Fortune 100 Increasing Voluntary Audit-Related Disclosures
EY's Center for Board Matters recently reported that a U.S. survey of investors indicates high degrees of confidence in the audited financial information disclosed by public companies, with more voluntary reports than ever before.
Some key findings:
-
In 2018, 71% of companies disclosed the length of auditor tenure. In 2017, the percentage was 64%, and in 2012 it was 25%.
-
62% of companies disclosed the factors used in the audit committee's assessment of the external auditor qualifications and work quality, while in 2017 and 2012 the percentage was 58% and 18%, respectively.
(Source: EY Center for Board Matters)
What's the Tone At the Very Top?
The Role of Boards In Overseeing Corporate Ethics & Compliance
LRN, an ethics and compliance consultant, recently conducted in-depth, off-the-record interviews with 26 chief ethics and compliance officers (CECO) of major companies. The interviews revealed that, despite aspirational statements of company values, ethics and compliance is not a high operational priority of their boards of directors.
Some more in-depth findings from the report:
• Nearly half of CECOs say that their board has not received education and training on their E&C responsibilities.
• About 40% say their boards have not done a “deep dive” on compliance failures and scandals, despite recent Department of Justice regulations requiring them to do so.
• Only about 40% of CECOs reported that their boards have metrics in place for measuring E&C effectiveness.
• Only 40% of CECOs say that their boards of directors are willing to hold senior executives accountable for misconduct.
• Over 50% say that boards spend two hours or fewer working on E&C each year.
New Board Seats Increasingly Going to Women
The Equilar Gender Diversity Index found that one third of new directorships went to women in Q2 2018, almost a two-fold gain from 2014.
(Source: Equilar Gender Diversity Index)
Shareholder Activism Puts Short-Term Pressure on the Board
At your organization, to what extent has short-term pressure from external sources compromised management's focus on long-term strategic goals?
Director Education
• 45% of board respondents said not enough time was allocated to director education in board meetings over the last 12 months.
• The amount of time directors currently dedicate to formal education is 21 hours annually, a slight increase from last year, when it was 18.5 hours.
Board Evaluations
• 60% of respondents now evaluate individual director performance in the evaluation process, up from 41% last year.
• Most individual director evaluations are conducted annually (89%); it is less common to conduct them every two years (9%) or three years (5%).
(Source: NACD Public Company Governance Survey 2017-2018)