the
leading information resource for senior officers and directors of
publicly traded corporations, large private companies and Global 1000
firms. The quarterly publication, Corporate Board Member magazine,
provides readers with decision-making tools to deal with the strategic
and corporate governance challenges confronting their boards. Corporate
Board Member further extends its governance leadership through an online
resource center, conferences, roundtables and timely research. The
magazine maintains the most comprehensive, up-to-date database of
directors and officers serving on boards of publicly traded companies
listed with NYSE Euronext and The NASDAQ OMX Group Inc. stock exchanges. www.boardmember.com
About NYSE Governance Services
NYSE Governance Services is an integrated suite of resources for public
and privately held companies worldwide seeking to create a leadership
advantage through corporate governance, risk, ethics and compliance
practices. NYSE Governance Services leverages the expertise of Corpedia®,
a leader in risk assessment and e-learning for ethics and compliance,
and Corporate Board Member®, a trusted source on governance
matters for company directors and C-level executives - both NYSE
Euronext companies. NYSE Governance Services offers a range of training
programs, advisory services, benchmarking analysis and scorecards,
exclusive access to peer-to-peer events and thought leadership on key
governance topics for company directors and C-level executives. For more
information, visit www.nyse.com/governance
