NACD - National Association of Corporate Directors

More Than Half of Public Company Boards Recognize the Effects of Short-Termism

NACD survey finds that short-term performance pressure is compromising board and management focus on long-term strategy.

WASHINGTON, D.C. (Dec. 5, 2017) – The National Association of Corporate Directors (NACD), the standard setter for responsible board leadership, today announced the release of its 2016–2017 NACD Public Company Governance Survey. The findings highlight the challenge that faces corporations attempting to strike a balance between gains from short-term initiatives and the creation of long-term value. Of the more than 600 public company directors and governance professionals surveyed, 75 percent indicated that pressure from external sources to make short-term gains is compromising management's focus on long-term strategic goals. The survey is available at www.NACDonline.org/PublicSurvey.

Key findings from this year’s survey include the following points:

  • The effects of short-termism. External factors encouraging a short-term focus are stronger now than ever before. 75 percent of respondents report that these short-term pressures now undermine management’s focus on long-term strategic objectives and value creation.
  • Concerns about global economic uncertainty. Sixty percent of respondents selected global economic uncertainty as one of the five trends that will have the greatest impact on their companies over the next 12 months.
  • Incentives now at the forefront of risk oversight. Perhaps in response to recent business headlines about excessive risk-taking, more than 50 percent of boards now assess whether incentives used in their companies’ compensation structure could inadvertently create or magnify unintended risks.
  • Wrestling with cyber-risk oversight. Fifty-nine percent of respondents reported that they find it challenging to oversee cyber risk, and only 19 percent of respondents said that their boards possess a high level of knowledge about cybersecurity.
  • Accelerating momentum in proactive board engagement with strategy. For more than half of respondents, active involvement in the development of strategy is a major improvement goal for the coming year. Directors recognize that there are real barriers to more active strategy engagement, including insufficient time on board agendas, difficulties in effectively pressure testing the validity of strategic assumptions in an uncertain business environment, and the impact of short-term performance pressures.   
  • Information rich, but insight poor. While directors noted an average increase of 12 hours for document review in preparation for meetings, roughly 50 percent of respondents also noted a glaring need for improvement in the quality of information provided by management. Many directors said that the information they receive from management doesn’t provide sufficient transparency about problems and is hard to interpret.
  • Allocating scarce meeting time. The scope of board responsibility has surged in recent years. Confronted with ever-growing agendas, more than a third of respondents indicated that their boards allocated too little time to key areas such as CEO succession, cyber-risk oversight, sustainability, and board succession. 

“Boards are rightly focused on becoming strategic assets to their companies in the face of growing economic uncertainty and significant short-term performance pressure,” said Ken Daly, NACD CEO. “Our flagship survey illuminates the suite of issues that are front and center in today’s boardroom, and we believe its findings will prove instructive as directors go about setting priorities for the coming year.”

The 2016–2017 NACD Public Company Governance Survey is available at www.NACDonline.org/PublicSurvey.

The Report of the NACD Blue Ribbon Commission on the Board and Long-Term Value Creation is available at www.NACDonline.org/Value.

The Report of the NACD Blue Ribbon Commission on Strategy Development is available at www.NACDonline.org/Strategy.

About NACD

The National Association of Corporate Directors (NACD) empowers more than 17,000 directors to lead with confidence in the boardroom. As the recognized authority on leading boardroom practices, NACD helps boards strengthen investor trust and public confidence by ensuring that today’s directors are well-prepared for tomorrow’s challenges. World-class boards join NACD to elevate performance, gain foresight, and instill confidence. Fostering collaboration among directors, investors, and corporate governance stakeholders, NACD has been setting the standard for responsible board leadership for 40 years. To learn more about NACD, visit www.NACDonline.org. To become an NACD member, please contact Matt Barone at Join@NACDonline.org or 202-572-2089. If you are already a member, contact your NACD Membership Advisor at MembershipAdvisor@NACDonline.org to ensure that you are receiving the best value from your membership.

Press Contacts

Bill Brawner Brawner Communications william@brawnercommunications.com 202-329-1389