NACD Private Company Governance Survey
The State of Private Company Board Governance
Expectations are rising for private company boards, and the business environment is becoming increasingly complex. Against this backdrop, directors seek to understand whether their boards' governance practices align with those of their peers. The 2016-2017 NACD Private Company Governance Survey offers insight into the priorities, challenges, and composition of private company boards.
Boards Face Barriers as They Seek to More Actively Influence StrategyFifty-five percent of private company respondents report that improving board engagement in the strategy-setting process is a critical priority. Respondents seek much stronger board involvement, but acknowledge that they face real obstacles. Fifty-three percent of respondents indicate that there is insufficient agenda time allocated for in-depth strategy discussions during board meetings and 58 percent of respondents find it challenging to pressure test the validity of assumptions underlying strategy.
To what extent have you found that the following barriers have hindered your board’s ability to oversee strategy?
Board-Management Relations a Critical Improvement AreaFor more than 60 percent of private company boards, improving the quality of their dialogue with management is a critical priority for the next 12 months, while 56 percent of respondents emphasize the need for improvement in the quality of information that the board receives from management. These improvement priorities not only seem to reflect heightened expectations for management's performance as part of effective board oversight, but also signal increased board engagement.
For your board, how important are improvements in the following areas over the next 12 months? (Top 10 most important improvement areas are presented.)
Private Company Boards Continue to Wrestle With Cyber-Risk Oversight ChallengesMore than half of respondents cited cybersecurity as a somewhat or very challenging risk area to oversee, while only 10 percent of respondents indicate their boards possess a high level of understanding of cybersecurity-a slight decrease from last year, and much lower than the 19 percent of public company respondents who indicate their boards have a high level of understanding of cybersecurity. Moreover, less than a third (29%) of respondents feel confident or very confident that their companies are properly secured against a cyberattack.
How challenging is it for the board to oversee the following risk?
Private Companies Lag Behind Public Company Peers Regarding Key Director Onboarding/Education PracticesJust under half (49%) of private company respondents indicate that their boards have onboarding programs for new directors-a striking difference from the 73 percent of public company directors who say the same. Further, 59 percent of private company respondents believe their boards spend too little time on director education. Respondents spent an average of 14.1 hours on director education for the 2016 survey year-up only slightly from 13.8 hours in 2015.
Does your board have an onboarding program for new directors?
About NACD's Private Company Governance Survey
NACD annually surveys its membership community on key board governance practices and major business trends. We analyze our rich survey data to deliver insights on the state of board governance for public and private companies in a wide range of areas, including board structure, composition, recruitment, diversity, strategy, risk oversight, and shareholder engagement. We also offer custom benchmarking support for members who want to assess how their approach in specific governance areas compares to their peers. Click here to learn more about our board benchmarking services.