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Governance survey shows shift in focus

by Scott Priest, Editorial Director

October 21, 2010

The National Association of Corporate Directors released a survey for 2010, showing a change in emphasis in how risk management is conducted in public companies.

Urgency for Risk and Crisis Oversight – This year, corporate board directors ranked risk and crisis oversight as among their top three priorities compared to 16th in 2007.  Further, the full board has surpassed the audit committee as the group primarily assigned the majority of tasks related to risk oversight. In 2010, 45 percent of companies consider risk oversight as a full board responsibility, while in 2007, 76 percent of companies considered risk oversight to be the responsibility of the audit committee.  The use of board-level risk oversight/crisis management committees are also becoming more prevalent from just one year ago, as evidenced by the 100 percent increase in 2010 over 2009.  

Perhaps it's not a surprise that directors are having a knee-jerk reaction toward a focus on crisis oversight as a result of the economy's collapse. But it's good to see that employees higher up in companies are now ultimately responsible for risky actions, thereby (at the very least, theoretically) putting companies down more economically responsible and sustainable paths.

NACD President Ken Daly spoke about the survey at a conference, saying:

As new regulatory demands continue, it is p aramount that boards not allow their ultimate focus on corporate strategy and protecting shareholder value to suffer at the expense of compliance.  Boards need to find ways to focus on the important, while satisfying the urgent.

It sounds like this quote could be contradictory to the survey's results -- eschewing compliance for the benefit of performance -- but it really isn't. If you have good governance and risk management, achieving proper compliance shouldn't become an "ultimate focus" that usurps corporate strategy, but merely a part of that strategy.

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