2011 board pracices report by deloitte

2011 Board Practices Report Design, Composition, and Function

2

December 2011

Dear Reader: The Society of Corporate Secretaries and Governance Professionals (“the Society”) and the Deloitte Center for Corporate Governance are pleased to issue the 2011 Board Practices Report (the “Report”) of companies represented in the Society's membership. This Report is a key component in our efforts to analyze and report on current governance practices. And, as this is the seventh edition, comparative information and trends related to reports published in 1999, 2002, 2005, and 2008, are provided. Topics addressed in the Report keep pace with the dynamic corporate governance environment; thus, this year’s issue covers new topics such as details on director qualifications, shareholder engagement, social media policies, and the use of technology in the boardroom. The value of this Report lies in the unique data it provides. Based on the responses of over 200 corporate secretaries, where else will you learn how much board meetings are lengthening, that mandatory retirement ages are trending older, that classified boards are only increasing at small-cap companies, and that a majority of audit committees receive reports on tips from internal compliance hotlines at least 2-4 times per year? It also reveals hard-to-come-by data, such as how many times directors have had direct contact with shareholders in the last year, and how many boards are using web portals and tablets to receive their materials. In short, we believe this Report is the only one of its kind tailored specifically to practitioners of corporate governance. We hope it will be a useful tool to you and those executives and boards that you advise. Finally, we sincerely thank the participants for their time; this Report would not be possible without you. Sincerely yours,

Darla C. Stuckey

Senior Vice President Policy & AdvocacySociety of Corporate Secretaries and Governance Professionals

Maureen P. Errity

DirectorDeloitte LLPDeloitte Center for Corporate Governance

This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

2011 Board Practices Report Design, Composition, and Function 3

Contents

4 Introduction

6 Participant demographics

7 Summary of results and key findings

20 Public company survey results20 Board selection, recruitment and composition26 Independent chairman30 Board meetings and materials38 Committee structures and roles45 Audit committee53 Board orientation and training58 Board evaluations61 Strategy64 Risk oversight, disclosure committee, and political contributions**69 CEO succession planning71 CEO performance evaluation73 Shareholder engagement and shareholder activism76 Voting and proxy issues78 Earnings guidance81 Directors and officers liability insurance83 Board’s use of technology87 Sustainability89 Culture/ setting tone at the top92 Private sessions (Board access to management)**

93 Non-public company survey results

107 Director qualifications survey results108 Leadership qualifications109 Technical skills110 Professional experience111 Ethnicity, gender, and age

114 Appendix A — Comparison table of prior year survey results

116 Appendix B — 2011 Board practices survey questionnaire

**In this Report, the section header has been modified from the original survey questionnaire.

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Introduction

BackgroundThe 2011 Board Practices Report (the “Report”) is the 7th edition put forth by the Society of Corporate Secretaries and Governance Professionals, Inc. (“the Society”). The first issue was published in 1995, and subsequent editions were made available in 1999, 2000, 2002, 2005, and 2008. The three most recent survey questionnaires and accompanying reports, including those from 2011, were developed in collaboration with Deloitte LLP’s Center for Corporate Governance.

Each report is based on the results of a survey distributed to the Society’s membership, which includes more than 3,000 members representing companies of various sizes, industries, and organization structures. The reports are intended to present timely information on board roles and responsibilities and other topics of corporate governance.

To provide trend data, the 2011 questionnaire contained many questions that were asked previously. Where appro-priate, questions were removed if they were no longer relevant, and questions were added to account for developments affecting board and governance practices. Industry data was not considered in 2008; therefore, the trend data applies only to market capitalization results.

Board Practices ReportQuestionnaireThe 2011 questionnaire included 81 questions (14 more than was on the 2008 survey), covering 19 areas of board practice, including: board meetings and materials, committee structures and roles, risk oversight, and strategy. The survey topics and questions reflect established board practices, as well as policies relating to recent efforts in the areas of governance reform and regulation. New this year was the addition of questions related to political contributions and donations, fifth analyst calls with investors, social media policies, and questions on sustainability. Also new to the questionnaire is a section on director qualifications, which provides data on the survey participants’ board demographics, attributes, and skills.

The choices for answers varied. In most cases, participants could select from either “Yes” or “No” responses; in some instances, it was appropriate to provide a numerical range or specific set of responses from which to choose. When appropriate, “Not Applicable” (represented by N/A) or “Don’t Know” was included in the choices.

Because the questionnaire was primarily limited to data not publicly available, Deloitte and the Society researched the proxy statements of the public company survey participants to obtain more information about the board governance practices of these companies. The results can be found in the public company survey results section.

MethodologyThroughout this Report, percentages were based on the number of responses to a particular question. Due to rounding to the nearest whole digit, there may be cases where percentages may not add up to 100%.

A number of questions allowed respondents to supply an answer if none of the provided choices was suitable. In some cases, these "other" responses have been consolidated into appropriate categories.

Participant overviewA total of 208 survey responses were received and are illustrated in the charts and tables contained in this Report. Survey participants were anonymous and the results provided cannot be attributed to a specific company. Participants were from a number of company types, shown in the table to the right.

Company Type Number of

Respondents

Public 175

Privately held 19

Nonprofit 12

Partnership 2


Report contentsParticipant demographicsThis section provides information concerning the industry, size, and type of companies that participated in this year’s survey.

Summary of overall results and key findingsResponses from all 208 participants from the public, private, and nonprofit companies have been compiled in a table for easy viewing. When answer choices consisted of a numerical range or another specific answer, the affirmative response (“Yes”) has been provided. When fewer than 208 participants responded to a question, the number of responses is indicated by an “n” value.

Public company survey resultsThe charts in this section represent responses from the 175 public company participants. In addition, the results are broken down by market capitalization and financial versus non-financial industries. When fewer than 175 participants responded to a question, an “n” value has been provided. Results from the 2008 results have been included, where applicable.

Non-public company survey resultsThis section includes responses received from participants representing private, partnership, and nonprofit organizations; the results for the 33 participants have been summarized in a tabular format, broken down to show results by company type. When fewer than 33 participants responded to a question, an “n” value has been provided.

Director qualifications survey resultsNew this year is a section providing data on director qualifications, which were segmented into three categories: leader-ship, technical, and professional. Other data related to director age, gender, and ethnicity is also included.

Appendices•Comparisontableofprioryearresults:Resultsfromcomparablequestionsinthe1999,2002,2005,and2008surveys

have been consolidated in a table.•2011Boardpracticessurveyquestionnaire

Certain charts contain information that was obtained from the proxy statements of the public company survey participants. This data was researched by the authors of this Report and are denoted by a blue border.

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Participant demographics

2. Please specify your company type (for each company type, the count of respondents (n value) and percentage of the total count is provided as “n value/ percentage”)

1. What is your organization's industry?

Large-cap 60/ 34%

Mid-cap 88/ 50%

Small-cap 27/ 16%

Small-cap

(n=207)

Mid-cap

Large-cap

15% 15%

10%

8% 8% 8%

7%

5% 5%

3% 3%2% 2%

1% 1% 1% 1% 0%3%

2. Please specify your company type (for each company type, the count of respondents (n value) and percentage of the total count is provided as “n value/ percentage”)

1. What is your organization's industry?

Large-cap 60/ 34%

Mid-cap 88/ 50%

Small-cap 27/ 16%

Small-cap

(n=207)

Mid-cap

Large-cap

15% 15%

10%

8% 8% 8%

7%

5% 5%

3% 3%2% 2%

1% 1% 1% 1% 0%3%

IndustryFifty-two respondents represented financial services companies, a category that consisted of banking, finance, insurance, real estate and construction. Other participating companies were considered non-financial services.

Company type and sizeThere were a total of 208 participants in this survey, which are further classified as follows:

Company type Total number of respondents

Financial services industry

Public 175 38

Privately held 19 11

Nonprofit 12 3

Partnership 2 0

For purposes of the 2011 survey and to follow the breakdown used in the 2008 survey, the distribution of public company participants were segregated using the following market capitalization:

Large-cap companies > $10 billion Mid-cap companies ≥700 million and ≤ $10 billion Small-cap companies < $700 million


Organization criteria1 What is your organization’s industry: (n=207)

Advertising and publishing 0%Agriculture or mining 3%Banking or finance 14%Energy 5%Healthcare or pharmaceutical 8%Insurance 8%Manufacturing consumer 7%Manufacturing industrial 14%Media/ communications 1%Nonprofit or public admin 2%Professional services 0%Public utility/ utility holding 10%Real estate or construction 2%Retail/ Wholesale 8%Service industries (misc.) 2%Technology (including software) 5%Telecommunications 1%Transportation or distribution 3%Other 3%

1a* If Other industry (Please specify):•Aerospace•Gaming•Industrialgases-basicmaterials•Specialtychemical

2 Please specify your company type:Public company 84%Privately held 9%Partnership 1%Nonprofit 6%Board practicesBoard selection, recruitment and composition

Yes No

3 Does your organization use a skills matrix or similar tool to periodically assess board composition and fill gaps when selecting new directors? (n=206)

59% 41%

Yes No

4 Does your organization use written criteria in director selection? (n=207) 75% 25%Yes No

5 Does your organization use an executive search/ board director recruiting firm to assist in the recruitment of board directors?

58% 42%

Yes No N/A

6 Does your organization provide a mechanism for shareholders to nominate candidates to the board?

77% 13% 10%

Summary of results and key findings

Summary of resultsThe following table includes the responses to the 2011 questionnaire from all 208 survey participants. For those questions in which fewer than 208 responses were received, an “n” value has been provided to indicate the number of responses. An asterisk represents questions where a participant was asked to provide a numerical or text response. These responses have been consolidated into categories or ranges.

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Yes No

7 Do you have a mandatory retirement policy for directors? 65% 34%7a* If so, at what age is retirement required? (n=132)

≤70 20%71 2%72 52%73 3%74 2%≥75 21%Other: formula based on age + years of service 1%Independent chairman

8 Is the independent board chairman also the chairman of the nominating and governance committee?The independent board chairman is also the chairman of the nominating and governance committee

8%

No, but our policy would not restrict the same individual from holding both positions 36%Our policy does not permit the same individual from holding both positions 4%Not applicable — we do not have an independent chairman 52%

9 Who is responsible for the periodic evaluation and development of the independent chairman? (n=207)The nominating and governance committee 13%The full board 17%Another committee 1%No formal evaluation is performed 17%Not applicable — we do not have an independent chairman 51%

9a* If another committee, please specify:•Anotherindependentdirectorhasbeenappointedtocompletethisreview•Executivecompensationcommittee

10 How often is periodic evaluation of the independent chairman performed?Annually 23%Periodically, as needed 4%No formal evaluation is performed 21%Not applicable — we do not have an independent chairman 52%

11 Does your policy specify a rotation policy or term limit for the independent chair? (n=207)Rotation policy 1%Term limit 4%Neither 41%Not applicable — we do not have an independent chairman 53%Board meetings and materials

12 Does your company permit shareholders to call special shareholder meetings? (n=198)Permitted without any restriction 11%Permitted but with minimum ownership threshold percentages 40%Not permitted 49%

12a* If permitted with a minimum ownership threshold, please specify the threshold percentage (e.g., 10, 15, 20, 25%) (n=70)≤10% 23%15-20% 13%25% 39%33-35% 3%50% 7%66% 1%75% 1%Majority of shares (not including specific threshold percentages listed above) 9%Other (e.g., as required by state law) 4%

13 How many hours does a typical board meeting last? (Do not count time spent on committee meetings on a board meeting day) (n=207)1-2 hours 5%3-5 hours 55%6-8 hours 30%9-10 hours 6%More than 10 hours 3%


14 How far in advance are board meeting materials provided to board members? (n=206)At most five business days before meeting 37%Between five to ten business days before meeting 61%More than ten business days before meeting 2%Materials are not distributed prior to board meetings 0%

15 What is the most common form of board meetings for your organization? Live, face-to-face meetings 90%Live, face-to-face meetings with some directors attending via web-conference or video conference

1%

Live, face-to-face meetings with some directors attending via telephone 5%Tele-conference calls 3%

16 How often do you hold board meetings outside of the country in which your company is headquartered? (n=206)Frequently (five or more times a year) 1%Sometimes (two to four times a year) 3%Rarely (once a year) 24%We do not hold board meetings outside of the country in which our company is headquartered 71%

Yes No N/A

17 Do you make company owned aircraft available to directors for travel to meetings? (n=207)

29% 30% 40%

18 What amount of reimbursement does your company provide to directors for travel to meetings?Full reimbursement 93%Partial reimbursement 1%None 6%Committee structures and roles

19 How many standing committees does your board have?Two or less 3%Three to five 83%Five or more 13%

20 Please complete the following table with regard to the specific committee practices of your boardNote: For each committee in the following table, the count of respondents (n value) and this percentage of the total count of respondents for the committee is provided as “n value/ percentage”.

CommitteeCommittee size

All companies

Meeting frequency in a year

All companies

Average length of meetings (hrs)

All companies

Auditor attendance in meetings (Y/N)

All companies

Audit committee

1-4 120/ 59% 1-6 91/ 46% 0.5-1.5 47/ 23% Yes 196/ 98%

5-9 83/ 41% 7-11 93/ 47% 2-3 132/ 66% No 3/ 2%

>10 1/ 0% ≥12 16/ 8% >3 22/ 11%

Compensation committee

1-4 117/ 58% 1-6 162/ 84% 0.5-1.5 70/ 35% Yes 0/ 0%

5-9 85/ 42% 7-11 28/ 14% 2-3 118/ 59% No 186/ 100%

>10 0/ 0% ≥12 4/ 2% >3 11/ 6%

Nominating/ corporate governance

1-4 119/ 61% 1-6 179/ 95% 0.5-1.5 121/ 63% Yes 0/ 0%

5-9 75/ 38% 7-11 7/ 4% 2-3 68/ 35% No 178/ 100%

>10 1/ 1% ≥12 2/ 1% >3 3/ 2%

Executive committee

1-4 34/ 45% 1-6 26/ 79% 0.5-1.5 30/ 73% Yes 0/ 0%

5-9 37/ 49% 7-11 3/ 9% 2-3 11/ 27% No 68/ 100%

>10 5/ 7% ≥12 4/ 12% >3 0/ 0%

Science & technologycommittee

1-4 5/ 56% 1-6 9/ 100% 0.5-1.5 3/ 38% Yes 0/ 0%

5-9 4/ 44% 7-11 0/ 0% 2-3 5/ 63% No 12/ 100%

>10 0/ 0% ≥12 0/ 0% >3 0/ 0%

Risk committee

1-4 6/ 25% 1-6 17/ 77% 0.5-1.5 6/ 25% Yes 3/ 14%

5-9 18/ 75% 7-11 4/ 18% 2-3 17/ 71% No 19/ 86%

>10 0/ 0% ≥12 1/ 5% >3 1/ 4%

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21 Which of the following has the primary responsibility for appointing committee members and chairs?Full board 47%Nominating/ corporate governance committee 44%Board chair/ lead director 5%Other 4%

21a* If Other, please specify:•Chairmanmakesrecommendationswhicharethenacteduponbythefullboard•Executivecommittee•Nominating/corporategovernancecommitteenominatescommitteemembers/chairsforfullboardapproval

Yes No

22 Does your board have a policy to rotate committee chairs? (n=206) 22% 78%Yes No

23 Does your board have a policy to rotate committee membership? (n=206) 21% 79%Yes No

24 Does your board have limits on audit committee members being able to participate on other organizations’ audit committees? (n=207)

45% 55%

24a* If yes, please specify the limit: (n=88)1 2%2 42%3 43%4 6%5 1%Other•Directorsshouldholdparticipationinotherboardstoalevelthatdoesnotadverselyimpact

their ability to serve the company’s board and avoid accepting director responsibilities that would create the opportunity for/ appearance of a conflict.

•Individualizedaccordingtodemandsontime•PerNYSErules•TheSEClimit

6%

Audit committee25 How often does the audit committee meet annually via:

In-person meetings (n=202)1-4 68%5-9 30%10-14 2%By tele-conference calls (n=161)1-4 81%5-9 19%10-14 0%By video or web conference (n=3)1-4 100%5-9 0%10-14 0%

CommitteeCommittee size

All companies


All companies

Average length of meetings (hrs)

All companies

Auditor attendance in meetings (Y/N)

All companies

Strategy committee

1-4 3/ 25% 1-6 11/ 100% 0.5-1.5 3/ 25% Yes 0/ 0%

5-9 7/ 58% 7-11 0/ 0% 2-3 7/ 58% No 15/ 100%

>10 2/ 17% ≥12 0/ 0% >3 2/ 17%

Environment committee

1-4 8/ 53% 1-6 15/ 100% 0.5-1.5 5/ 36% Yes 0/ 0%

5-9 7/ 47% 7-11 0/ 0% 2-3 9/ 64% No 15/ 100%

>10 0/ 0% ≥12 0/ 0% >3 0/ 0%

Corporate responsibility

1-4 4/ 40% 1-6 10/ 100% 0.5-1.5 6/ 60% Yes 0/ 0%

5-9 6/ 60% 7-11 0/ 0% 2-3 4/ 40% No 11/ 100%

>10 0/ 0% ≥12 0/ 0% >3 0/ 0%

Disclosure

1-4 2/ 25% 1-6 5/ 63% 0.5-1.5 5/ 63% Yes 2/ 22%

5-9 4/ 50% 7-11 3/ 38% 2-3 3/ 38% No 7/ 78%

>10 2/ 25% ≥12 0/ 0% >3 0/ 0%


26 How has the frequency of audit committee meetings changed since last year? (n=207)Increased substantially 2%Increased slightly 9%Decreased 4%No change 85%

Yes No

27 Are audit committee meetings held by phone considered different than in-person meetings for purpose of proxy disclosure? (n=197)

6% 94%

28 Does your organization’s audit committee hold a separate meeting to review the earnings release vs. quarterly reviews or are they combined? (n=193)Separate meetings 37%Combined meetings 63%

29 How often do external auditors attend your company’s audit committee meetings? (n=206)Frequently (all or almost all audit committee meetings) 93%Sometimes (two to three audit committee meetings a year) 4%Rarely (one audit committee meeting a year) 2%Never 0%Don’t know 0%

30 How often does your audit committee meet separately with management? (n=206)Frequently (all or almost all audit committee meetings) 81%Sometimes (two to three audit committee meetings a year) 15%Rarely (one audit committee meeting a year) 2%Never 2%Don’t know 0%

31 Which members of management meet separately with the audit committee? (Check all that apply) (n=202)Head of internal audit 87%General counsel 49%Chief executive officer 44%Chief financial officer 77%Chief compliance officer 32%Other 18%

31a* If Other, please specify:Representative responses:•Controllerand/orchiefaccountingofficer•Chiefriskofficer•Chiefoperatingofficer

Other responses:•Allmembersofmanagementexcepttheinternalauditor•Managementgroupmeetswithauditcommittee;Internalauditmeetsalonewithauditcommittee•Riskmanager,corporatesecretary,chiefcreditofficer,humanresourcesdirector,controller,directorofretailbanking,

commercial banking manager•Secretaryandtreasurer•Nomeetings

32 How often does your company’s audit committee engage specialists for specific matters on their agenda? (n=204)Frequently (five or more times a year) 2%Sometimes (two to four times a year) 18%Rarely (once a year) 53%Never 25%Don’t know 2%

33 How often does the audit committee receive reports on internal tips from a compliance hotline? (n=203)Frequently (five or more times a year) 34%Sometimes (two to four times a year) 33%Rarely (once a year) 20%Never 9%Don’t know 4%

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Board orientation and trainingYes No

34 Does your organization have a formal orientation program for new directors (beyond supplying a directors’ manual)? (n=203)

74% 26%

34a If yes, please check the orientation programs sponsored by your organization for directors: (Choose all that apply) (n=149)Live, in-house session led by an individual serving on the board and/or a staff member of the organization

99%

Live training by a third party 2%Internet-based training 5%

35 Does your company train directors on: (Choose all that apply) (n=180)Anti-corruption policies (e.g., FCPA, UK Anti-bribery Act) 36%Insider trading 78%Political contributions 22%Company policies 81%Other regulatory issues related to your business such as privacy, etc. 62%Other formal training 21%

35a* If Other, please specify:Representative responses:•Codeofconduct•Ethics•Company,operations,andindustryspecificmatters•Generalcorporategovernance•Fiduciary/directorduties

Other responses:•BaselII•BSA/AML-Section16-RegFD•Reinsurance,investmentmanagement,marketing

36 Which of the following best describes your board’s director education program?: (Choose all that apply) (n=206)Provided in-house by management 71%Provided in-house by a third party 21%Directors are reimbursed for public forums or peer group sessions attended 60%The full board collectively attends a single public forum 1%Other 4%Our board does not have a formal director education program 15%

36a* If Other, please specify:•Differentapproachesreflectingtheneedsofdifferentdirectors•Eachboardmemberinathreeyearperiodisencouragedtoparticipateineducationalprogramsrelevanttothedirector’s

committee assignment and/ or recommended best governance practices•Onceayeartrainingisprovidedataboardmeetingbyeitherin-houseorexternalproviders.Inaddition,directorsareencour-

aged to attend programs sponsored by groups such as NACD, NASDAQ, UCLA, Stanford, etc.•Providedbycorporatesecretary•Publicwebinars•Regularstorewalkswithmanagement•Relevantreadingmaterialsaresenttodirectors

37 How do your directors learn about director education programs? (Choose all that apply) (n=192)From the corporate secretary or management 85%From other directors 48%From third party mailings 59%Other 5%

37a* If Other, please specify:•Externalauditors•Thenominating/governancecommitteemaysuggestoutsideeducationprograms•Alltheylearnfromourcompanycomesthroughmeetingmaterials/presentations.Board evaluations

38 How are your directors evaluated? (Choose all that apply) (n=205)Self-evaluation 74%Individual peer-evaluation led by corporate secretary or other in-house personnel 18%Individual peer-evaluation led by a third party facilitator 13%Our organization does not have a formal board performance evaluation process 6%Other 13%


38a* If Other, please specify:•Annualboard/committeeselfevaluationfacilitatedbyoutsidecounsel;noformalpeer-evaluation•Bio,qualifications,meetingattendanceallprovidedtofullboard;suggesteddiscussiontopicsgiventofullboardtodiscussin

private session•Boardandcommitteeevaluationsand‘lite’individualassessmentsdoneinexecutivesession•Boardevaluatesboardandcommitteeperformanceviaquestionnaire,coordinatedbycorporatesecretary•Chairofthegovernancecommitteemeetswithallcommitteechairsandevaluatesdirectors’performanceandparticipation•Eachindependentdirectormeetsprivatelywiththechairmanoftheboardandthechairmanofthecorporategovernance

and nominating committee•Evaluationbycommitteechairs•For2012,movingtoathird-partyindependentevaluationmethod•Individualpeerbyelectronicsurvey(anonymous)•Individualpeer-evaluationledbychairofthenominatingandcorporategovernancecommittee•Individualpeer-evaluationledbychairmanoftheboard•Individualpeer-evaluationledbyindependentleaddirector-anotherindependentdirectorleadsthereviewofthelead

director•Individualpeer-evaluationledbytwochairs(ofboardandonecommittee)•Individualselfandpeer-evaluationledbygovernancecommitteechair•Managementevaluationofboard•Nopeer-to-peerevaluationprogram.Facilitatedbyoutsidecounsel,eachdirectorevaluatesthefullboard’sperformanceover

the year.•Outsideadvisorperiodicallyengagedtoconductinterviewsafterself-evaluationsaredone•Self-evaluationsfacilitatedbyleaddirector•Werotateourapproachfromyear-to-yeartokeeptheprocessfresh

39 To whom does the evaluation pertain? (Select all that apply) (n=206)Individual board members 42%Board committees 80%Full board as a whole 88%Not applicable 6%

Yes No N/A

40 Have you had a third party evaluate the board’s performance? (n=206) 18% 77% 5%41 How often is the board evaluated? (n=207)

More frequently than once a year 1%Less frequently than once a year 4%Once a year 89%Not evaluated 5%Strategy

42 How often are strategic objectives discussed with the board? (n=207)Annually 21%Quarterly 20%At every meeting 50%Other 9%

42a* If Other, please specify:Representative responses provided:•2-daysemi-annualdeepdive;discussionprivatelywithCEOatnearlyeverymeeting•Periodically;asdevelopmentsoccuronvariousaspectsofthestrategy•Semi-annually•Someaspectofstrategyisdiscussedatnearlyeverymeeting•Theentirestrategicplan,forthefollowingyearandlong-term,isdiscussedonceayear.Progressagainstobjectivesmaybe

discussed quarterly.•Thereareannualstrategysessionswithfollowupsbycertainbusinessesduringtheyear

43 How often does your board participate in an off-site strategy meeting with management? (n=205)More frequently than once a year 2%Less frequently than once a year 10%Once a year 60%We do not hold off-site strategy meetings with management 29%

44 How is strategy set at your organization? (n=206)Management develops strategy and the board advises, challenges and approves 92%The board and management develop strategy together 6%The board develops the strategy and management approves and executes 0%Other 1%

14

44a* If Other, please specify:•Ateverymeeting,butwithspecialemphasissemi-annually.•Continuouscollaborationbetweenmanagementandtheboard

45 Is the level of board involvement in setting strategy increasing or decreasing? (n=206)Increasing 50%Decreasing 0%Remains the same 50%Risk oversight, disclosure committee, and political contributions**

46 How does your board assign risk oversight for the organization’s risk management program? (Select all that apply) (n=207)We have a board risk committee 13%The audit committee has primary responsibility for risk oversight 50%Risk oversight responsibilities are spread across all board committees 43%The full board is responsible for risk oversight 54%We have not considered board responsibility for risk oversight 0%Other 8%

46a* If Other, please specify:•Auditandriskcommittee•Boardoverseesstrategic,operational;committeesoverseeriskintheirrespectiveareasofresponsibility;auditcommittee

oversees allocation of oversight response•Committeesarealsochargedwithriskoversightfortheriskswithintheircommitteecharters•Compliancecommittee•Currentlyevaluating•Executivecommitteeisresponsibleforriskoversight•Chiefriskofficer,riskmanagementstructureandmanagementriskcommitteesandboardapproveriskappetite•Internalauditormanages/designsriskmanagement•Managemententerpriseriskmanagementcommitteewithauditcommitteechairasboard’sliaisonwithreportsto

full board•Nominating&governancecommitteeensuresoversightbyacommitteeorboard•Riskmanagementissupplementedbyseniormanagementreviewsandreporteduptotheboard•Splitbetweengovernanceandauditcommittee•Thesafetycommitteehasoversightofspecificsafety-relatedrisks•Wehaveafinanceandriskmanagementcommittee•Whiletheboardhasfullresponsibilityforriskoversight,quarterlyactivitiesofthemanagementriskcommitteearemadeto

the audit committeeYes No N/A

47 Does your organization have a management disclosure committee as recommended by the SEC for public companies? (n=207)

78% 10% 12%

Yes No

47a If yes, does the management disclosure committee report to either the board or a board committee? (n=158)

34% 66%

47b If yes, how often? (n=54)Monthly 0%Quarterly 87%Semi-annually 2%Annually 0%No determined frequency; only when needed 11%

48 Does the company align risk oversight/ risk management with the company’s strategy? (n=206)Yes 87%No 5%Don’t know 8%

49 Does your company’s board oversee political contributions and donations made by the company — or oversee the political action committees (or similar) of the company? (n=202)Yes 30%No 63%Don’t know 7%

50 Has your company imposed any limitations, or reporting obligations, to the company on political contributions by directors? (n=203)Yes 11%No 82%Don’t know 7%


CEO succession planning51 How often does the full board review CEO succession plans? (n=204)

More than once a year 23%Once a year 62%Less than once a year (e.g., every two years) 4%Only when a change in circumstance requires 8%Never 2%

52 Who has the primary responsibility over the CEO succession planning process? (n=205)Entire board 37%Compensation committee 24%Nominating/ corporate governance committee 26%Independent directors 4%CEO 3%Other 6%

52a* If Other, please specify:•Asapartnership,themajoritypartner’schairmandecides•ChairmanandCEO,whichinturnreportstatustotheboard•Compensationcommitteebutinpractice,thefullboard•Entireboardresponsible,planandplanningprocessdrivenbyCEO•Executivecommittee•Fullboardthroughitsexecutivecommittee•Humanresourceandgovernancecommittee•Leaddirector•Smallcommitteeofindependentdirectors•Specialcommitteecomposedofleaddirectorandthechairsofthegovernance

and compensation committeesCEO performance evaluation

53 How often does the full board review the CEO’s performance? (n=205)More than once a year 8%Once a year 86%Less than once a year (e.g., every two years) 0%Only when a change in circumstance requires 3%Never 3%

54 Who has the lead responsibility over the CEO performance evaluation process? (n=204)Entire board 13%Compensation committee 61%Nominating/ corporate governance committee 12%Independent chair or lead director 10%Other 4%

54a* If Other, please specify:•Compensationcommitteeinconjunctionwithleadindependentdirector•Executivecommittee•Humanresourceandgovernancecommittee•Nominatingandgovernancecommitteeandleaddirector•Theindependentdirectors(allofwhomsitontheexecutivecompensationcommittee)evaluatetheperformanceofthe

management directors as a group, and individually, following a presentation by management to the committeeShareholder engagement and shareholder activism

Yes No N/A

55 Are directors required to attend the annual shareholders meeting? (n=207) 66% 23% 12%Yes No N/A

56 Do you have a policy relating to contact between directors and shareholders? (n=206) 45% 45% 10%57 Have board members had direct contact with shareholder(s) or shareholder groups

over the past year? (n=203)Board members have had direct contact 21%Direct contact was made only as arranged or suggested by company management 15%Board members did not have direct contact 51%Not applicable 13%

16

Yes No N/A

58 Has your organization been approached by a shareholder activist within the last 12 months? (n=204)

30% 57% 13%

59 Has your board considered holding what is known as a “fifth analyst” call with investors? (n=207)Yes 5%No 56%Not familiar with the term 27%Not applicable 12%Voting and proxy issues

Yes No N/A

60 Did your organization receive a shareholder proposal during the 2011 proxy season other than auditor ratification, say-on-pay, or required proposals? (n=207)

30% 55% 14%

61 When does your organization provide reimbursement of expenses related to director election campaigns? (Choose one) (n=206)Reimbursement is provided when the nominee is successful 1%Reimbursement is provided when the nominee achieves a certain percentage of the vote 0%Never 31%Not applicable 68%

62 Is your organization considering adopting a policy or by-law providing reimbursement of expenses related to director election campaigns in light of proxy access? (Choose one) (n=202)Reimbursement would be provided when the nominee is successful 0%Reimbursement would be provided when the nominee achieves a certain percentage of the vote 0%Not considering adopting a policy or by-law 69%Not applicable 31%Earnings guidance

63 Does your organization publicly provide earnings per share (EPS) estimates? (Select all that apply) (n=202)Quarterly earnings per share estimates are provided 22%Annual earnings per share estimates are provided 36%Other types of forward-looking information (e.g., net income, revenue, operating cash flow, etc.) are provided

32%

EPS estimates nor other types of forward-looking information (e.g., net income, revenue, operating cash flow, etc.) are not provided

21%

Not applicable 19%64 Does your organization intend to change how it provides EPS estimates or other

forward-looking information? (n=205)There is no intention to change the amount of information provided 59%We intend to reduce the amount of information provided 1%We intend to increase the amount of information provided 1%Don’t know 18%Not applicable 20%Directors and officers liability insurance

Yes No

65 Does your organization have directors and officers (“D&O”) liability insurance? (n=207)

99% 1%

Yes No

65a If yes, does the D&O insurance cover more than designated directors and officers of the organization? (n=198)

32% 68%

65a* Please list who else is covered under the D&O policy:Representative responses:•Allormostemployees•Selectemployees,e.g.,

– Employees who serve in nonprofit director positions at company request– Employees who serve at the company’s request on the boards of subsidiary companies or joint ventures, or portfolio

companies.– Employees who take responsibilities or roles at the request of the company– Employees for securities claims– Certain key employees (environmental, investor relations, etc.) who are not officers– Employees acting on behalf of the organization– Other employees on the disclosure committee and in the finance department

•Directorsand/orofficersofsubsidiariesandaffiliates•InvestorRelations

Yes No N/A

66 Do any of your directors own individual director liability insurance? (n=207) 1% 27% 72%


66a If yes, which statement best describes how the individual director liability insurance policies gets funded? (n=2)The director funds his/ her own insurance policy 50%The company funds his/ her own insurance policy 50%Don’t know 0%

67 Please indicate how your liability insurance policy limits have changed in the past 12 months: (n=205)Increased 20%Decreased 2%No change 58%Don’t know 18%Not applicable 1%Board’s use of technology

68 What level best describes your board’s involvement with information technology? (n=207)No involvement besides basic email communications 24%Aware of the benefits technology can provide 38%Frequently engaged and up-to-date on latest technology applications 34%Don’t know 4%

69 Please specify how your organization distributes board materials. (Select all that apply)Through unsecured e-mail, e.g., Internet 25%Through secure e-mail, e.g., company intranet 19%Through an internal or external board portal 42%Through mailing of hardcopies 77%In-person at board meetings 50%Using an application for the iPad or other tablet device 20%

70 If your organization does not have a board portal, which statement below best explains your company’s view on the technology platform? (n=124)We have considered the use of board portals but do not currently see a need for this technology 23%We are currently considering the benefits of the use of board portals 35%We will be introducing this technology in the near future 31%We have not considered board portal technology 11%

71 Would you assess the board’s use of technology to be:Increasing 79%Decreasing 0%No change 21%

72 Do your directors engage in social media associated with your organization?Directors engage in social media 1%Some directors engage in social media 8%Directors do not engage in social media 57%Don’t know 34%

Yes No

73 Does your company have a social media policy? (n=205) 61% 39%Sustainability

74 Does your organization prepare and file a separate sustainability report? (n=206)Yes 36%No 51%Don’t know 13%

74a If yes, is this report available on your organization’s website (n=74)Yes 96%No 1%Don’t know 3%

75 Has your organization received a shareholder proposal related to corporate social responsibility initiatives? (n=202)Yes 22%No 75%Don’t know 2%

18

75a* If yes, please specify:Most common responses:•Disclosureofpoliticalcontributionsand/orlobbying•EEOreportingproposal•HumanRightsPolicy/Participateincommunity’sdevelopmentaroundthecompanyactivities•Environmental/Climatechangedisclosure•RequestforandspecificmetricsforSustainabilityReport•Linksustainabilitytoexecutivecompensation

Other responses:•Animalwelfare•Divestfromspecifiedcompanies•Healthcarereformandaffordablepremiums•Toprepareandpublishareportbasedoncertaincriteria

76 Is the board and its committees involved with reviewing the sustainability effort maintained by the organization? (n=202)Yes 38%No 53%Don’t know 9%Culture/ setting the tone at the top

77 Given the new SEC whistleblower rules (May 2011), has your board asked management to take specific steps to continue to enhance a culture of candid and open communication? (n=198)Yes 30%No 61%Don’t know 9%

78 How often does your organization conduct cultural surveys? (n=201)Annually 26%Only in certain circumstances 28%We do not conduct cultural surveys 45%

78a If cultural surveys are conducted by your organization, which parties participate? (Select all that apply) (n=177)All employees (including management) 59%All employees under the management level 1%The board 0%Not applicable 40%

78b If cultural surveys are conducted by your organization, does management review the survey findings with the board? (n=177)Management reviews the survey findings with the board 34%Management reviews the survey findings with the board in certain circumstances 19%Management does not review the survey findings with the board 6%Not applicable 41%

79 How do employees receive communication from the board? (Select all that apply) (n=202)Through electronic communication 9%Through verbal communications (e.g., live meetings, voicemails, etc.) 8%The board does not provide communications to employees 84%Only in certain circumstances 6%

79a* If certain circumstances apply, please specify•Managementhascommunicatedontheboard’sbehalf,butthereisapossibilitythatcertaincircumstancescouldariseneces-

sitating the direct involvement of the board•Haddirectorsaddressseveraldifferentemployeeleadershipgroupsandanemployeeaffinitygroup•Insomecases,messagesfromtheboardaresenttoemployeesviae-mail•Individualdirectorshaveparticipatedinseveralemployeeforums;severalfemaledirectorshavespokentogroupsfocusedon

the advancement of women in the company•OnlywhenamajorissuearisessuchasthedepartureofaCEO•Theauditcommitteesendstwiceyearlyemailstoallfinanceandaccountingpersonnelremindingthemthattheymay

contact the audit committee or any member with any report regarding misconduct in connection with financial reporting•Theboardcommunicatesregularlywithmembersofmanagementbothverballyandelectronically,butgenerallydoesnot

communicate with employees otherwise•Theboardhasonlydealtwithafewemployees(management,internalaudit,legalandcontroller’sgroup)•ThroughchairmanandCEOcommunications•TypicallyanemailcommunicationthatisforwardedbytheCEOorcorporatesecretary–butitisrare


80 Has your company established an anti-hedging policy that applies to directors? (n=199)My company has established an anti-hedging policy that applies to directors 56%My company has not established an anti-hedging policy that applies to directors 32%We are considering the establishment of such a policy 12%Private sessions (Board access to management)**

Yes No

81 Do non-employee directors have direct access to management below the CEO level (not including boardroom presentations) without CEO approval? (n=202)

97% 3%


Key findingsPresented in this table are some of the most common practices and interesting responses derived from the total participant responses received.

Most common practices/ interesting responses Question

99% Provide live, in-house director orientation sessions led by an individual serving on the board and/or a staff member of the organization

34a

99% Companies that have directors and officers (“D&O”) liability insurance 65

97% Non-employee directors have direct access to management below the CEO level (not including boardroom presen-tations) without CEO approval

81

94% In-person audit committee meetings and those held by phone are considered the same for purposes of proxy disclosure

27

93% Companies provide full reimbursement to directors for travel to meetings 18

93% External auditors attend every meeting or almost every meeting of the company audit committee 29

92% Management develops strategy and the board advises, challenges and approves 44

90% Most common form of board meetings are live, face-to-face meetings 15

89% Boards evaluated once a year 41

87% Head of internal audit meets separately with the audit committee 31

87% The company aligns risk oversight/risk management with the company’s strategy 48

86% The full board reviews the CEO’s performance once a year 53

85% No change to the frequency of audit committee meetings since last year 26

85% Directors learn about director education programs from the corporate secretary or management 37

20

Public company survey results

Board selection, recruitment and compositionSince the 2008 report, small-cap companies appear to have made considerable changes to their practices relating to board composition. Specifically, 59% use a board skills matrix or similar tool, nearly double the number of companies that did so in 2008. Also since 2008, there has been a significant (29%) increase in small-cap companies using written criteria for director selection, and a significant increase of small-cap companies using search firms to assist in recruiting board directors. From an industry perspective, significantly fewer financial services companies (37%) use executive search firms for recruiting directors compared to non-financial services companies (69%).

These changes suggest heightened focus on board compo-sition during the past couple of years. The potential for proxy access, which would allow shareholders to nominate

directors on the proxy ballot sent to investors, was one factor that put the spotlight on board composition. However, on July 22, 2011, the final SEC proxy access rule 14a-11 was vacated by the U.S. Court of Appeals. While the SEC has decided not to appeal, many companies are spending more time thinking about the directors they need on their boards to execute their strategy. Further, the SEC’s proxy disclosure enhancement rules, which took effect February 28, 2010, may also be a factor. These rules require all public companies to disclose more information about director qualifications, including why a director is qualified to serve on the board of a particular company. With this increased focus, more boards are utilizing a board skills matrix and placing emphasis on the specific skills and attributes they need.

The results in this section represent survey responses by 175 public companies. In order to provide a comprehensive view of the results, findings are presented in the following three formats, and in each case, an “n” value has been provided to show the actual total participant responses for each question if less than 175 responses were received:•All175publiccompaniesrespondents•Marketcapitalizationdesignation,inwhichthereare27small-,88mid-and60large-capcompanies•Industryclassification,inwhichthereare38financialservicescompaniesand137non-financialservicescompanies

In some cases, certain data points have been excluded from the chart and instead are provided in a sidebar.

To the extent possible, survey questions asked in 2008 are presented along with the 2011 survey results. In 2008, the total number of public company survey participants was 229, which included 53 small-cap, 120 mid-cap, and 56 large-cap companies.

Additional informationTo learn more about board selection, recruitment and composition, read the Deloitte Center for Corporate Governance publication “Creating the board your company deserves", available at www.corpgov.deloitte.com.

Creating the board your company deservesThe art – and science –to choosing directors

http://www.corpgov.deloitte.com/site/us/nominating-corporate-governance-committee/board-composition-and-recruitment/


3. Does your organization use a skills matrix or similar tool to periodically assess board composition and fill gaps when selecting new directors?

Small-cap

Mid-cap

Large-cap

Financial services (n=38)

Non-financial services (n=135)

All public companies (n=173)

Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




53%

32%

59%

64%

52%

63%

62%

68%

62%

Yes

Yes

2011 (n=173)

2011

2008 (n=229)

4. Does your organization use written criteria in director selection?

2011 (n=174)

2011

2008 (n=229)

2011

2011

2008 (n=229)

79%

52%

81%

78%

71%

78%

78%

83%

77%

Yes

Yes

5. Does your organization use an executive search/ board director recruiting firm to assist in the recruitment of board directors?

2011

2011

2011

2011

37%

20%

33%

69%

58%

65%

62%

77%

72%

Yes

Yes

6. Does your organization provide a mechanism for shareholders to nominate candidates to the board?

92%

78%

84%

82%

86%

95%Yes

Yes

7. Do you have a mandatory retirement policy for directors?

71%

44%

69%

69%

70%

82%Yes

Yes

With regard to question 7 concerning mandatory retire-ment, 69% of mid-cap companies and 82% of large-cap companies said they have such a policy for directors. For small-cap companies, 44% of the respondents said they had a mandatory retirement policy.

In 2008, no companies had a mandatory retirement age of 75. In 2011, 75 was the mandatory age for retirement at one quarter of the small-cap companies, 13% of mid-cap companies, and 28% of large-cap companies.

Board selection, recruitment and composition

22


Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




53%

32%

59%

64%

52%

63%

62%

68%

62%

Yes

Yes

2011 (n=173)

2011

2008 (n=229)


2011 (n=174)

2011

2008 (n=229)

2011

2011

2008 (n=229)

79%

52%

81%

78%

71%

78%

78%

83%

77%

Yes

Yes


2011

2011

2011

2011

37%

20%

33%

69%

58%

65%

62%

77%

72%

Yes

Yes


92%

78%

84%

82%

86%

95%Yes

Yes


71%

44%

69%

69%

70%

82%Yes

Yes

Since the 2008 report, the push for boards to move to annual elections of all directors, as opposed to the election of a classified or staggered board structure has grown stronger. The proxy statement research completed revealed that when compared to 2008, at least 20% more mid- and large-cap companies moved to an annual process. Small-cap companies, on the other hand, revealed a movement in the other direction with a 13% increase in classified boards.

11%

4%

5%

4%

21%

23%

30%

2%

3%

3%

10%

5%

24%

28%

27%

9%

8%

11%

15%

25%

30%

2%

19%

4%

7%

11%

19%

15%

22%

4%

24%

6%

8%

13%

23%

15%

8%

2%

31%

8%

15%

19%

17%

8%

2%

9

8

7

6

5

4

≤ 3

74%

26%

61%

39%

64%

36%

38%

62%

66%

34%

62%

38%

48%

52%

58%

42%

86%

14%

Electedannually

Classified/Staggered

Electedannually


95%

77%

99%

90%

98%

92%

100% 97% 100%Yes

Yes

13%

8%

11%

11%

11%

5%

42%

2%

7%

14%

23%

16%

10%

7%

21%

2%

8%

13%

20%

15%

10%

6%

26%

≤3

4

5

6

7

8

9

≥10

16%

23%

4%

46%

6%

45%

3%14%Yes

Yes

66%

18%

41%

61%

39%

59%

62%

74%

76%Yes

Yes

4%

37%

46%

13%

3%

22%

50%

22%

3%

11%

45%

32%

11%

7%

19%

33%

41%

5%

27%

45%

23%

8%

47%

37%

5%

2%

≥13

10-12

7-9

4-6

0-3

50%

29%

60%

59%

58%

66%

41% 57% 68%Yes

Yes

45%

39%

52%

54%

51%

53%

44% 44% 63%

Yes

Yes

The chairman of the board is also the CEO

Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)

There is a separate position for lead or presiding director

Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)

The company has implemented a majority vote policy for uncontested director elections

Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)

Is there a limit to the number of other directorships your non-employee directors may hold?

Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)

The company provides stock-based compensation to non-employee directors

Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)

Board classification

Small-cap

Mid-cap

Large-cap




2011

2011

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

Directors designated as "independent" on the board

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

16%

29%

37%

18%

1%

21%

44%

31%

3%

1%

20%

41%

33%

6%

0-3

4-6

7-9

10-12

≥13

The number of times a year the board normally meets

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)≥10

2011

2011

2011

Officers on the board

Small-cap

Mid-cap

Large-cap




2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

0%

36%

4%

7%

0%

14%

4%

5%

7%

23%

1%

12%

8%

3%

2%

34%

2%

2%

8%

8%

6%

Other titles

generalcounsel/ chief

legal officer

chiefoperating

officer

Chief financialofficer

8%

3%

3%

7%

1%

2%

8%

1%


Chiefoperating

officerGeneral

counsel/ chieflegal officer

Other titles

2011



11%

4%

5%

4%

21%

23%

30%

2%

3%

3%

10%

5%

24%

28%

27%

9%

8%

11%

15%

25%

30%

2%

19%

4%

7%

11%

19%

15%

22%

4%

24%

6%

8%

13%

23%

15%

8%

2%

31%

8%

15%

19%

17%

8%

2%

9

8

7

6

5

4

≤ 3

74%

26%

61%

39%

64%

36%

38%

62%

66%

34%

62%

38%

48%

52%

58%

42%

86%

14%

Electedannually


Electedannually


95%

77%

99%

90%

98%

92%

100% 97% 100%Yes

Yes

13%

8%

11%

11%

11%

5%

42%

2%

7%

14%

23%

16%

10%

7%

21%

2%

8%

13%

20%

15%

10%

6%

26%

≤3

4

5

6

7

8

9

≥10

16%

23%

4%

46%

6%

45%

3%14%Yes

Yes

66%

18%

41%

61%

39%

59%

62%

74%

76%Yes

Yes

4%

37%

46%

13%

3%

22%

50%

22%

3%

11%

45%

32%

11%

7%

19%

33%

41%

5%

27%

45%

23%

8%

47%

37%

5%

2%

≥13

10-12

7-9

4-6

0-3

50%

29%

60%

59%

58%

66%

41% 57% 68%Yes

Yes

45%

39%

52%

54%

51%

53%

44% 44% 63%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

16%

29%

37%

18%

1%

21%

44%

31%

3%

1%

20%

41%

33%

6%

0-3

4-6

7-9

10-12

≥13


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)≥10

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

0%

36%

4%

7%

0%

14%

4%

5%

7%

23%

1%

12%

8%

3%

2%

34%

2%

2%

8%

8%

6%

Other titles


legal officer

chiefoperating

officer


8%

3%

3%

7%

1%

2%

8%

1%


Chiefoperating

officerGeneral


Other titles

2011

Survey results show that small- and mid-cap companies are “catching up” with the large-cap companies on implementing majority vote standards. While there has been little change in results of large-cap company research with 76% of companies having a majority vote standard in place, there is at least a 20% increase since 2008 among the small- and mid-cap companies. There is only minimal variation among the financial and non-financial services companies.

11%

4%

5%

4%

21%

23%

30%

2%

3%

3%

10%

5%

24%

28%

27%

9%

8%

11%

15%

25%

30%

2%

19%

4%

7%

11%

19%

15%

22%

4%

24%

6%

8%

13%

23%

15%

8%

2%

31%

8%

15%

19%

17%

8%

2%

9

8

7

6

5

4

≤ 3

74%

26%

61%

39%

64%

36%

38%

62%

66%

34%

62%

38%

48%

52%

58%

42%

86%

14%

Electedannually


Electedannually


95%

77%

99%

90%

98%

92%

100% 97% 100%Yes

Yes

13%

8%

11%

11%

11%

5%

42%

2%

7%

14%

23%

16%

10%

7%

21%

2%

8%

13%

20%

15%

10%

6%

26%

≤3

4

5

6

7

8

9

≥10

16%

23%

4%

46%

6%

45%

3%14%Yes

Yes

66%

18%

41%

61%

39%

59%

62%

74%

76%Yes

Yes

4%37%

46%

13%

3%

22%

50%

22%

3%

11%

45%

32%

11%

7%

19%

33%

41%

5%27%

45%

23%

8%

47%

37%

5%

2%

≥13

10-12

7-9

4-6

0-3

50%

29%

60%

59%

58%

66%

41% 57% 68%Yes

Yes

45%

39%

52%

54%

51%

53%

44% 44% 63%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

16%

29%

37%

18%

1%

21%

44%

31%

3%

1%

20%

41%

33%

6%

0-3

4-6

7-9

10-12

≥13


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)≥10

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

0%

36%

4%

7%

0%

14%

4%

5%

7%

23%

1%

12%

8%

3%

2%

34%

2%

2%

8%

8%

6%

Other titles


legal officer

chiefoperating

officer


8%

3%

3%

7%

1%

2%

8%

1%


Chiefoperating

officerGeneral


Other titles

2011


24


Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




53%

32%

59%

64%

52%

63%

62%

68%

62%

Yes

Yes

2011 (n=173)

2011

2008 (n=229)


2011 (n=174)

2011

2008 (n=229)

2011

2011

2008 (n=229)

79%

52%

81%

78%

71%

78%

78%

83%

77%

Yes

Yes


2011

2011

2011

2011

37%

20%

33%

69%

58%

65%

62%

77%

72%

Yes

Yes


92%

78%

84%

82%

86%

95%Yes

Yes


71%

44%

69%

69%

70%

82%Yes

Yes

Sub-question 7a, not shown, applied to those that had a mandatory retirement policy and asked the age in which directors would need to retire. This question was also asked in 2008.

The most common retirement age for directors among all company sizes is 72, with 58%, 53%, and 53% for small-, mid-, and large-cap companies, respectively. When compared to 2008, this represents only a 2% increase in director retirement age of large-cap companies, but a 26% and an 18% increase for small- and mid-cap companies, respectively.

Fewer large-cap companies (15%) have set the retirement age at age 70 or younger, compared to 2008 (34%). No companies set the retirement age at 75 in 2008; however, in 2011, 28% of large-cap, of 13% mid-cap, and of 25% small-cap companies set the retirement age at 75.

There was no notable distinction in results between the financial and non-financial services companies.


Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




53%

32%

59%

64%

52%

63%

62%

68%

62%

Yes

Yes

2011 (n=173)

2011

2008 (n=229)


2011 (n=174)

2011

2008 (n=229)

2011

2011

2008 (n=229)

79%

52%

81%

78%

71%

78%

78%

83%

77%

Yes

Yes


2011

2011

2011

2011

37%

20%

33%

69%

58%

65%

62%

77%

72%

Yes

Yes


92%

78%

84%

82%

86%

95%Yes

Yes


71%

44%

69%

69%

70%

82%Yes

Yes

19%, 16%, and 5% of small-, mid-, and large-cap respondents, respectively, answered “No”, and 4%, 2%, and 0% of small-, mid-, and large-cap respondents, respectively, answered “Not Applicable”.

13%,14%, and 8% of all public, non-financial services, and financial services companies, respectively, answered “No”, and 2%, 2%, and 0% of all public, non-financial services, and financial services companies answered, respectively, “Not Applicable”.

Required retirement age

Director ageSmall-cap Mid-cap Large-cap

2011 2008 2011 2008 2011 2008≤ 70 17% 42% 23% 34% 15% 34%

71 0% 11% 2% 6% 0% 0%72 58% 32% 53% 35% 53% 51%73 0% 0% 5% 8% 0% 5%74 0% 16% 0% 18% 4% 10%75 25% 0% 13% 0% 28% 0%78 0% 0% 2% 0% 0% 0%

Other 0% 0% 2% 0% 0% 0%



According to the proxy statement research, companies are increasing the number of independent directors on their boards. More companies, small-cap companies in particular, now have 10-12 independent directors on their boards now, as compared to 2008.

11%

4%

5%

4%

21%

23%

30%

2%

3%

3%

10%

5%

24%

28%

27%

9%

8%

11%

15%

25%

30%

2%

19%

4%

7%

11%

19%

15%

22%

4%

24%

6%

8%

13%

23%

15%

8%

2%

31%

8%

15%

19%

17%

8%

2%

9

8

7

6

5

4

≤ 3

74%

26%

61%

39%

64%

36%

38%

62%

66%

34%

62%

38%

48%

52%

58%

42%

86%

14%

Electedannually


Electedannually


95%

77%

99%

90%

98%

92%

100% 97% 100%Yes

Yes

13%

8%

11%

11%

11%

5%

42%

2%

7%

14%

23%

16%

10%

7%

21%

2%

8%

13%

20%

15%

10%

6%

26%

≤3

4

5

6

7

8

9

≥10

16%

23%

4%

46%

6%

45%

3%14%Yes

Yes

66%

18%

41%

61%

39%

59%

62%

74%

76%Yes

Yes

4%

37%

46%

13%

3%

22%

50%

22%

3%

11%

45%

32%

11%

7%

19%

33%

41%

5%

27%

45%

23%

8%

47%

37%

5%

2%

≥13

10-12

7-9

4-6

0-3

50%

29%

60%

59%

58%

66%

41% 57% 68%Yes

Yes

45%

39%

52%

54%

51%

53%

44% 44% 63%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

16%

29%

37%

18%

1%

21%

44%

31%

3%

1%

20%

41%

33%

6%

0-3

4-6

7-9

10-12

≥13


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)≥10

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

0%

36%

4%

7%

0%

14%

4%

5%

7%

23%

1%

12%

8%

3%

2%

34%

2%

2%

8%

8%

6%

Other titles


legal officer

chiefoperating

officer


8%

3%

3%

7%

1%

2%

8%

1%


Chiefoperating

officerGeneral


Other titles

2011Board selection, recruitment and composition

26

Independent chairmanBoard leadership structure has gained significant attention in recent years. Effective for the 2010 proxy season, the SEC Proxy Disclosure Enhancements require a company to disclose whether and why it has chosen to combine or separate the CEO and board chairman positions, and why such a structure is most appropriate for the company. The company must also disclose the role of the lead indepen-dent director, if there is one.

The majority (63%) of large-cap companies combine the CEO/ board chairman position, and 44% and 44% of small- and of mid-cap companies, respectively, do. Of those with a separate board chairman, fewer than 8% of the

participants reported that the independent chairman is also chairman of the nominating and governance committee. But, many said that their policy would not restrict the same individual from holding both positions. It is also worth noting that of the companies with an independent chairman, the majority of companies reported that they do not have a mechanism, such as a rotation policy or term limits, to rotate individuals serving in this role.

When an evaluation of the independent chairman is performed, it is typically done by either the nominating and governance committee or the full board.

11%

4%

5%

4%

21%

23%

30%

2%

3%

3%

10%

5%

24%

28%

27%

9%

8%

11%

15%

25%

30%

2%

19%

4%

7%

11%

19%

15%

22%

4%

24%

6%

8%

13%

23%

15%

8%

2%

31%

8%

15%

19%

17%

8%

2%

9

8

7

6

5

4

≤ 3

74%

26%

61%

39%

64%

36%

38%

62%

66%

34%

62%

38%

48%

52%

58%

42%

86%

14%

Electedannually


Electedannually


95%

77%

99%

90%

98%

92%

100% 97% 100%Yes

Yes

13%

8%

11%

11%

11%

5%

42%

2%

7%

14%

23%

16%

10%

7%

21%

2%

8%

13%

20%

15%

10%

6%

26%

≤3

4

5

6

7

8

9

≥10

16%

23%

4%

46%

6%

45%

3%14%Yes

Yes

66%

18%

41%

61%

39%

59%

62%

74%

76%Yes

Yes

4%

37%

46%

13%

3%

22%

50%

22%

3%

11%

45%

32%

11%

7%

19%

33%

41%

5%

27%

45%

23%

8%

47%

37%

5%

2%

≥13

10-12

7-9

4-6

0-3

50%

29%

60%

59%

58%

66%

41% 57% 68%Yes

Yes

45%

39%

52%

54%

51%

53%

44% 44% 63%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

16%

29%

37%

18%

1%

21%

44%

31%

3%

1%

20%

41%

33%

6%

0-3

4-6

7-9

10-12

≥13


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)≥10

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

0%

36%

4%

7%

0%

14%

4%

5%

7%

23%

1%

12%

8%

3%

2%

34%

2%

2%

8%

8%

6%

Other titles


legal officer

chiefoperating

officer


8%

3%

3%

7%

1%

2%

8%

1%


Chiefoperating

officerGeneral


Other titles

2011

Since the 2008 study, 10% more large-cap and 5% more small-cap companies are combining the role of chairman and CEO. A higher percentage of small-cap companies also have a separate position for the lead director since 2008, according to the proxy statement analysis.

Additional informationTo learn more about the role of the independent chairman, read the Deloitte Center for Corporate Governance publication “Board leadership: A global perspective", available at www.corpgov.deloitte.com.

Board leadership:A global perspective

May 2011

Independent chairman

http://www.corpgov.deloitte.com/site/us/board-governance/roles-and-responsibilities/


8. Is the independent board chairman also the chairman of the nominating and governance committee?

Small-cap

Mid-cap

Large-cap




9. Who is responsible for the periodic evaluation and development of the independent chairman?

Small-cap

Mid-cap

Large-cap




33%

4%

52%

11%

49%

5%

38%

9%

67%

3%

25%

5%

Our policy does not permit thesame individual from holding

both positions

No, but our policy would notrestrict the same individualfrom holding both positions

The independent boardchairman is also the chairman

of the nominating andgovernance committee

11%

42%

42%

7%

34%

55%

8%

35%

53%Not applicable have an independent chairman


both positions




— we do not

5% 4% 4%

Not applicable — we do not have an independent chairman

37%

15%

15%

19%

1%

20%

13%

10%

10%

12%

No formal evaluation isperformed

Another committee

The full board

The nominating andgovernance committee

32%

3%

16%

8%

15%

16%

14%

19%

1%

16%

13%


Another committee

The full board


10. How often is periodic evaluation of the independent chairman performed?

Small-cap

Mid-cap

Large-cap




44%

4%

19%

23%

6%

24%

12%

20%

No formalevaluation is

performed

Periodically,as needed

Annually

34%

3%

21%

19%

4%

22%

22%

3%

22%


performed


Annually

11. Does your policy specify a rotation policy or term limit for the independent chair?

Small-cap

Mid-cap

Large-cap




67% 45%

3%

1%

28%

2%

2%

Neither

Term limit

Rotationpolicy

45%

8%

42%

1%

1%

43%

2%

1%

Neither

Term limit

Rotationpolicy

2011 (n=175)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011

2011

2011


28


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




33%

4%

52%

11%

49%

5%

38%

9%

67%

3%

25%

5%


both positions




11%

42%

42%

7%

34%

55%

8%

35%



both positions




— we do not

5% 4% 4%


37%

15%

15%

19%

1%

20%

13%

10%

10%

12%


Another committee

The full board


32%

3%

16%

8%

15%

16%

14%

19%

1%

16%

13%


Another committee

The full board



Small-cap

Mid-cap

Large-cap




44%

4%

19%

23%

6%

24%

12%

20%


performed


Annually

34%

3%

21%

19%

4%

22%

22%

3%

22%


performed


Annually


Small-cap

Mid-cap

Large-cap




67% 45%

3%

1%

28%

2%

2%

Neither

Term limit

Rotationpolicy

45%

8%

42%

1%

1%

43%

2%

1%

Neither

Term limit

Rotationpolicy

2011 (n=175)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011

2011

2011

33%, 47%, and 68% of small-, mid-, and large-cap respondents answered, respectively, “Not applicable - we do not have an independent chairman” to this question.

52%, 55%, and 42% of all public, non-financial services, and financial services companies answered, respectively, “Not applicable - we do not have an independent chairman” to this question.

33%, 48%, and 68% of small-, mid-, and large-cap respondents, respectively, answered “Not applicable - we do not have an independent chairman” to this question.

53%, 55%, and 42% of all public, non-financial services, and financial services companies, respectively, answered “Not applicable - we do not have an independent chairman” to this question.




Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




33%

4%

52%

11%

49%

5%

38%

9%

67%

3%

25%

5%


both positions




11%

42%

42%

7%

34%

55%

8%

35%



both positions




— we do not

5% 4% 4%


37%

15%

15%

19%

1%

20%

13%

10%

10%

12%


Another committee

The full board


32%

3%

16%

8%

15%

16%

14%

19%

1%

16%

13%


Another committee

The full board



Small-cap

Mid-cap

Large-cap




44%

4%

19%

23%

6%

24%

12%

20%


performed


Annually

34%

3%

21%

19%

4%

22%

22%

3%

22%


performed


Annually


Small-cap

Mid-cap

Large-cap




67% 45%

3%

1%

28%

2%

2%

Neither

Term limit

Rotationpolicy

45%

8%

42%

1%

1%

43%

2%

1%

Neither

Term limit

Rotationpolicy

2011 (n=175)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011

2011

2011

33%, 51%, and 68% of small-, mid-, and large-cap respondents, respectively, answered “Not applicable - we do not have an independent chairman” to this question.

54%, 55%, and 47% of all public, non-financial services, and financial services companies, respectively, answered “Not applicable - we do not have an independent chairman” to this question.


30

Board meetings and materials

Board meetings and materialsShareholder proposals on shareholder rights to call special meetings have been frequent ballot items in recent years. This year, survey results show that 52% of small-cap companies, 44% of mid-cap companies, and 61% of large-cap companies provide such rights, mostly with a minimum ownership threshold.

Unlike the small- and mid-cap companies, the majority of large-cap companies allow shareholders with a certain ownership threshold to call special meetings. Sub-question 12a, not shown, asked respondents to provide an ownership threshold, and results varied across all company sizes and industry types, as shown in the table on page 31. The most common threshold across all companies was 25% followed by 10%.

Board meetings are lengthening. Fewer companies are meeting for 1-2 hours, compared to 2008. Instead, 58%

of boards are meeting for 3-5 hours across all company types, and another 38% are meeting for 6 or more hours. Meeting length varied little between companies in the non-financial services and financial services industries.

In addition, boards are meeting more frequently; 19% of small-cap, 24% of mid-cap, and 31% of large-cap companies, reported 10 or more board meetings in 2011. In 2008, the percentages were 11% of small-cap, 3% of mid-cap, and 9% of large-cap met that frequently.

More boards across all company types are sending materials 5-10 days in advance of meetings, as compared to 5 days or fewer in 2008.


2%

20%

70%

2%

45%

53%

3%

7%

32%

66%

48%

52%

3%

63%

34%

0%

60%

40%

No agenda/background information distributed

prior to meeting

More than ten business days before meeting

Between five to ten business days before meeting

At most five business days before meeting

12. Does your company permit shareholders to call special shareholder meetings?

Small-cap

Mid-cap

Large-cap




48%

26%

26%

56%

37%

7%

38%

58%

3%

No

Permitted but withminimum ownership

threshold percentages

Permitted without anyrestriction

45%

47%

8%

50%

41%

9%

49%

43%

9%

No




13. How many hours does a typical board meeting last? (Do not count time spent on committee meetings on a board meeting day).

Small-cap

Mid-cap

Large-cap




2%

5%

21%

57%

16%

3%

3%

28%

62%

4%

4%

6%

20%

64%

5%

4%

27%

63%

4%

2%

9%

31%

53%

5%

3%

5%

30%

63%

2%

More than10 hours

9-10 hours

6-8 hours

3-5 hours

1-2 hours

3%

21%

66%

8%

2%

8%

32%

56%

2%

2%

7%

29%

58%

3%

3%

More than10 hours

9-10 hours

6-8 hours

3-5 hours

1-2 hours

2011 (n=174)

2008 (n=229)

2011 (n=174)

2011

2011

2011

2011

2011

2008 (n=229)

2011 (n=174)

2008 (n=229)

2011 (n=174)

2008 (n=229)

2011 (n=174)

2008 (n=229)

14. How far in advance are board meeting materials provided to board members?

Small-cap

Mid-cap

Large-cap

Financial Services (n=38)

Non-Financial Services (n=135)

All Public Companies (n=173)

2011 (n=173)

2008 (n=229)

2011 (n=173)

2011

2011

2011

2011

2008 (n=229)

2011 (n=173)

2008 (n=229)

2011 (n=173)

2008 (n=229)

58%

42%

2%

0%

60%

38%

2%

60%

39%




2011 (n=171)

2011 (n=171)

2011 (n=171)

2011

2011

2011


prior to meeting


Ownership threshold

Small-cap Mid-cap Large-capFinancial services

Non-financial services

All public companies

<10% 0% 0% 3% 0% 2% 1%

10% 50% 23% 15% 17% 23% 21%

15% 0% 0% 3% 0% 2% 1%

20% 0% 15% 12% 17% 11% 11%

25% 17% 23% 55% 50% 34% 39%

33% 0% 4% 0% 0% 2% 1%

50% 0% 12% 6% 0% 11% 7%

≥50.1% 33% 19% 0% 17% 9% 11%

Other 0% 4% 6% 0% 6% 6%

32

Committee structures and roles

2%

20%

70%

2%

45%

53%

3%

7%

32%

66%

48%

52%

3%

63%

34%

0%

60%

40%


prior to meeting





Small-cap

Mid-cap

Large-cap




48%

26%

26%

56%

37%

7%

38%

58%

3%

No




45%

47%

8%

50%

41%

9%

49%

43%

9%

No





Small-cap

Mid-cap

Large-cap




2%

5%

21%

57%

16%

3%

3%

28%

62%

4%

4%

6%

20%

64%

5%

4%

27%

63%

4%

2%

9%

31%

53%

5%

3%

5%

30%

63%

2%

More than10 hours

9-10 hours

6-8 hours

3-5 hours

1-2 hours

3%

21%

66%

8%

2%

8%

32%

56%

2%

2%

7%

29%

58%

3%

3%

More than10 hours

9-10 hours

6-8 hours

3-5 hours

1-2 hours

2011 (n=174)

2008 (n=229)

2011 (n=174)

2011

2011

2011

2011

2011

2008 (n=229)

2011 (n=174)

2008 (n=229)

2011 (n=174)

2008 (n=229)

2011 (n=174)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011 (n=173)

2008 (n=229)

2011 (n=173)

2011

2011

2011

2011

2008 (n=229)

2011 (n=173)

2008 (n=229)

2011 (n=173)

2008 (n=229)

58%

42%

2%

0%

60%

38%

2%

60%

39%




2011 (n=171)

2011 (n=171)

2011 (n=171)

2011

2011

2011


prior to meeting



Since 2008, significantly more mid- and large-cap company boards met 10 times or more annually. This surge could possibly be attributed to the financial crisis which increased the need for board involve-ment in and oversight of various company matters. The proxy research analysis revealed that 26% of all public companies met at least 10 times a year, and another 31% met either 7, 8, or 9 times in 2011.

11%

4%

5%

4%

21%

23%

30%

2%

3%

3%

10%

5%

24%

28%

27%

9%

8%

11%

15%

25%

30%

2%

19%

4%

7%

11%

19%

15%

22%

4%

24%

6%

8%

13%

23%

15%

8%

2%

31%

8%

15%

19%

17%

8%

2%

9

8

7

6

5

4

≤ 3

74%

26%

61%

39%

64%

36%

38%

62%

66%

34%

62%

38%

48%

52%

58%

42%

86%

14%

Electedannually


Electedannually


95%

77%

99%

90%

98%

92%

100% 97% 100%Yes

Yes

13%

8%

11%

11%

11%

5%

42%

2%

7%

14%

23%

16%

10%

7%

21%

2%

8%

13%

20%

15%

10%

6%

26%

≤3

4

5

6

7

8

9

≥10

16%

23%

4%

46%

6%

45%

3%14%Yes

Yes

66%

18%

41%

61%

39%

59%

62%

74%

76%Yes

Yes

4%

37%

46%

13%

3%

22%

50%

22%

3%

11%

45%

32%

11%

7%

19%

33%

41%

5%

27%

45%

23%

8%

47%

37%

5%

2%

≥13

10-12

7-9

4-6

0-3

50%

29%

60%

59%

58%

66%

41% 57% 68%Yes

Yes

45%

39%

52%

54%

51%

53%

44% 44% 63%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

16%

29%

37%

18%

1%

21%

44%

31%

3%

1%

20%

41%

33%

6%

0-3

4-6

7-9

10-12

≥13


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)≥10

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

0%

36%

4%

7%

0%

14%

4%

5%

7%

23%

1%

12%

8%

3%

2%

34%

2%

2%

8%

8%

6%

Other titles


legal officer

chiefoperating

officer


8%

3%

3%

7%

1%

2%

8%

1%


Chiefoperating

officerGeneral


Other titles

2011

34

2%

20%

70%

2%

45%

53%

3%

7%

32%

66%

48%

52%

3%

63%

34%

0%

60%

40%


prior to meeting





Small-cap

Mid-cap

Large-cap




48%

26%

26%

56%

37%

7%

38%

58%

3%

No




45%

47%

8%

50%

41%

9%

49%

43%

9%

No





Small-cap

Mid-cap

Large-cap




2%

5%

21%

57%

16%

3%

3%

28%

62%

4%

4%

6%

20%

64%

5%

4%

27%

63%

4%

2%

9%

31%

53%

5%

3%

5%

30%

63%

2%

More than10 hours

9-10 hours

6-8 hours

3-5 hours

1-2 hours

3%

21%

66%

8%

2%

8%

32%

56%

2%

2%

7%

29%

58%

3%

3%

More than10 hours

9-10 hours

6-8 hours

3-5 hours

1-2 hours

2011 (n=174)

2008 (n=229)

2011 (n=174)

2011

2011

2011

2011

2011

2008 (n=229)

2011 (n=174)

2008 (n=229)

2011 (n=174)

2008 (n=229)

2011 (n=174)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011 (n=173)

2008 (n=229)

2011 (n=173)

2011

2011

2011

2011

2008 (n=229)

2011 (n=173)

2008 (n=229)

2011 (n=173)

2008 (n=229)

58%

42%

2%

0%

60%

38%

2%

60%

39%




2011 (n=171)

2011 (n=171)

2011 (n=171)

2011

2011

2011


prior to meeting



15. What is the most common form of board meetings for your organization?

Small-cap

Mid-cap

Large-cap




16. How often do you hold board meetings outside of the country in which your company is headquartered?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

7%7%

11%

74%

3%

2%

94%

2%

2%

7%

90%

Tele-conference calls

Live, face-to-facemeetings with some

directors attending viaweb-conference or

video conference


directors attending viatelephone

Live, face-to-facemeetings

82%

13%

5%

92%

3%

2%

3%

90%

5%

2%

3%






video conference


89%

7%

4%

69%

27%

1%

2%

58%

35%

7%

We do not hold boardmeetings outside ofthe country in which

our company isheadquartered

Rarely (once a year)

Sometimes (two tofour times a year)

Frequently (five ormore times a year)

79%

18%

3%

66%

29%

4%

1%

69%

27%

3%

1%






2011

2011

17. Do you make company owned aircraft available to directors for travel to meetings?

Small-cap

Mid-cap

Large-cap




21%

11%

37%

18%

33%

66%Yes

Yes

2011 (n=174)

2011

2011

2011

18. What amount of reimbursement does your company provide to directors for travel to meetings?

Small-cap

Mid-cap

Large-cap




87%

93%

97%

97%

95%

93%Fullreimbursment

Fullreimbursment


36


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

7%7%

11%

74%

3%

2%

94%

2%

2%

7%

90%




video conference




82%

13%

5%

92%

3%

2%

3%

90%

5%

2%

3%






video conference


89%

7%4%

69%

27%

1%

2%

58%

35%

7%






79%

18%

3%

66%

29%

4%

1%

69%

27%

3%

1%






2011

2011


Small-cap

Mid-cap

Large-cap




21%

11%

37%

18%

33%

66%Yes

Yes

2011 (n=174)

2011

2011

2011


Small-cap

Mid-cap

Large-cap




87%

93%

97%

97%

95%

93%Fullreimbursment

Fullreimbursment




Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

7%7%

11%

74%

3%

2%

94%

2%

2%

7%

90%




video conference




82%

13%

5%

92%

3%

2%

3%

90%

5%

2%

3%






video conference


89%

7%

4%

69%

27%

1%

2%

58%

35%

7%






79%

18%

3%

66%

29%

4%

1%

69%

27%

3%

1%






2011

2011


Small-cap

Mid-cap

Large-cap




21%

11%

37%

18%

33%

66%Yes

Yes

2011 (n=174)

2011

2011

2011


Small-cap

Mid-cap

Large-cap




87%

93%

97%

97%

95%

93%Fullreimbursment

Fullreimbursment

19%, 40%, and 22% of small-, mid-, and large-cap respondents, respectively, answered “No”, and 70%, 42%, and 12% of small-, mid-, and large-cap respondents, respectively, answered “Not Applicable”.

30%, 30%, and 32% of all public, non-financial services, and financial services companies, respectively, answered “No”, and 36%, 33%, and 47% of all public, non-financial services, and financial services companies, respectively, answered “Not Applicable”.

0%, 1%, and 3% of small-, mid-, and large-cap respondents, respectively, answered “Partial reimbursement”, and 7%, 2%, and 3% of small-, mid-, and large-cap respondents, respec-tively, answered “None”.

2%, 1%, and 3% of all public, non-financial services, and financial services companies, respectively, answered “Partial reimbursement”, and 2%, 1%, and 11% of all public, non-financial services, and financial services companies, respectively, answered “None”.


38

Committee structures and rolesAcross all public companies, regardless of size or industry, most respondents indicated that their boards had 3-5 standing committees. Twenty-one percent (21%) of financial services companies had more than 5 standing committees, compared to 8% of non-financial services companies. The four most common committees were the audit, compensation, nominating/ corporate governance, and executive. Among respondents who indicated another committee, the finance committee was the most common response. This committee was associated with only mid- and large-cap respondents and was most prevalent among non-financial services companies.

As depicted in the table for question 20:•Therewerenosmall-caporfinancialservicescompanies

with an environmental committee. Also, no small-cap companies had a corporate responsibility committee. There were notable differences in the frequency of committee meetings between financial services and non-financial services companies.

•Asidefromtheauditcommittee,forwhichcertaincommunications are required, the auditor was in attendance at only the risk committee and disclosure committee meetings.

In comparison to 2008, fewer boards, in particular mid-and large-cap companies, are placing the responsibility for appointing committee members and chairs with the board chair or lead director. At the majority of all public companies, this is the responsibility of the nominating/ corporate governance committee or the full board.

Across all public companies, no more than 23% have a policy to rotate committee members or chairs, which is consistent with 2008 results. With regard to whether boards have limits on audit committee members partici-pating on the audit committees of other boards, 65% of small-cap companies have such a limit, a notable increase from the 2008 results, in which 14% set such limits. Both mid- and large-cap companies also reported increases.

Of the respondents who stated that they have limits, 43% limited it to 2 additional audit committees, and 42% permitted 3. A few other responses deferred to the limits set by the NYSE or the SEC.


19. How many standing committees does your board have?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

11%

85%

4%

8%

91%

1%

15%

85%

Morethanfive

Threeto five

Two orless

21%

79%

8%

91%

1%

11%

88%

1%

Morethanfive

Threeto five

Two orless

21. Which of the following has the primary responsibility for appointing committee members and chairs?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

9%

36%

55%

7%

54%

39%

6%

60%

34%

4%

7%

44%

44%

2%

0%

3%

51%

43%

5%

2%

47%

47%

Other

Boardchair/ lead

director

Nominating/corporate

governancecommittee

Full board

34%

53%

8%

5%

47%

47%

2%

3%

45%

49%

3%

3%

Full board


governancecommittee

Boardchair/ lead

director

Other

22. Does your board have a policy to rotate committee chairs?

Small-cap

Mid-cap

Large-cap




16%

14%

24%

22%

23%

34%

19% 18% 31%

Yes

Yes

2008 (n=229)

2011 (n=173)

2011

23. Does your board have a policy to rotate committee membership?

Small-cap

Mid-cap

Large-cap




2008 (n=229)

2011 (n=173)

2011 16%

4%

21%

21%

20%

28%

11% 20% 25%

Yes

Yes

24. Does your board have limits on audit committee members being able to participate on other organizations' audit committees?

Small-cap

Mid-cap

Large-cap




2008 (n=229)

2011 (n=174)

2011 55%

14%

50%

36%

51%

42%

65% 52% 57%

Yes

Yes


CommitteeCommittee

sizeSmall–

capMid– cap

Large– cap

Financial services

Non- financial services



1-4 19/73% 54/62% 30/50% 20/53% 83/61% 103/60%

5-9 7/27% 33/38% 30/50% 18/47% 52/39% 70/40%

≥10 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Audit committee

1-4 20/77% 54/62% 31/52% 17/45% 88/65% 105/61%

5-9 6/23% 32/37% 29/48% 20/53% 47/35% 67/39%

≥10 0/0% 1/1% 0/0% 1/3% 0/0% 1/1%

Nominating/ corporate governance committee

1-4 17/65% 62/71% 29/49% 21/55% 87/65% 108/63%

5-9 9/35% 24/28% 30/51% 17/45% 46/34% 63/37%

≥10 0/0% 1/1% 0/0% 0/0% 1/1% 1/1%

Executive committee

1-4 8/62% 16/52% 7/41% 11/48% 20/53% 31/51%

5-9 5/38% 12/39% 9/53% 8/35% 18/47% 26/43%

≥10 0/0% 3/10% 1/6% 4/17% 0/0% 4/7%

Risk committee

1-4 1/50% 3/30% 2/25% 3/27% 3/33% 6/30%

5-9 1/50% 7/70% 6/75% 8/73% 6/67% 14/70%

≥10 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


1-4 0/0% 6/86% 2/25% 0/0% 8/53% 8/53%

5-9 0/0% 1/14% 6/75% 0/0% 7/47% 7/47%

≥10 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Strategy committee

1-4 2/100% 1/25% 0/0% 1/33% 2/40% 8/53%

5-9 0/0% 3/75% 1/50% 1/33% 3/60% 7/47%

≥10 0/0% 0/0% 1/50% 1/33% 0/0% 0/0%

Corporate responsibility committee

1-4 0/0% 1/50% 3/50% 1/33% 3/60% 4/50%

5-9 0/0% 1/50% 3/50% 2/67% 2/40% 4/50%

≥10 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Disclosure committee

1-4 1/33% 1/100% 0/0% 1/50% 1/20% 2/29%

5-9 1/33% 0/0% 2/67% 1/50% 2/40% 3/43%

≥10 1/33% 0/0% 1/33% 0/0% 2/40% 2/29%


1-4 1/100% 2/100% 1/25% 2/67% 2/50% 4/57%

5-9 0/0% 0/0% 3/75% 1/33% 2/50% 3/43%

≥10 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

20. Please complete the following table with regard to the specific committee practices of your boardNote: For each committee in the following tables, the count of respondents (n value) and this percentage of the total count of respondents for the committee is provided as “n value/ percentage”. Committees are listed in descending order by count of “All public companies” respondents as it pertains to a given category.

Number of Members


40

Committee


Small– cap

Mid– cap

Large– cap

Financial services



Audit committee

1-6 17/65% 33/38% 17/29% 14/38% 53/40% 67/39%

7-11 7/27% 46/53% 35/60% 17/46% 71/53% 88/52%

≥12 2/8% 7/8% 6/10% 6/16% 9/7% 15/9%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


1-6 20/77% 77/90% 39/68% 28/76% 108/82% 136/80%

7-11 4/15% 9/10% 14/25% 4/11% 23/17% 27/16%

≥12 1/4% 0/0% 3/5% 3/8% 1/1% 4/2%

Other 1/4% 0/0% 1/2% 2/5% 0/0% 2/1%


1-6 25/96% 85/99% 49/89% 33/92% 126/96% 159/95%

7-11 0/0% 1/1% 6/11% 2/6% 5/4% 7/4%

≥12 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 1/4% 0/0% 0/0% 1/3% 0/0% 1/1%

Executive committee

1-6 7/58% 7/30% 5/50% 10/45% 9/39% 19/42%

7-11 0/0% 1/4% 1/10% 2/9% 0/0% 2/4%

≥12 0/0% 2/9% 0/0% 2/9% 0/0% 2/4%

Other 5/42% 13/57% 4/40% 8/36% 14/61% 22/49%

Risk committee

1-6 2/100% 6/60% 6/86% 7/78% 7/70% 14/74%

7-11 0/0% 3/30% 1/14% 2/22% 2/20% 4/21%

≥12 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 1/10% 0/0% 0/0% 1/10% 1/5%


1-6 0/0% 7/78% 8/100% 1/50% 14/93% 15/88%

7-11 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

≥12 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 2/22% 0/0% 1/50% 1/7% 2/12%


1-6 0/0% 2/50% 6/100% 3/75% 5/83% 8/80%

7-11 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

≥12 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 2/50% 0/0% 1/25% 1/17% 2/20%

Strategy committee

1-6 2/100% 3/50% 2/100% 3/75% 4/67% 7/70%

7-11 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

≥12 0/ 0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 3/50% 0/0% 1/25% 2/33% 3/30%


1-6 1/100% 2/50% 4/100% 3/75% 4/80% 7/78%

7-11 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

≥12 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 2/50% 0/0% 1/25% 1/20% 2/22%


1-6 3/100% 1/50% 1/33% 1/50% 4/67% 5/63%

7-11 0/0% 0/0% 2/67% 1/50% 1/17% 2/25%

≥12 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 1/50% 0/0% 0/0% 1/17% 1/13%

Meeting frequency



Committee

Average length of meetings

(hrs)Small–

capMid– cap

Large– cap

Financial services



Audit committee

0.5-1.5 10/38% 20/23% 10/17% 3/8% 37/28% 40/23%

2-3 14/54% 55/64% 45/76% 28/74% 86/65% 114/67%

>3 2/8% 10/12% 4/7% 7/18% 9/7% 16/9%

Other 0/0% 1/1% 0/0% 0/0% 1/1% 1/1%


0.5-1.5 11/42% 29/34% 19/33% 10/26% 49/37% 59/35%

2-3 14/54% 54/63% 37/64% 26/68% 79/60% 105/62%

>3 1/4% 3/3% 2/3% 2/5% 4/3% 6/4%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


0.5-1.5 19/73% 58/67% 32/56% 21/55% 88/67% 109/64%

2-3 7/27% 28/33% 24/42% 17/45% 42/32% 59/35%

>3 0/0% 0/0% 1/2% 0/0% 1/1% 1/1%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Executive committee

0.5-1.5 9/90% 9/60% 4/57% 13/68% 9/69% 22/69%

2-3 1/10% 5/33% 2/29% 6/32% 2/15% 8/25%

>3 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 1/7% 1/14% 0/0% 2/15% 2/6%

Risk committee

0.5-1.5 1/50% 4/40% 1/13% 2/18% 4/44% 6/30%

2-3 1/50% 6/60% 6/75% 8/73% 5/56% 13/65%

>3 0/0% 0/0% 1/13% 1/9% 0/0% 1/5%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


0.5-1.5 0/0% 4/57% 1/14% 0/0% 5/36% 5/36%

2-3 0/0% 3/43% 6/86% 0/0% 9/64% 9/64%

>3 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


0.5-1.5 0/0% 1/50% 5/83% 2/67% 4/80% 6/75%

2-3 0/0% 1/50% 1/17% 1/33% 1/20% 2/25%

>3 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Strategy committee

0.5-1.5 0/0% 1/25% 1/50% 1/33% 1/20% 2/25%

2-3 1/50% 2/50% 1/50% 2/67% 2/40% 4/50%

>3 1/50% 1/25% 0/0% 0/0% 2/40% 2/25%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


0.5-1.5 3/100% 0/0% 2/67% 1/50% 4/80% 5/71%

2-3 0/0% 1/100% 1/33% 1/50% 1/20% 2/29%

>3 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


0.5-1.5 0/0% 1/50% 1/33% 1/33% 1/33% 2/33%

2-3 1/100% 1/50% 2/67% 2/67% 2/67% 4/67%

>3 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

Other 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%



42

Committee

Auditor attendance in meetings

(Y/N)Small–

capMid– cap

Large– cap

Financial services



Audit committeeYes 57/100% 86/100% 26/100% 37/100% 132/100% 169/100%

No 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%


Yes 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

No 55/100% 80/100% 24/100% 35/100% 124/100% 159/100%


Yes 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

No 54/100% 79/100% 24/100% 35/100% 122/100% 157/100%

Executive committee

Yes 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

No 18/100% 24/100% 12/100% 21/100% 33/100% 54/100%

Risk committee

Yes 1/13% 0/0% 1/50% 2/22% 0/0% 2/11%

No 7/88% 8/100% 1/50% 7/78% 9/100% 16/89%


Yes 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

No 8/100% 6/100% 0/0% 1/100% 13/100% 14/100%

Strategy committee

Yes 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

No 4/100% 4/100% 2/100% 4/100% 6/100% 10/100%


Yes 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

No 7/100% 2/100% 0/0% 3/100% 6/100% 9/100%


Yes 0/0% 0/0% 0/0% 0/0% 0/0% 0/0%

No 5/100% 3/100% 1/100% 4/100% 5/100% 9/100%


Yes 1/25% 1/100% 0/0% 1/50% 1/20% 2/29%

No 3/75% 0/0% 2/100% 1/50% 4/80% 5/71%

Auditor attendance in meetings




Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

11%

85%

4%

8%

91%

1%

15%

85%

Morethanfive

Threeto five

Two orless

21%

79%

8%

91%

1%

11%

88%

1%

Morethanfive

Threeto five

Two orless


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

9%

36%

55%

7%

54%

39%

6%

60%

34%

4%

7%

44%

44%

2%

0%

3%

51%

43%

5%

2%

47%

47%

Other

Boardchair/ lead

director


governancecommittee

Full board

34%

53%

8%

5%

47%

47%

2%

3%

45%

49%

3%

3%

Full board


governancecommittee

Boardchair/ lead

director

Other


Small-cap

Mid-cap

Large-cap




16%

14%

24%

22%

23%

34%

19% 18% 31%

Yes

Yes

2008 (n=229)

2011 (n=173)

2011


Small-cap

Mid-cap

Large-cap




2008 (n=229)

2011 (n=173)

2011 16%

4%

21%

21%

20%

28%

11% 20% 25%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2008 (n=229)

2011 (n=174)

2011 55%

14%

50%

36%

51%

42%

65% 52% 57%

Yes

Yes


44


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

11%

85%

4%

8%

91%

1%

15%

85%

Morethanfive

Threeto five

Two orless

21%

79%

8%

91%

1%

11%

88%

1%

Morethanfive

Threeto five

Two orless


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

9%

36%

55%

7%

54%

39%

6%

60%

34%

4%

7%

44%

44%

2%

0%

3%

51%

43%

5%

2%

47%

47%

Other

Boardchair/ lead

director


governancecommittee

Full board

34%

53%

8%

5%

47%

47%

2%

3%

45%

49%

3%

3%

Full board


governancecommittee

Boardchair/ lead

director

Other


Small-cap

Mid-cap

Large-cap




16%

14%

24%

22%

23%

34%

19% 18% 31%

Yes

Yes

2008 (n=229)

2011 (n=173)

2011


Small-cap

Mid-cap

Large-cap




2008 (n=229)

2011 (n=173)

2011 16%

4%

21%

21%

20%

28%

11% 20% 25%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2008 (n=229)

2011 (n=174)

2011 55%

14%

50%

36%

51%

42%

65% 52% 57%

Yes

Yes



Audit committeeWith regard to audit committee meetings, two thirds of all public companies hold 1-4 in-person meetings each year, and one third hold 5-9 in-person meetings each year. In addition to these meetings, about 80% meet 1-4 times a year via conference call, and another 20% meet 5-9 times per year via conference call. According to 85% of the public company respondents, the number of audit committee meetings has not changed since last year. Only 6% of public company respondents indicated that audit committee meetings held by phone are considered different than in-person meetings for purposes of proxy disclosure.

At least 84% of audit committees met with management at all or almost all meetings. The majority of respondents said the members of management who typically attend audit committee meetings are the head of internal audit and the chief financial officer. Respondents across all company sizes and types indicated that other members of management, not included in the list of possible answer choices, were the chief audit officer, chief risk officer, and the controller.

One practice not widely utilized is inviting specialists to attend audit committee meetings. Such experts, such as those in the areas of mergers and acquisitions, tax, or

valuation, can provide additional insight beyond the level of what may normally be discussed. Survey results indicate that the audit committees of 28% of public companies never engage specialists for specific matters on their agenda, and 50% do rarely (once a year).

In the area of whistleblowing, 46% of small-cap, 71% of mid-cap, and 75% of large-cap company boards receive reports on compliance hotline tips at least 2 times a year. Twenty percent (20%) of the public companies get such reports once a year.

Only 22% of the financial services companies reported that their audit committees received reports on compliance hotline tips 5 or more times a year, compared with 39% of non-financial services companies. There is little difference between mid- and large-cap companies. In May 2011, the SEC adopted a program affecting rewards to whistle-blowers who voluntarily report certain information to the SEC. In light of these rules, it will be interesting to see the trends in coming years.

Additional informationTo learn more about audit committee roles and responsibilities, read the Deloitte Center for Corporate Governance publication “SEC sets final whistleblower rules“, available at www.corpgov.deloitte.com.

June 2011

Hot TopicsSEC Sets Final Whistleblower Rules

Copyright © 2011 Deloitte Development LLC. All rights reserved. Hot Topics—June 2011 • 1

The SEC, in an open meeting on May 25, 2011, approved final rules for implementing the whistleblower provisions in Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules passed by a vote of 3 to 2, with commissioners Kathleen Casey and Troy Paredes dissenting.

Background

This is not the first time that reporting suspected violations of securities laws has been addressed in regulations. The SEC has long been authorized to award whistleblowers for reporting insider trading violations. Regulations in this area have also focused on companies’ internal reporting systems. Specifically, Section 301 of the Sarbanes-Oxley Act and the securities market listing standards require the audit committees of listed companies to establish procedures for:

• Receiving, retaining, and addressing complaints regarding accounting, internal accounting controls, or auditing matters, whether from internal or external sources, as well as reporting a range of compliance matters, including code of conduct violations

• The confidential, anonymous submission of employee concerns regarding questionable accounting or auditing matters.

The Dodd-Frank Act gave the SEC enhanced authority to provide rewards throughextending the whistleblower rewards to any securities law violations and increasing the potential size of the rewards. In November 2010, the SEC proposed rules to implement the Whistleblower Incentives & Protection Program created in the Dodd-Frank Act. The SEC received numerous comment letters regarding the proposed rules, many of which expressed concern about potential unintended consequences. One common concern for the effectiveness of companies’ internal whistleblower systems and their compliance and ethics programs was that whistleblowers would bypass internal reporting systems in order to report externally to receive an award.

Final Rules

The SEC rules provide for rewards of 10 to 30 percent of monetary sanctions for whistleblowers who voluntarily report to the SEC original information leading to securities law enforcement actions that recover more than $1 million. In determining the $1 million threshold, several factors will be considered, including the potential aggregation of multiple sanctions arising from information provided by a single source.

Original Information

Original information is defined in the final rules as “information that is: (i) derived from the independent knowledge or independent analysis of the whistleblower; (ii) not already known to the [SEC] from any other source, unless the whistleblower is the original source of the information; (iii) not exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from

Audit committee

http://www.corpgov.deloitte.com/site/us/audit-committee/roles-and-responsibilities/

46

0%

12%

88%

19%

81%

25%

75%

10-14 timesper year

5-9 timesper year

1-4 timesper year

25. How often does the audit committee meet annually via:

a. In-person

b. By video or web conference

Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




2011 (n=171)

2011 (n=171)

2011 (n=171)

2011

2011

2011

2011 (n=2)

2011 (n=2)

2011 (n=2)

2011

2011

2011

5%

38%

57%

1%

30%

69%

2%

32%

66%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100% 100%

10-14 timesper year

5-9 timesper year

1-4 timesper year

c. By tele-conference calls

Small-cap

Mid-cap

Large-cap




26. How has the frequency of audit committee meetings changed since last year?

Small-cap

Mid-cap

Large-cap




27. Are audit committee meetings held by phone considered different than in-person meetings for purpose of proxy disclosure?

Small-cap

Mid-cap

Large-cap




2011 (n=141)

2011 (n=141)

2011 (n=141)

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011 0%

21%

79%

21%

79%

21%

79%

10-14 timesper year

5-9 timesper year

1-4 timesper year

88%

4%

8%

86%

6%

7%

1%

82%

5%

10%

3%

No change

Decreased

Increasedslightly

Increasedsubstantially

11%

11%

79%

2%

7%

4%

87%

2%

8%

5%

85%


Increasedslightly

Decreased

No change

5%

8%

6%

7%

6%

3%Yes

Yes

4%

19%

77%

2%

26%

72%

3%

46%

51%

10-14 timesper year

5-9 timesper year

1-4 timesper year

0%

12%

88%

19%

81%

25%

75%

10-14 timesper year

5-9 timesper year

1-4 timesper year


a. In-person


Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




2011 (n=171)

2011 (n=171)

2011 (n=171)

2011

2011

2011

2011 (n=2)

2011 (n=2)

2011 (n=2)

2011

2011

2011

5%

38%

57%

1%

30%

69%

2%

32%

66%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100% 100%

10-14 timesper year

5-9 timesper year

1-4 timesper year


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=141)

2011 (n=141)

2011 (n=141)

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011 0%

21%

79%

21%

79%

21%

79%

10-14 timesper year

5-9 timesper year

1-4 timesper year

88%

4%

8%

86%

6%

7%

1%

82%

5%

10%

3%

No change

Decreased

Increasedslightly


11%

11%

79%

2%

7%

4%

87%

2%

8%

5%

85%


Increasedslightly

Decreased

No change

5%

8%

6%

7%

6%

3%Yes

Yes

4%

19%

77%

2%

26%

72%

3%

46%

51%

10-14 timesper year

5-9 timesper year

1-4 timesper year

Audit committee

Only 2 participants responded to survey question 25b — one mid-cap company and one large-cap company. Results revealed that the audit committees of both companies meet annually via video or web conference 1-4 times a year.


0%

12%

88%

19%

81%

25%

75%

10-14 timesper year

5-9 timesper year

1-4 timesper year


a. In-person


Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




2011 (n=171)

2011 (n=171)

2011 (n=171)

2011

2011

2011

2011 (n=2)

2011 (n=2)

2011 (n=2)

2011

2011

2011

5%

38%

57%

1%

30%

69%

2%

32%

66%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100% 100%

10-14 timesper year

5-9 timesper year

1-4 timesper year


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=141)

2011 (n=141)

2011 (n=141)

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011 0%

21%

79%

21%

79%

21%

79%

10-14 timesper year

5-9 timesper year

1-4 timesper year

88%

4%

8%

86%

6%

7%

1%

82%

5%

10%

3%

No change

Decreased

Increasedslightly


11%

11%

79%

2%

7%

4%

87%

2%

8%

5%

85%


Increasedslightly

Decreased

No change

5%

8%

6%

7%

6%

3%Yes

Yes

4%

19%

77%

2%

26%

72%

3%

46%

51%

10-14 timesper year

5-9 timesper year

1-4 timesper year

Audit committee

48

0%

12%

88%

19%

81%

25%

75%

10-14 timesper year

5-9 timesper year

1-4 timesper year


a. In-person


Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




2011 (n=171)

2011 (n=171)

2011 (n=171)

2011

2011

2011

2011 (n=2)

2011 (n=2)

2011 (n=2)

2011

2011

2011

5%

38%

57%

1%

30%

69%

2%

32%

66%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100%

10-14 timesper year

5-9 timesper year

1-4 timesper year

100%

0%

0%

100% 100%

10-14 timesper year

5-9 timesper year

1-4 timesper year


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=141)

2011 (n=141)

2011 (n=141)

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011 0%

21%

79%

21%

79%

21%

79%

10-14 timesper year

5-9 timesper year

1-4 timesper year

88%

4%

8%

86%

6%

7%

1%

82%

5%

10%

3%

No change

Decreased

Increasedslightly


11%

11%

79%

2%

7%

4%

87%

2%

8%

5%

85%


Increasedslightly

Decreased

No change

5%

8%

6%

7%

6%

3%Yes

Yes

4%

19%

77%

2%

26%

72%

3%

46%

51%

10-14 timesper year

5-9 timesper year

1-4 timesper year

22%

43%

11%

16%

8%

39%

31%

22%

5%

3%

35%

34%

20%

8%

4%

Frequently(five or moretimes a year)

Sometimes(two to four

times a year)

Rarely(once a year)

Never

Don't know

28. Does your organization's audit committee hold a separate meeting to review the earnings release vs. quarterly reviews or are they combined?

Small-cap

Mid-cap

Large-cap




30. How often does your audit committee meet separately with management?

Small-cap

Mid-cap

Large-cap




31. Which members of management meet separately with the audit committee? (Check all that apply)

Small-cap

Mid-cap

Large-cap




32. How often does your company's audit committee engage specialists for specific matters on their agenda?

Small-cap

Mid-cap

Large-cap




33. How often does the audit committee receive reports on internal tips from a compliance hotline?

Small-cap

Mid-cap

Large-cap




29. How often do external auditors attend your company's audit committee meetings?

Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=173)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011

62%

38%

60%

40%

60%

40%

Combinedmeetings

Separatemeetings

45%

55%

38%

62%

40%

60%

Separatemeetings

Combinedmeetings

27%

73%

2%

11%

84%

2%

8%

90%

Rarely (one auditcommittee meeting a

year)

Sometimes (two to threeaudit committee

meetings a year)

Frequently (all or almostall audit committee

meetings)

82%

18%

85%

11%

2%

84%

13%

2%


meetings)Sometimes (two to three

audit committeemeetings a year)Rarely (one audit

committee meeting ayear)

31%

35%

73%

50%

35%

65%

11%

26%

85%

53%

49%

91%

25%

40%

73%

30%

57%

98%

Other

Chief complianceofficer


Chief executiveofficer

General counsel

Head of internalaudit

92%

50%

47%

61%

32%

24%

89%

50%

44%

84%

33%

18%

90%

50%

45%

79%

32%

19%


General counsel




Other

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011

2011

2011

2011

2011

12%

35%

42%

8%

4%

1%

20%

57%

22%

37%

43%

17%

3%

Don't know

Never



times a year)


5%

18%

47%

29%

1%

18%

51%

27%

3%

2%

18%

50%

28%

2%



times a year)

Rarely(once a year)

Never

Don't know

8%

23%

23%

19%

27%

2%

7%

20%

33%

38%

5%

2%

19%

41%

34%

Don't know

Never

Rarely(once a year)


times a year)


100%

100%

99%

99%

99%

98%Frequently (all

or almost allaudit committee

meetings)

Frequently (allor almost all

audit committeemeetings)

Audit committee


22%

43%

11%

16%

8%

39%

31%

22%

5%

3%

35%

34%

20%

8%

4%



times a year)

Rarely(once a year)

Never

Don't know


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=173)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011

62%

38%

60%

40%

60%

40%

Combinedmeetings

Separatemeetings

45%

55%

38%

62%

40%

60%

Separatemeetings

Combinedmeetings

27%

73%

2%

11%

84%

2%

8%

90%


year)


meetings a year)


meetings)

82%

18%

85%

11%

2%

84%

13%

2%





31%

35%

73%

50%

35%

65%

11%

26%

85%

53%

49%

91%

25%

40%

73%

30%

57%

98%

Other




General counsel


92%

50%

47%

61%

32%

24%

89%

50%

44%

84%

33%

18%

90%

50%

45%

79%

32%

19%


General counsel




Other

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011

2011

2011

2011

2011

12%

35%

42%

8%

4%

1%

20%

57%

22%

37%

43%

17%

3%

Don't know

Never



times a year)


5%

18%

47%

29%

1%

18%

51%

27%

3%

2%

18%

50%

28%

2%



times a year)

Rarely(once a year)

Never

Don't know

8%

23%

23%

19%

27%

2%

7%

20%

33%

38%

5%

2%

19%

41%

34%

Don't know

Never

Rarely(once a year)


times a year)


100%

100%

99%

99%

99%

98%Frequently (all


meetings)



1% and 2% of mid-, and large-cap respondents, respectively, answered “Sometimes (two to three audit committee meetings a year)”.

1% and 1% of all public and non-financial services companies, respectively, answered “Sometimes (two to three audit committee meetings a year)”.

Answer choices “Rarely (one audit committee meeting a year)”, “Never”, and “Don’t Know” received 0% responses across all company sizes, and across all public companies and industry types.

Answer choices “Never” and “Don’t Know” received 1% from mid-cap respondents.

Answer choices “Never” and “Don’t Know” received 1% of responses from both all public and non-financial services companies.

Audit committee

50

22%

43%

11%

16%

8%

39%

31%

22%

5%

3%

35%

34%

20%

8%

4%



times a year)

Rarely(once a year)

Never

Don't know


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=173)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011

62%

38%

60%

40%

60%

40%

Combinedmeetings

Separatemeetings

45%

55%

38%

62%

40%

60%

Separatemeetings

Combinedmeetings

27%

73%

2%

11%

84%

2%

8%

90%


year)


meetings a year)


meetings)

82%

18%

85%

11%

2%

84%

13%

2%





31%

35%

73%

50%

35%

65%

11%

26%

85%

53%

49%

91%

25%

40%

73%

30%

57%

98%

Other




General counsel


92%

50%

47%

61%

32%

24%

89%

50%

44%

84%

33%

18%

90%

50%

45%

79%

32%

19%


General counsel




Other

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011

2011

2011

2011

2011

12%

35%

42%

8%

4%

1%

20%

57%

22%

37%

43%

17%

3%

Don't know

Never



times a year)


5%

18%

47%

29%

1%

18%

51%

27%

3%

2%

18%

50%

28%

2%



times a year)

Rarely(once a year)

Never

Don't know

8%

23%

23%

19%

27%

2%

7%

20%

33%

38%

5%

2%

19%

41%

34%

Don't know

Never

Rarely(once a year)


times a year)


100%

100%

99%

99%

99%

98%Frequently (all


meetings)



Audit committee


22%

43%

11%

16%

8%

39%

31%

22%

5%

3%

35%

34%

20%

8%

4%



times a year)

Rarely(once a year)

Never

Don't know


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=173)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011

62%

38%

60%

40%

60%

40%

Combinedmeetings

Separatemeetings

45%

55%

38%

62%

40%

60%

Separatemeetings

Combinedmeetings

27%

73%

2%

11%

84%

2%

8%

90%


year)


meetings a year)


meetings)

82%

18%

85%

11%

2%

84%

13%

2%





31%

35%

73%

50%

35%

65%

11%

26%

85%

53%

49%

91%

25%

40%

73%

30%

57%

98%

Other




General counsel


92%

50%

47%

61%

32%

24%

89%

50%

44%

84%

33%

18%

90%

50%

45%

79%

32%

19%


General counsel




Other

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011

2011

2011

2011

2011

12%

35%

42%

8%

4%

1%

20%

57%

22%

37%

43%

17%

3%

Don't know

Never



times a year)


5%

18%

47%

29%

1%

18%

51%

27%

3%

2%

18%

50%

28%

2%



times a year)

Rarely(once a year)

Never

Don't know

8%

23%

23%

19%

27%

2%

7%

20%

33%

38%

5%

2%

19%

41%

34%

Don't know

Never

Rarely(once a year)


times a year)


100%

100%

99%

99%

99%

98%Frequently (all


meetings)



Audit committee

52

22%

43%

11%

16%

8%

39%

31%

22%

5%

3%

35%

34%

20%

8%

4%



times a year)

Rarely(once a year)

Never

Don't know


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=173)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=174)

2011

2011

62%

38%

60%

40%

60%

40%

Combinedmeetings

Separatemeetings

45%

55%

38%

62%

40%

60%

Separatemeetings

Combinedmeetings

27%

73%

2%

11%

84%

2%

8%

90%


year)


meetings a year)


meetings)

82%

18%

85%

11%

2%

84%

13%

2%





31%

35%

73%

50%

35%

65%

11%

26%

85%

53%

49%

91%

25%

40%

73%

30%

57%

98%

Other




General counsel


92%

50%

47%

61%

32%

24%

89%

50%

44%

84%

33%

18%

90%

50%

45%

79%

32%

19%


General counsel




Other

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011

2011

2011

2011

2011

12%

35%

42%

8%

4%

1%

20%

57%

22%

37%

43%

17%

3%

Don't know

Never



times a year)


5%

18%

47%

29%

1%

18%

51%

27%

3%

2%

18%

50%

28%

2%



times a year)

Rarely(once a year)

Never

Don't know

8%

23%

23%

19%

27%

2%

7%

20%

33%

38%

5%

2%

19%

41%

34%

Don't know

Never

Rarely(once a year)


times a year)


100%

100%

99%

99%

99%

98%Frequently (all


meetings)



Audit committee


Board orientation and trainingWhen asked whether their organizations have a formal orientation program for directors, responses from mid- and large-cap companies remained virtually unchanged since 2008. However, 85% of small-cap company respondents said they do have a program, up from 32% three years ago. Virtually all public companies (99%) used the form of a live, in-house session led by an individual on the board or staff member of the organization. Orientation training by a third party or via the Internet was not widely used.

Similarly, director training generally consists of in-house, management-led programs. Only 19% of small-cap, 26% mid-cap, and 22% of large-cap companies use third-party providers. However, if a director chooses to attend an external program, a large majority of the public companies would reimburse the expense.

Of the answer choices provided, the topic most companies of all sizes addressed in their director training was insider trading, followed by company policies. At sub-question 35a, not shown, some respondents mentioned “other” responses, which included topics such as code of conduct and ethics, industry trends, and general corporate gover-nance and directors' duties. From an industry perspective, more non-financial services companies (43%) focused training on anti-corruption polices than those in financial services (18%). Also, 71% of financial services companies train directors on other regulatory issues related to the business, as opposed to 58% of non-financial services.

Across all company sizes and industries, respondents indicated that corporate secretaries or other management informed directors about education programs available to them.

34. Does your organization have a formal orientation program for new directors (beyond supplying a directors' manual)?

Small-cap

Mid-cap

Large-cap




34a. If yes, please check the orientation programs sponsored by your organization for directors: (Choose all that apply)

Small-cap

Mid-cap

Large-cap




35. Does your company train directors on: (Choose all that apply)

Small-cap

Mid-cap

Large-cap




36. Which of the following best describes your board's director education program?: (Choose all that apply)

Small-cap

Mid-cap

Large-cap




37. How do your directors learn about director education programs? (Choose all that apply)

Small-cap

Mid-cap

Large-cap




2011 (n=171)

2008 (n=229)

2011 (n=171)

2011 (n=130)

2011 (n=130)

2011 (n=130)

2011

2011

2011

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011

2011

2011

2011

2011

74%

32%

78%

71%

77%

87%

85% 72% 82%

Yes

Yes

5%

100%

5%

2%

100%

4%

98%

Internet-based training

Live training by a thirdparty

Live, in-house sessionled by an individual

serving on the boardand/or a staff member of

the organization

96%

4%

100%

2%

4%

99%

2%

4%



the organization



18%

88%

15%

79%

71%

24%

43%

89%

25%

79%

58%

18%

37%

89%

23%

79%

61%

19%

Anti-corruption policies (e.g. FCPA,UK Anti-bribery Act)

Insider trading

Political contributions

Company policies

Other regulatory issues related toyour business such as privacy, etc.

Other formal training

17%

70%

87%

17%

91%

35%

17%

62%

84%

25%

92%

34%

24%

56%

69%

22%

84%

42%



Company policies


Insider trading


4%

19%

58%

19%

58%

2%

13%

2%

65%

26%

76%

7%

12%

69%

22%

75%

Other

Our board does not have a formal directoreducation program

The full board collectively attends a singlepublic forum

Directors are reimbursed for public forumsor peer group sessions attended

Provided in-house by a third party

Provided in-house by management

82%

21%

63%

11%

3%

70%

24%

66%

1%

14%

4%

73%

24%

65%

1%

13%

4%






Other

8%

58%

42%

83%

4%

69%

61%

87%

7%

62%

42%

82%

Other

From thirdparty mailings

From otherdirectors

From thecorporate

secretary ormanagement

80%

51%

60%

6%

86%

52%

66%

5%

85%

52%

65%

6%

From thecorporate


From otherdirectors


Other

Board orientation and training

54


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=171)

2008 (n=229)

2011 (n=171)

2011 (n=130)

2011 (n=130)

2011 (n=130)

2011

2011

2011

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011

2011

2011

2011

2011

74%

32%

78%

71%

77%

87%

85% 72% 82%

Yes

Yes

5%

100%

5%

2%

100%

4%

98%





the organization

96%

4%

100%

2%

4%

99%

2%

4%



the organization



18%

88%

15%

79%

71%

24%

43%

89%

25%

79%

58%

18%

37%

89%

23%

79%

61%

19%


Insider trading


Company policies



17%

70%

87%

17%

91%

35%

17%

62%

84%

25%

92%

34%

24%

56%

69%

22%

84%

42%



Company policies


Insider trading


4%

19%

58%

19%

58%

2%

13%

2%

65%

26%

76%

7%

12%

69%

22%

75%

Other






82%

21%

63%

11%

3%

70%

24%

66%

1%

14%

4%

73%

24%

65%

1%

13%

4%






Other

8%

58%

42%

83%

4%

69%

61%

87%

7%

62%

42%

82%

Other


From otherdirectors

From thecorporate


80%

51%

60%

6%

86%

52%

66%

5%

85%

52%

65%

6%

From thecorporate


From otherdirectors


Other

5% and 4% of mid- and large-cap respondents, respectively, answered “Internet-based training”, and 5% and 2% of small- and mid-cap respondents, respectively, answered “Live training by a third party”.

4%, 4%, and 4% of all public, non-financial services, and financial services companies, respectively, answered “Internet-based training”, and 2% and 2% of all public and non-financial services companies, respectively, answered “Live training by a third party”.




Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=171)

2008 (n=229)

2011 (n=171)

2011 (n=130)

2011 (n=130)

2011 (n=130)

2011

2011

2011

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011

2011

2011

2011

2011

74%

32%

78%

71%

77%

87%

85% 72% 82%

Yes

Yes

5%

100%

5%

2%

100%

4%

98%





the organization

96%

4%

100%

2%

4%

99%

2%

4%



the organization



18%

88%

15%

79%

71%

24%

43%

89%

25%

79%

58%

18%

37%

89%

23%

79%

61%

19%


Insider trading


Company policies



17%

70%

87%

17%

91%

35%

17%

62%

84%

25%

92%

34%

24%

56%

69%

22%

84%

42%



Company policies


Insider trading


4%

19%

58%

19%

58%

2%

13%

2%

65%

26%

76%

7%

12%

69%

22%

75%

Other






82%

21%

63%

11%

3%

70%

24%

66%

1%

14%

4%

73%

24%

65%

1%

13%

4%






Other

8%

58%

42%

83%

4%

69%

61%

87%

7%

62%

42%

82%

Other


From otherdirectors

From thecorporate


80%

51%

60%

6%

86%

52%

66%

5%

85%

52%

65%

6%

From thecorporate


From otherdirectors


Other


56


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=171)

2008 (n=229)

2011 (n=171)

2011 (n=130)

2011 (n=130)

2011 (n=130)

2011

2011

2011

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011

2011

2011

2011

2011

74%

32%

78%

71%

77%

87%

85% 72% 82%

Yes

Yes

5%

100%

5%

2%

100%

4%

98%





the organization

96%

4%

100%

2%

4%

99%

2%

4%



the organization



18%

88%

15%

79%

71%

24%

43%

89%

25%

79%

58%

18%

37%

89%

23%

79%

61%

19%


Insider trading


Company policies



17%

70%

87%

17%

91%

35%

17%

62%

84%

25%

92%

34%

24%

56%

69%

22%

84%

42%



Company policies


Insider trading


4%

19%

58%

19%

58%

2%

13%

2%

65%

26%

76%

7%

12%

69%

22%

75%

Other






82%

21%

63%

11%

3%

70%

24%

66%

1%

14%

4%

73%

24%

65%

1%

13%

4%






Other

8%

58%

42%

83%

4%

69%

61%

87%

7%

62%

42%

82%

Other


From otherdirectors

From thecorporate


80%

51%

60%

6%

86%

52%

66%

5%

85%

52%

65%

6%

From thecorporate


From otherdirectors


Other




Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=171)

2008 (n=229)

2011 (n=171)

2011 (n=130)

2011 (n=130)

2011 (n=130)

2011

2011

2011

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011 (n=154)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011 (n=163)

2011

2011

2011

2011

2011

74%

32%

78%

71%

77%

87%

85% 72% 82%

Yes

Yes

5%

100%

5%

2%

100%

4%

98%





the organization

96%

4%

100%

2%

4%

99%

2%

4%



the organization



18%

88%

15%

79%

71%

24%

43%

89%

25%

79%

58%

18%

37%

89%

23%

79%

61%

19%


Insider trading


Company policies



17%

70%

87%

17%

91%

35%

17%

62%

84%

25%

92%

34%

24%

56%

69%

22%

84%

42%



Company policies


Insider trading


4%

19%

58%

19%

58%

2%

13%

2%

65%

26%

76%

7%

12%

69%

22%

75%

Other






82%

21%

63%

11%

3%

70%

24%

66%

1%

14%

4%

73%

24%

65%

1%

13%

4%






Other

8%

58%

42%

83%

4%

69%

61%

87%

7%

62%

42%

82%

Other


From otherdirectors

From thecorporate


80%

51%

60%

6%

86%

52%

66%

5%

85%

52%

65%

6%

From thecorporate


From otherdirectors


Other


58

38. How are your directors evaluated? (Choose all that apply)

Small-cap

Mid-cap

Large-cap




39. To whom does the evaluation pertain? (Select all that apply)

Small-cap

Mid-cap

Large-cap




40. Have you had a third party evaluate the board's performance?

Small-Cap

Mid-Cap

Large-Cap




2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011 (n=173)

2011

2011 (n=173)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

8%

4%

8%

15%

85%

9%14

%

20%

78%

22%

2%

13%

17%

77%

Other

Our organization does not have aformal board performance

evaluation process

Individual peer-evaluation led by athird party facilitator

Individual peer-evaluation led bycorporate secretary or other in-

house personnel

Self-evaluation

82%

18%

8%

3%

11%

78%

18%

14%

1%

14%

79%

18%

13%

1%

13%

Self-evaluation


house personnel

Individual peer-evaluation led bya third party facilitator


evaluation process

Other

46%

77%

92%

44%

90%

94%

42%

90%

97%

Individualboard

members

Boardcommittees

Full board asa whole

32%

79%

95%

47%

90%

95%

43%

88%

95%

Individualboard

members

Boardcommittees


18%

3%

18%

7%

18%

14%

12% 24% 12%

Yes

Yes

41. How often is the board evaluated?

Small-cap

Mid-cap

Large-cap




21%

59%

14%

5%

6%

93%

2%

98%

2%

0%

96%

4%

95%

3%

1%

97%

3%

Not evaluated

Once a year

Less frequently than once a year(e.g. every two years)

More frequently than once a year

3%

97%

0%

1%

3%

96%

2%

2%

96%



Once a year

Not evaluated

2008 (n=190)

Board evaluationsDirectors from nearly all (79%) companies in the survey population perform self-evaluations, which typically pertain to the full board and board committees. However, 43% of all boards evaluate individual board members. Since 2008, there has been a sizeable increase in the number of small- and mid-cap companies that have employed a third party to evaluate the board’s performance. Still, just 18% of all public companies surveyed do so. Also since 2008, there has been a 21% increase in the number of small-cap companies that perform board evaluations.

Some respondents specifically stated other ways in which directors are evaluated. These responses included:

“Bio, qualifications, meeting attendance…suggested discussion topics given to full board to discuss in private session”

“Each independent director meets privately with the chairman of the board and the chairman of the corporate governance and nominating committee”

“Evaluation by committee chairs”

“Management evaluation of board”

“We rotate our approach from year to year to keep the process fresh”.

Board evaluations



Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-Cap

Mid-Cap

Large-Cap




2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011 (n=173)

2011

2011 (n=173)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

8%

4%

8%

15%

85%

9%14

%

20%

78%

22%

2%

13%

17%

77%

Other


evaluation process



house personnel

Self-evaluation

82%

18%

8%

3%

11%

78%

18%

14%

1%

14%

79%

18%

13%

1%

13%

Self-evaluation


house personnel



evaluation process

Other

46%

77%

92%

44%

90%

94%

42%

90%

97%

Individualboard

members

Boardcommittees


32%

79%

95%

47%

90%

95%

43%

88%

95%

Individualboard

members

Boardcommittees


18%

3%

18%

7%

18%

14%

12% 24% 12%

Yes

Yes


Small-cap

Mid-cap

Large-cap




21%

59%

14%

5%

6%

93%

2%

98%

2%

0%

96%

4%

95%

3%

1%

97%

3%

Not evaluated

Once a year



3%

97%

0%

1%

3%

96%

2%

2%

96%



Once a year

Not evaluated

2008 (n=190)

2% of large-cap respondents answered “Not Applicable”.

1% of all public and 1% of non-financial services companies answered “Not Applicable”.

Board evaluations

60


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-Cap

Mid-Cap

Large-Cap




2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011 (n=173)

2011

2011 (n=173)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

8%

4%

8%

15%

85%

9%14

%

20%

78%

22%

2%

13%

17%

77%

Other


evaluation process



house personnel

Self-evaluation

82%

18%

8%

3%

11%

78%

18%

14%

1%

14%

79%

18%

13%

1%

13%

Self-evaluation


house personnel



evaluation process

Other

46%

77%

92%

44%

90%

94%

42%

90%

97%

Individualboard

members

Boardcommittees


32%

79%

95%

47%

90%

95%

43%

88%

95%

Individualboard

members

Boardcommittees


18%

3%

18%

7%

18%

14%

12% 24% 12%

Yes

Yes


Small-cap

Mid-cap

Large-cap




21%

59%

14%

5%

6%

93%

2%

98%

2%

0%

96%

4%

95%

3%

1%

97%

3%

Not evaluated

Once a year



3%

97%

0%

1%

3%

96%

2%

2%

96%



Once a year

Not evaluated

2008 (n=190)

Board evaluations


StrategyBeing involved in the strategic direction of the company is one of the primary roles of a board. However, such board involvement can vary across companies. As a result of the financial crisis, there has been an increased focus on board involvement in discussing an organization’s strategy; directors are expected to play a more active role in strategic development as well as in the ongoing moni-toring of the execution of strategy. Results of the questions relating to strategic objectives show that 52% of all public companies discuss such objectives at every board meeting, and 62% hold an annual offsite strategy meeting with management. This latter trend is more prevalent among the mid- and large-cap companies.

When asked how the level of board involvement in setting strategy has changed, 58% of small-cap and 53% of mid-cap companies said it was increasing, while 60% of large-cap companies said it has remained the same.

With regard to how strategy is developed, more than 90% of all public companies said that management develops strategy and the board advises, challenges, and approves it. No respondent indicated that the board develops strategy, and only 15% of small-cap companies indicated the board and management develop strategy together.

42. How often are strategic objectives discussed with the board?

Small-cap

Mid-cap

Large-cap




43. How often does your board participate in an off-site strategy meeting with management?

Small-cap

Mid-cap

Large-cap




44. How is strategy set at your organization?

Small-cap

Mid-cap

Large-cap




45. Is the level of board involvement in setting strategy increasing or decreasing?

Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011

2011

58%

27%

15%

14%

50%

19%

17%

12%

52%

13%

23%

Other

At everymeeting

Quarterly

Annually

24%

18%

47%

11%

18%

18%

53%

11%

19%

18%

52%

11%

Annually

Quarterly

At everymeeting

Other

42%

54%

4%

30%

64%

6%

23%

63%

12%

2%

We do not holdoff-site strategy

meetings withmanagement

Once a year

Less than oncea year (e.g.

every two years)

More than oncea year

13%

58%

29%

1%

6%

64%

30%

1%

8%

62%

29%

More frequentlythan once a year

Less frequentlythan once a year

(e.g. every twoyears)

Once a year



0%

15%

85%

5%

94%

5%

92%

The board develops thestrategy and

management approvesand executes

The board andmanagement develop

strategy together

Management developsstrategy and the board

advises, challenges andapproves

92%

5%

0%

92%

7%

92%

6%




strategy together



42%

58%

47%

53%

60%

38%

Remains thesame

Increasing

45%

53%

50%

50%

49%

51%

Increasing

Remains thesame

Additional informationTo learn more about the board’s role in strategy, read the Deloitte Center for Corporate Governance publication “Shaping a Risk Intelligent strategy“, available at www.corpgov.deloitte.com.

Shaping a Risk Intelligent strategy Confronting assumptions to find risk and opportunity

Strategy

http://www.corpgov.deloitte.com/site/us/board-governance/roles-and-responsibilities/

62


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011

2011

58%

27%

15%

14%

50%

19%

17%

12%

52%

13%

23%

Other

At everymeeting

Quarterly

Annually

24%

18%

47%

11%

18%

18%

53%

11%

19%

18%

52%

11%

Annually

Quarterly

At everymeeting

Other

42%

54%

4%

30%

64%

6%

23%

63%

12%

2%



Once a year


every two years)


13%

58%

29%

1%

6%

64%

30%

1%

8%

62%

29%




Once a year



0%

15%

85%

5%

94%

5%

92%




strategy together



92%

5%

0%

92%

7%

92%

6%




strategy together



42%

58%

47%

53%

60%

38%

Remains thesame

Increasing

45%

53%

50%

50%

49%

51%

Increasing

Remains thesame

Strategy



Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011

2011

58%

27%

15%

14%

50%

19%

17%

12%

52%

13%

23%

Other

At everymeeting

Quarterly

Annually

24%

18%

47%

11%

18%

18%

53%

11%

19%

18%

52%

11%

Annually

Quarterly

At everymeeting

Other

42%

54%

4%

30%

64%

6%

23%

63%

12%

2%



Once a year


every two years)


13%

58%

29%

1%

6%

64%

30%

1%

8%

62%

29%




Once a year



0%

15%

85%

5%

94%

5%

92%




strategy together



92%

5%

0%

92%

7%

92%

6%




strategy together



42%

58%

47%

53%

60%

38%

Remains thesame

Increasing

45%

53%

50%

50%

49%

51%

Increasing

Remains thesame

2% of large-cap respondents, respectively, answered “Decreasing”.

1% of all public and 3% of financial services companies, respectively, answered “Decreasing”.

1% and 2% of mid-, and large-cap respondents, respectively, answered “Other”.

2%, 1%, and 3% of all public companies, non-financial services companies, and financial services companies, respectively, answered “Other”.

Strategy

64

Risk oversight, disclosure committee, and political contributions**Risk oversight is a fundamental role of any director, and in the current governance environment, there is increased pressure from investors and regulators for boards to spend more time on overseeing risk management. How boards approach risk oversight appears to be decidedly mixed, with many respondents assigning primary responsibility to the audit committee at small- and mid-cap companies, but only 30% of large-cap companies indicating this. With regard to the industry sectors, 32% of financial services companies, as compared to 8% of non-financial services companies, have a board risk committee. Given the nature of their business, the risks they face, and a rapidly evolving regulatory climate, companies in the financial services industry tend to have more developed risk oversight and management practices.

While there is no legal obligation for public companies to establish a management disclosure committee, the SEC recommends it and 89% of all public companies have one. There has been an trend for public companies to form one, especially in the small- and large-cap companies, which have shown 20% and 12% increases, respectively, since 2008. From an industry perspective, fewer financial services companies (82%) have this committee, compared to non-financial services companies (91%).

Of the companies with a management disclosure committee, 45% of small-cap companies say the committee reports to the board or a board committee, compared to 37% and 29% of mid- and large-cap companies, respectively. Across all company sizes and industries, a majority of the management disclosure committees who do report directly to the board or a board committee do so on a quarterly basis.

Gaining attention in recent years is political spending transparency and accountability from public companies, with specific focus on board oversight to ensure political spending of corporate funds is aligned with the best interests of the company and its shareholders. Much of this attention can be attributed to the controversial case of Citizens United v. Federal Election Commission in which, in 2010, the Supreme Court ruled it a First Amendment right for corporations and unions to be able to participate in the political process. Twenty-nine (29%) of all public companies and 52% of large-cap company respondents said their boards oversee political contributions and donations made by the company. Across all public companies, less than 10% have imposed limitations or reporting obligations on political contributions made by directors of the company.

Additional informationTo learn more about the board’s role in risk oversight, read publications in the Deloitte Risk Intelligent whitepaper series, and also the “Risk Intelligent proxy disclosures — 2011” publication, available at www.corpgov.deloitte.com.

Risk Intelligent proxy disclosures – 2011: Have risk-oversight practices improved?

Risk oversight, disclosure committee, and political contributions


http://www.corpgov.deloitte.com/site/us/board-governance/risk-oversight/


100% 85%

2%

12%

89%

2%

9%

Quarterly

Semi-annually

No determinedfrequency; only

when needed

39%

62%

45%

34%

63%

37%

35%

57%

29%Yes

Yes

32%

55%

39%

42%

0%

13%

8%

46%

51%

62%

5%

13%

48%

48%

57%

7%

We have a board risk committee

The audit committee has primaryresponsibility for risk oversight

Risk oversight responsibilities arespread across all board committees

The full board is responsible for riskoversight

We have not considered boardresponsibility for risk oversight

Other

46. How does your board assign risk oversight for the organization's risk management program? (Select all that apply)

Small-cap

Mid-cap

Large-cap




47. Does your organization have a management disclosure committee as recommended by the SEC for public companies?

Small-cap

Mid-cap

Large-cap




47a. If yes, does the management disclosure committee report to either the board or a board committee?

Small-cap

Mid-cap

Large-cap




47b. If yes, how often?

Small-cap

Mid-cap

Large-cap




49. Does your company's board oversee political contributions and donations made by the company — or oversee the political action committees (or similar) of the company?

Small-cap

Mid-cap

Large-cap




50. Has your company imposed any limitations, or reporting obligations, to the company on political contributions by directors?

Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=151)

2008 (n=181)

2011 (n=53)

2011 (n=53)

2011 (n=53)

2011 (n=173)

2011 (n=171)

2011 (n=171)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=171)

2011 (n=174)

2011

2011

2011

2011

2011

2011

2011

48. Does the company align risk oversight/ risk management with the company's strategy?

Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2008 (n=229)

2011

12%

58%

50%

62%

8%6%

56%

45%

56%

14%

7%

0%

60%

52%

30%

15%

Other

We have not considered boardrepsonsibility for risk oversight





82%

61%

91%

86%

89%

83%

81% 88% 95%Yes

Yes

11%

89%

7%

93%

13%

7%

87%


when needed

Semi-annually

Quarterly

87%

85%

89%

89%

88%

90%Yes

Yes

8%

81%

12%

8%

72%

20%

3%

45%

52%

Don't know

No

Yes

39%

55%

5%

26%

67%

7%

29%

64%

6%

Yes

No

Don't know

8%

85%

8%

8%

80%

11%

3%

92%

5%

Don't know

No

Yes

13%

84%

3%

7%

85%

7%

9%

85%

6%

Yes

No

Don't know


66

100% 85%

2%

12%

89%

2%

9%

Quarterly

Semi-annually


when needed

39%

62%

45%

34%

63%

37%

35%

57%

29%Yes

Yes

32%

55%

39%

42%

0%

13%

8%

46%

51%

62%

5%

13%

48%

48%

57%

7%






Other


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=151)

2008 (n=181)

2011 (n=53)

2011 (n=53)

2011 (n=53)

2011 (n=173)

2011 (n=171)

2011 (n=171)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=171)

2011 (n=174)

2011

2011

2011

2011

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2008 (n=229)

2011

12%

58%

50%

62%

8%

6%

56%

45%

56%

14%

7%

0%

60%

52%

30%

15%

Other






82%

61%

91%

86%

89%

83%

81% 88% 95%Yes

Yes

11%

89%

7%

93%

13%

7%

87%


when needed

Semi-annually

Quarterly

87%

85%

89%

89%

88%

90%Yes

Yes

8%

81%

12%

8%

72%

20%

3%

45%

52%

Don't know

No

Yes

39%

55%

5%

26%

67%

7%

29%

64%

6%

Yes

No

Don't know

8%

85%

8%

8%

80%

11%

3%

92%

5%

Don't know

No

Yes

13%

84%

3%

7%

85%

7%

9%

85%

6%

Yes

No

Don't know

In 2011, 19%, 11%, and 5% of small-, mid-, and large-cap respondents, respectively, answered “No”, and in 2008, 25%, 9%, and 17% of small-, mid-, and large-cap respondents, respectively, answered “No”.

In 2011, 1% of mid-cap respondents, respectively, answered “Not Applicable”, and in 2008, 14% and 5% of small- and mid-cap respondents, respectively, answered “Not Applicable”.

10%, 8%, and 18% of all public, non-financial services, and financial services companies, respectively, answered “No”, and 1% of both all public and non-financial services companies, respectively, answered “Not Applicable”.



100% 85%

2%

12%

89%

2%

9%

Quarterly

Semi-annually


when needed

39%

62%

45%

34%

63%

37%

35%

57%

29%Yes

Yes

32%

55%

39%

42%

0%

13%

8%

46%

51%

62%

5%

13%

48%

48%

57%

7%






Other


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=151)

2008 (n=181)

2011 (n=53)

2011 (n=53)

2011 (n=53)

2011 (n=173)

2011 (n=171)

2011 (n=171)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=171)

2011 (n=174)

2011

2011

2011

2011

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2008 (n=229)

2011

12%

58%

50%

62%

8%

6%

56%

45%

56%

14%

7%

0%

60%

52%

30%

15%

Other






82%

61%

91%

86%

89%

83%

81% 88% 95%Yes

Yes

11%

89%

7%

93%

13%

7%

87%


when needed

Semi-annually

Quarterly

87%

85%

89%

89%

88%

90%Yes

Yes

8%

81%

12%

8%

72%

20%

3%

45%

52%

Don't know

No

Yes

39%

55%

5%

26%

67%

7%

29%

64%

6%

Yes

No

Don't know

8%

85%

8%

8%

80%

11%

3%

92%

5%

Don't know

No

Yes

13%

84%

3%

7%

85%

7%

9%

85%

6%

Yes

No

Don't know

4%, 3%, and 5% of small-, mid-, and large-cap respondents, respectively, answered “No”, and 12%, 8%, and 5% of small-, mid-, and large-cap respondents answered “Don’t know”.

5% of non-financial services companies, respectively, answered “No”, and 6% and 3% of non-financial services and non-financial services companies, respectively, answered “Don’t know”.

None (0%) of respondents answered “Monthly” or “Annually”.


68

100% 85%

2%

12%

89%

2%

9%

Quarterly

Semi-annually


when needed

39%

62%

45%

34%

63%

37%

35%

57%

29%Yes

Yes

32%

55%

39%

42%

0%

13%

8%

46%

51%

62%

5%

13%

48%

48%

57%

7%






Other


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=151)

2008 (n=181)

2011 (n=53)

2011 (n=53)

2011 (n=53)

2011 (n=173)

2011 (n=171)

2011 (n=171)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=171)

2011 (n=174)

2011

2011

2011

2011

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=174)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2008 (n=229)

2011

12%

58%

50%

62%

8%

6%

56%

45%

56%

14%

7%

0%

60%

52%

30%

15%

Other






82%

61%

91%

86%

89%

83%

81% 88% 95%Yes

Yes

11%

89%

7%

93%

13%

7%

87%


when needed

Semi-annually

Quarterly

87%

85%

89%

89%

88%

90%Yes

Yes

8%

81%

12%

8%

72%

20%

3%

45%

52%

Don't know

No

Yes

39%

55%

5%

26%

67%

7%

29%

64%

6%

Yes

No

Don't know

8%

85%

8%

8%

80%

11%

3%

92%

5%

Don't know

No

Yes

13%

84%

3%

7%

85%

7%

9%

85%

6%

Yes

No

Don't know



CEO succession planningCEO succession planning includes both planned (e.g., retirement) and unexpected (e.g., “hit by a bus” or ousted) scenarios.

When compared to a similar question asked in 2008, results to question 51 show that more companies are reviewing succession plans as a matter of course rather than when prompted by circumstantial changes. Specifically, there is a 31% increase since 2008 in small-cap companies reviewing CEO succession plans annually, while 11% more mid-cap companies and 14% more large-cap companies review these plans more than once a year.

With regard to who has primary responsibility over the succession planning process, 43% of large-cap companies assigned the task to the entire board, and the majority of the remaining Large-cap companies assign responsibility

to the nominating/ corporate governance committee and the compensation committee. Most small-cap companies assigned the responsibility to the nominating/ corporate governance committee; responses from mid-cap companies were mixed. When compared to results from the 2008 report, the data shows a shift from the delega-tion of this responsibility from the entire board to the nominating/corporate governance committee for small-cap companies. From an industry perspective, most financial services companies delegated the responsibility to the nominating/ corporate governance committee where results were varied for non-financial services companies. Other responses included the chairman and CEO, an executive committee, a special committee, and a small committee of independent directors.

51. How often does the full board review CEO succession plans?

Small-cap

Mid-cap

Large-cap




52. Who has the primary responsibility over the CEO succession planning process?

Small-cap

Mid-cap

Large-cap




2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

19%

81%

3%

6%

64%

26%

2%

3%

2%

60%

33%

Never

Only when a changein circumstance

requires

Less than once ayear (e.g. every two

years)

Once a year

More than once ayear

21%

66%

8%

5%

26%

65%

2%

6%

1%

25%

65%

3%

6%

1%


Once a year


years)Only when a change

in circumstancerequires

Never

8%

60%

16%

16%

6%

1%

3%

23%

29%

38%

7%

2%

3%

23%

22%

43%

Other

CEO

Independent directors

Nominating/ corporategovernance committee


Entire board

29%

26%

42%

3%

39%

24%

25%

5%

1%

6%

37%

24%

28%

4%

1%

5%

Entire board




CEO

Other

CEO succession planning

70


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

19%

81%

3%

6%

64%

26%

2%

3%

2%

60%

33%

Never


requires


years)

Once a year


21%

66%

8%

5%

26%

65%

2%

6%

1%

25%

65%

3%

6%

1%


Once a year


years)Only when a change

in circumstancerequires

Never

8%

60%

16%

16%

6%

1%

3%

23%

29%

38%

7%

2%

3%

23%

22%

43%

Other

CEO




Entire board

29%

26%

42%

3%

39%

24%

25%

5%

1%

6%

37%

24%

28%

4%

1%

5%

Entire board




CEO

Other

CEO succession planning


CEO performance evaluationA primary board responsibility is the evaluation of the CEO. Consistent with 2008 survey results, most companies assign this responsibility to the compensation committee. Further, 87% of all public companies indicated that this happens annually.

8%

92%

1%

87%

9%

2%

83%

12%


requires

Once a year


53. How often does the full board review the CEO's performance?

Small-cap

Mid-cap

Large-cap




54. Who has the lead responsibility over the CEO performance evaluation process?

Small-cap

Mid-cap

Large-cap




2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011

2011

2011

97%

3%

11%

84%

2%

9%

87%

2%


Once a year


requires

23%

15%

54%

8%

1%

8%

11%

68%

11%

5%

7%

12%

60%

17%

3%

63%

18%

8%

8%

16%

63%

10%

10%

1%

13%

63%

12%

10%

2%

Other

Independent chair orlead director



Entire board

Other




Entire board

CEO performance evaluation

1% of mid-cap respondents, respectively, answered “Less than once a year (e.g. every two years)”, and 1% and 3% of mid-, and large-cap respondents, respectively, answered “Never”.

1% and 1% of all public and financial services companies, respectively, answered “Less than once a year (e.g. every two years)”, and 2% and 2% of all public and financial services companies answered, respec-tively, “Never”.

72

8%

92%

1%

87%

9%

2%

83%

12%


requires

Once a year


53. How often does the full board review the CEO's performance?

Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011

2011

2011

2011

2011

2011

2011

2011

2011

97%

3%

11%

84%

2%

9%

87%

2%


Once a year


requires

23%

15%

54%

8%

1%

8%

11%

68%

11%

5%

7%

12%

60%

17%

3%

63%

18%

8%

8%

16%

63%

10%

10%

1%

13%

63%

12%

10%

2%

Other




Entire board

Other




Entire board

CEO performance evaluation


Shareholder engagement and shareholder activismWhile not a new topic, shareholder activism continues to be in the spotlight, primarily due to regulatory changes that emphasize investor rights. Such activism can arise for a number of reasons, such as poor performance, discontent with executive compensation, a desire for majority voting, or a company’s position on environmental concerns. Because activism can come in the form of aggressive tactics, board communication with activist shareholders is critical. Boards and management are increasingly consid-ering communications strategies for effectively interacting with their shareholders.

Since 2008, a greater number of small- and mid-cap companies require directors to attend annual shareholder meetings. A smaller number of large-cap companies have required attendance. Since 2008, there has also been an increase in large-cap companies that have a policy regarding contact between directors and shareholders, but a decrease for mid- and small-cap companies.

Directors at 44% of small-cap companies, 30% at mid-cap companies, and 47% of large-cap companies have had some form of contact with shareholders during the past year. This represents 53% of financial services and 34% of financial and non-financial services companies. A question similar to number 57 was asked in 2008 and results show an increase of director/ shareholder contact of approxi-mately 15%. Finally, 60% of large-cap companies have been approached by a shareholder activist in the past year, compared to 27% of mid-cap companies and just 8% of small-cap companies.

Sixty-four percent (64%) of public companies have not considered holding a “fifth analyst” call with investors, with 29% of public companies unfamiliar with the term. A fifth analyst call is an emerging idea to conduct a teleconfer-ence with investors, akin to a quarterly earnings call (hence "fifth"), devoted to corporate governance.

55. Are directors required to attend the annual shareholders meeting?

Small-cap

Mid-cap

Large-cap




201168%

61%

76%

68%

74%

79%

69% 82% 65%

Yes

Yes

2011 (n=174)

56. Do you have a policy relating to contact between directors and shareholders?

Small-cap

Mid-cap

Large-cap




2011 (n=173)

2008 (n=229)

58. Has your organization been approached by a shareholder activist within the last 12 months?

Small-cap

Mid-cap

Large-cap




57. Have board members had direct contact with shareholder(s) or shareholder groups over the past year?

Small-cap

Mid-cap

Large-cap




59. Has your board considered holding what is known as a “fifth analyst” call with investors?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=171)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2008 (n=221)

61%

41%

49%

55%

51%

49%

35% 54% 55%

Yes

Yes

4%

52%

16%

28%

2%

67%

15%

15%

53%

22%

25%

Not applicable

Board members did not havedirect contact

Direct contact was made onlyas arranged or suggested by

company management

Board members have haddirect contact

29%

24%

45%

3%

18%

16%

64%

2%

21%

18%

60%

2%



company management


Not applicable

25%

8%

39%

27%

36%

60%Yes

Yes

38%

54%

8%

34%

63%

3%

2%

18%

70%

10%

Not applicable

Not familiarwith the term

No

Yes

8%

71%

21%

6%

62%

32%

1%

6%

64%

29%

1%

Yes

No


Not applicable

In 2011, 31%, 18%, and 33% of small-, mid-, and large-cap respondents, respectively, answered “No”, and in 2008, 30%, 29%, and 21% of small-, mid-, and large-cap respondents, respectively, answered “No”.

In 2011, 2% of large-cap respondents answered “Not Applicable”, and in 2008, 9% and 3% of small- and mid-cap respondents, respectively, answered “Not Applicable”.

24% and 32% of non-financial services and financial services companies, respectively, answered “No”, and 1% of non-financial services companies answered “Not Applicable”.

Additional informationTo learn more about Shareholder engagement and shareholder activism, read the Deloitte Center for Corporate Governance publication “Shareholder activism: Reinforcing practices”, available at www.corpgov.deloitte.com.

March 2011

Hot TopicsShareholder Activism: Reinforcing Practices

Copyright © 2011 Deloitte Development LLC. All rights reserved. Hot Topics—March 2011 • 1

Although shareholder activism is by no means a new topic, it continues to attract attention,especially in light of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as recent SEC rulings. There is a common theme to these regulatory changes:increasing the rights of the investor.

Shareholder activism continues to be a subject of considerable debate, including whether it results in positive or negative consequences for a company. Such activism has acquired a somewhat negative connotation given the aggressive tactics employed by a small number of prominent investors. However, alternatively, there are many investors whoengage with company management in a constructive and collaborative way and often take the position of long-term investor allies of the company. Dialogue with these investors can often have beneficial impacts on a company. Some ways in which shareholder activism can produce positive and beneficial impacts for the company is when it increases the performance of the company relative to its peer group, or when environmental, social, or governance (ES&G) issues that may have otherwise gone unaddressed are attended toby the company based on dialogue with shareholders. For instance, some investment institutions that serve as active, engaged investor advocates have developed new policies on governance that also include ES&G issues.

Shareholder activism, regardless of whether it is adversarial or proactive in nature, can take many forms, and can arise from a variety of situations. For instance, activism can result from a perception of inefficiency in the company’s capital structure, or anobservation that the company may not have an adequate takeover defense. Shareholder advocates may notice opportunities for companies to strengthen their own sustainability policies, which may have a long-term constructive role and produce additional shareholder value. Additionally, through the increasing use of social networking technologies, the number of activist campaigns is rapidly growing and gaining critical mass. In preparing for and responding to shareholder activism and advocacy in any form, management and the board should consider three leading practices: identifying the relevant source issues and company attributes, assembling a response team, and developing a communication strategy.

Identify

Members of management and the board should identify and stay up to date on issues and company attributes that could be the source for shareholder activism. They should be aware of the shareholders who may act and the mechanisms available to activist shareholders. As noted above, there may be only a small number of shareholders who fit into the category of activist. Therefore, it is critical to have a strong understanding of the shareholder base, what these shareholders’ priorities are, and how to respond.

First, company leadership should identify attributes that may make the companyvulnerable to an activist investor, such as underperformance as measured by earnings;

Shareholder engagement and shareholder activism

http://www.corpgov.deloitte.com/site/us/nominating-corporate-governance-committee/proxy-topics/

74


Small-cap

Mid-cap

Large-cap




201168%

61%

76%

68%

74%

79%

69% 82% 65%

Yes

Yes

2011 (n=174)


Small-cap

Mid-cap

Large-cap




2011 (n=173)

2008 (n=229)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=171)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2008 (n=221)

61%

41%

49%

55%

51%

49%

35% 54% 55%

Yes

Yes

4%

52%

16%

28%

2%

67%

15%

15%

53%

22%

25%

Not applicable



company management


29%

24%

45%

3%

18%

16%

64%

2%

21%

18%

60%

2%



company management


Not applicable

25%

8%

39%

27%

36%

60%Yes

Yes

38%

54%

8%

34%

63%

3%

2%

18%

70%

10%

Not applicable


No

Yes

8%

71%

21%

6%

62%

32%

1%

6%

64%

29%

1%

Yes

No


Not applicable




Small-cap

Mid-cap

Large-cap




201168%

61%

76%

68%

74%

79%

69% 82% 65%

Yes

Yes

2011 (n=174)


Small-cap

Mid-cap

Large-cap




2011 (n=173)

2008 (n=229)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=171)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2008 (n=221)

61%

41%

49%

55%

51%

49%

35% 54% 55%

Yes

Yes

4%

52%

16%

28%

2%

67%

15%

15%

53%

22%

25%

Not applicable



company management


29%

24%

45%

3%

18%

16%

64%

2%

21%

18%

60%

2%



company management


Not applicable

25%

8%

39%

27%

36%

60%Yes

Yes

38%

54%

8%

34%

63%

3%

2%

18%

70%

10%

Not applicable


No

Yes

8%

71%

21%

6%

62%

32%

1%

6%

64%

29%

1%

Yes

No


Not applicable

92%, 73%, and 38% of small-, mid-, and large-cap respondents, respectively, answered “No”, and 2% of large-cap respondents answered “Not Applicable”.

64%, 61% and 75% of all public, non-financial services, and financial services companies, respectively, answered “No”, and 1% of both all public and non-financial services companies answered “Not Applicable”.


76

Voting and proxy issuesOutside of auditor ratification, say on pay or required proposals, such as equity plan approvals, other common shareholder votes pertained to shareholder proposals on corporate social responsibility, political contributions, and rights to call special meetings. While survey respondents did not specify what types of proposals their companies received, 68% of large-cap companies had received a shareholder proposal, compared to 8% of small-cap companies and 22% of mid-cap companies. From an

industry perspective, there was about 10% variation between the financial services (29%) and non-financial services (38%) companies.

It is important to note that this survey was administered prior to July 2011, when the U.S. Court of Appeals vacated the SEC’s final proxy access rules. However, shareholder proposals on proxy access on a company-by-company basis were not affected by the court ruling.

70%

30%

0%

70%

29%

1%

50%

48%

2%

Not applicable

Never

Reimbursement is providedwhen the nominee achieves acertain percentage of the vote

Reimbursement is providedwhen the nominee is

successful

60. Did your organization receive a shareholder proposal during the 2011 proxy season other than auditor ratification, say-on-pay, or required proposals?

Small-cap

Mid-cap

Large-cap




2011

2011 (n=174)

29%

8%

38%

22%

36%

68%Yes

Yes

61. When does your organization provide reimbursement of expenses related to director election campaigns? (Choose one)

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

0%

37%

63%

1%

36%

63%

1%

36%

63%


successfulReimbursement is provided

when the nominee achieves acertain percentage of the vote

Never

Not applicable

62. Is your organization considering adopting a policy or by-law providing reimbursement of expenses related to director election campaigns in light of proxy access?

Small-cap

Mid-cap

Large-cap




2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011

2011

2011

2011

19%

81%

0%

26%

74%

10%

88%

2%

Not applicable

Not considering adoptinga policy or by-law

Reimbursement would be providedwhen the nominee achieves acertain percentage of the vote

Reimbursement would be providedwhen the nominee is successful

0%

82%

18%

1%

80%

20%

1%

80%

19%




Not applicable

96%, 77%, and 32% of small-, mid-, and large-cap respondents, respectively, answered “No”, and 1% of mid-cap respondents answered “Not Applicable”.

64%, 62% and 71% of all public, non-financial services, and financial services companies, respectively, answered “No”, and 1% of both all public and non-financial services companies answered “Not Applicable”.

Voting and proxy issues


70%

30%

0%

70%

29%

1%

50%

48%

2%

Not applicable

Never

Reimbursement is providedwhen the nominee achieves acertain percentage of the vote


successful


Small-cap

Mid-cap

Large-cap




2011

2011 (n=174)

29%

8%

38%

22%

36%

68%Yes

Yes


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

0%

37%

63%

1%

36%

63%

1%

36%

63%


successfulReimbursement is provided

when the nominee achieves acertain percentage of the vote

Never

Not applicable

62. Is your organization considering adopting a policy or by-law providing reimbursement of expenses related to director election campaigns in light of proxy access?

Small-cap

Mid-cap

Large-cap




2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011

2011

2011

2011

19%

81%

0%

26%

74%

10%

88%

2%

Not applicable




0%

82%

18%

1%

80%

20%

1%

80%

19%




Not applicable

Voting and proxy issues

78

11%

4%

5%

4%

21%

23%

30%

2%

3%

3%

10%

5%

24%

28%

27%

9%

8%

11%

15%

25%

30%

2%

19%

4%

7%

11%

19%

15%

22%

4%

24%

6%

8%

13%

23%

15%

8%

2%

31%

8%

15%

19%

17%

8%

2%

9

8

7

6

5

4

≤ 3

74%

26%

61%

39%

64%

36%

38%

62%

66%

34%

62%

38%

48%

52%

58%

42%

86%

14%

Electedannually


Electedannually


95%

77%

99%

90%

98%

92%

100% 97% 100%Yes

Yes

13%

8%

11%

11%

11%

5%

42%

2%

7%

14%

23%

16%

10%

7%

21%

2%

8%

13%

20%

15%

10%

6%

26%

≤3

4

5

6

7

8

9

≥10

16%

23%

4%

46%

6%

45%

3%14%Yes

Yes

66%

18%

41%

61%

39%

59%

62%

74%

76%Yes

Yes

4%

37%

46%

13%

3%

22%

50%

22%

3%

11%

45%

32%

11%

7%

19%

33%

41%

5%

27%

45%

23%

8%

47%

37%

5%

2%

≥13

10-12

7-9

4-6

0-3

50%

29%

60%

59%

58%

66%

41% 57% 68%Yes

Yes

45%

39%

52%

54%

51%

53%

44% 44% 63%

Yes

Yes


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011 (n=172)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

16%

29%

37%

18%

1%

21%

44%

31%

3%

1%

20%

41%

33%

6%

0-3

4-6

7-9

10-12

≥13


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)

2011 (n=172)

2008 (n=229)≥10

2011

2011

2011


Small-cap

Mid-cap

Large-cap




2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=229)

2008 (n=229)

2008 (n=229)

2008 (n=229)

0%

36%

4%

7%

0%

14%

4%

5%

7%

23%

1%

12%

8%

3%

2%

34%

2%

2%

8%

8%

6%

Other titles


legal officer

chiefoperating

officer


8%

3%

3%

7%

1%

2%

8%

1%


Chiefoperating

officerGeneral


Other titles

2011

Earnings guidanceWhen compared to 2008 survey results, significantly more companies of all sizes are providing annual earnings per share (EPS) estimates, with increases of 12% for small-cap, 11% for mid-cap, and 23% for large-cap companies. Forty three percent (43%) of all companies provide annual EPS estimate guidance, and 25% provide quarterly guidance. Further, since 2008, 27% more mid-cap and 22% more

large-cap companies are providing other types of forward-looking information, such as estimates of net income, revenue, and operating cash flow. It is interesting to note that more financial services companies (41%) do not provide EPS estimates or other type of forward-looking information compared to non-financial services companies (19%).

Additional informationTo learn more about Earnings guidance, read the Deloitte Center for Corporate Governance publication “Earnings guidance: The current state of play”, available at www.corpgov.deloitte.com.

A Follow-up Discussion of Earnings Guidance and Other Forward-looking Information Provided to Investors

Earnings Guidance: The Current State of Play

June 2009

Voting and proxy issues & Earnings guidance

http://www.corpgov.deloitte.com/site/us/board-governance/short-and-long-termism/


63. Does your organization publicly provide earnings per share (EPS) estimates? (Select all that apply)

Small-cap

Mid-cap

Large-cap




64. Does your organization intend to change how it provides EPS estimates or other forward-looking information?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=222)

2008 (n=222)

2008 (n=222)

2008 (n=222)

2008 (n=222)6%

55%

22%

4%

13%

3%

21%

17%

31%

26%

23%

15%

32%

32%

4%

52%

24%

16%

12%

4%

18%

44%

42%

25%

8%

20%

37%

55%

32%

Not applicable

EPS estimates nor other types offorward-looking information (e.g.,

net income, revenue, operatingcash flow, etc.) are not provided

Other types of forward-lookinginformation (e.g., net income,revenue, operating cash flow,

etc.) are provided

Annual earnings per shareestimates are provided

Quarterly earnings per shareestimates are provided

16%

16%

22%

41%

14%

28%

50%

43%

19%

3%

25%

43%

38%

24%

5%




etc.) are provided



Not applicable

8% 8% 8%

23%

4%

65%

17%

2%

2%

70%

20%

2%

70%

Not applicable

Don't know

We intend to increase theamount of information

provided

We intend to reduce theamount of information

provided

There is no intention tochange the amount of

information provided

53%

3%

26%

18%

74%

1%

2%

17%

5%

69%

2%

2%

19%

8%


information providedWe intend to reduce the

amount of informationprovided

We intend to increasethe amount of


Don't know

Not applicable

Earnings guidance

80


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2011 (n=172)

2008 (n=222)

2008 (n=222)

2008 (n=222)

2008 (n=222)

2008 (n=222)6%

55%

22%

4%

13%

3%

21%

17%

31%

26%

23%

15%

32%

32%

4%

52%

24%

16%

12%

4%

18%

44%

42%

25%

8%

20%

37%

55%

32%

Not applicable




etc.) are provided



16%

16%

22%

41%

14%

28%

50%

43%

19%

3%

25%

43%

38%

24%

5%




etc.) are provided



Not applicable

8% 8% 8%23%

4%

65%

17%

2%

2%

70%

20%

2%

70%

Not applicable

Don't know

We intend to increase theamount of information

provided

We intend to reduce theamount of information

provided



53%

3%

26%

18%

74%

1%

2%

17%

5%

69%

2%

2%

19%

8%


information providedWe intend to reduce the

amount of informationprovided

We intend to increasethe amount of


Don't know

Not applicable

Voting and proxy issues & Earnings guidance


Directors and officers liability insuranceConsistent with the 2008 survey findings, almost all companies have directors and officers ("D&O") liability insurance. However, since 2008 there have been increases in small- and large-cap companies, 14% and 20% respec-tively, insuring more than only the designated officers and directors. As to whom this extended coverage applies, some responses provided by survey participants included: •Directorsandofficersofaffiliatesandsubsidiaries•Mostemployeesoftheorganization•Employeesactingonbehalfoftheorganization

•Employeesservingasdirectorsorofficersatnonprofitorganizations or at certain for-profit organizations at the request of the company

•Certainemployees,suchasin-houseattorneys,control-lers, and heads of investor relations.

Most companies have not changed their policy limits in the past 12 months, but 15%, 24%, and 20% of small-, mid-, and large-cap companies, respectively, did increase their limits. This represents 18% of financial services companies and 22% of non-financial services companies.

100%

93%

99%

98%

99%

100%

100% 100% 98%Yes

Yes

65. Does your organization have directors and officers (”D&O”) liability insurance?

Small-cap

Mid-cap

Large-cap




2011

2011 (n=174)

2008 (n=229)

65a. If yes, does the D&O insurance cover more than designated directors and officers of the organization?

Small-cap

Mid-cap

Large-cap




2011

2011 (n=169)

2008 (n=223)

28%

13%

27%

34%

30%

29%

33%

21%

41%Yes

Yes

66. Do any of your directors own individual director liability insurance?

Small-cap

Mid-cap

Large-cap




67. Please indicate how your liability insurance policy limits have changed in the past 12 months:

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

74%

26%

66%

33%

1%

80%

20%

Don't know

No

Yes

3%

26%

71%

28%

72%

1%

28%

72%

Yes

No

Don't know

4%

26%

48%

7%

15%

12%

62%

2%

24%

2%

22%

55%

2%

20%

Not applicable

Don't know

No change

Decreased

Increased

18%

61%

18%

3%

22%

4%

56%

17%

1%

21%

3%

57%

17%

1%

Increased

Decreased

No change

Don't know

Not applicable

Directors and officers liability insurance

82

100%

93%

99%

98%

99%

100%

100% 100% 98%Yes

Yes

65. Does your organization have directors and officers (”D&O”) liability insurance?

Small-cap

Mid-cap

Large-cap




2011

2011 (n=174)

2008 (n=229)

65a. If yes, does the D&O insurance cover more than designated directors and officers of the organization?

Small-cap

Mid-cap

Large-cap




2011

2011 (n=169)

2008 (n=223)

28%

13%

27%

34%

30%

29%

33%

21%

41%Yes

Yes


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

2011 (n=173)

74%

26%

66%

33%

1%

80%

20%

Don't know

No

Yes

3%

26%

71%

28%

72%

1%

28%

72%

Yes

No

Don't know

4%

26%

48%

7%

15%

12%

62%

2%

24%

2%

22%

55%

2%

20%

Not applicable

Don't know

No change

Decreased

Increased

18%

61%

18%

3%

22%

4%

56%

17%

1%

21%

3%

57%

17%

1%

Increased

Decreased

No change

Don't know

Not applicable

Directors and officers liability insurance


Board’s use of technologyAccording to the majority of public company respondents, most directors are frequently engaged and up-to-date on the latest technology applications, or are aware of technological benefits. Not surprisingly, 79% of all public company respondents stated their board’s use of tech-nology is increasing. New to the survey this year was the option for respondents to indicate whether their organiza-tion distributes board materials using a portal application for a tablet device or other smart phone. Nineteen percent (19%) of all public companies, which consists primarily of large-cap companies, use such a distribution medium. Specifically, 28% of boards of large-cap companies are using tablets, and 66% of all public companies use or are considering the use of portals in the near future.

Other methods of distribution included the Internet and intranet; there was minimal change in this area since 2008. However, there were significant decreases from the 2008 study relative to the printed forms of board materials, as a result of the portal and tablet distribution method noted above. Specifically, 21% fewer small-cap, 7% fewer

mid-cap, and 14% fewer large-cap companies are mailing hard copy materials and 29%, 14%, and 20% fewer small-, mid-, and large-cap companies, respectively, are distrib-uting materials at board meetings since 2008.

Facebook, LinkedIn, Twitter, and other forms of social media are becoming widely used forums for companies to interact with their clients, consumers, other stakeholders, and the general public. While 58% of public company respondents indicated that their directors do not engage in social media associated with their organizations, 35% did not know whether this took place. The benefits of social media are abundant, but if used ineffectively or inappropriately, could lead to negative implications for the company, thus affecting the board. To mitigate such risks, a company might establish a policy to address how social media is expected to be used by all employees. Sixty-one percent (61%) of all public companies in this survey have such a policy, which represents 52% of small-cap, 57% of mid-cap, and 70% of large-cap companies.

68. What level best describes your board's involvement with information technology?

Small-cap

Mid-cap

Large-cap




69. Please specify how your organization distributes board materials. (Select all that apply)

Small-cap

Mid-cap

Large-cap




70. If your organization does not have a board portal, which statement below best explains your company's view on the technology platform?

Small-cap

Mid-cap

Large-cap




71. Would you assess the board's use of technology to be:

Small-cap

Mid-cap

Large-cap




72. Do your directors engage in social media associated with your organization?

Small-cap

Mid-cap

Large-cap




73. Does your company have a social media policy?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)19%

41%

22%

19%

2%

37%

32%

29%

3%

23%

50%

23%

Don't know

Frequently engaged andup-to-date on latest

technology applications

Aware of the benefitstechnology can provide

No involvement besidesbasic email

communications

26%

37%

32%

5%

25%

37%

33%

5%

25%

37%

33%

5%


communications




Don't know

7%

44%

63%

30%

15%

26%

17%

57%

82%

42%

20%

28%

28%

50%

80%

45%

15%

22%

Using an application for theiPad or other tablet device

In-person at board meetings

Through mailing ofhardcopies

Through an internal orexternal board portal

Through secure e-mail, e.g.company intranet

Through unsecured e-mail,e.g. Internet

29%

32%

37%

84%

61%

11%

25%

14%

42%

77%

50%

22%

26%

18%

41%

78%

53%

19%







2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

6%

17%

56%

22%

9%

33%

28%

30%

13%

35%

35%

16%

We have not considered boardportal technology

We will be introducing thistechnology in the near future

We are currently considering thebenefits of the use of board portals

We have considered the use ofboard portals but do not currently

see a need for this technology2011 (n=103)

2011 (n=103)

2011 (n=103)

2011 (n=103)

21%

42%

29%

8%

25%

33%

32%

10%

24%

35%

31%

10%


see a need for this technology




30%

70%

16%

84%

25%

75%

No change

Increasing

79%

21%

79%

21%

79%

21%

Increasing

No change

44%

41%

15%

0%

36%

57%

7%

28%

67%

5%

Don't know

Directors do notengage in social

media

Some directorsengage in social

media

Directors engage insocial media

0%

16%

53%

32%

5%

59%

36%

7%

58%

35%



mediaDirectors do notengage in social

media

Don't know

66%

52%

59%

57%

61%

70%Yes

Yes

2011 (n=173)

Board’s use of technology

84


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)19%

41%

22%

19%

2%

37%

32%

29%

3%

23%

50%

23%

Don't know





communications

26%

37%

32%

5%

25%

37%

33%

5%

25%

37%

33%

5%


communications




Don't know

7%

44%

63%

30%

15%

26%

17%

57%

82%

42%

20%

28%

28%

50%

80%

45%

15%

22%







29%

32%

37%

84%

61%

11%

25%

14%

42%

77%

50%

22%

26%

18%

41%

78%

53%

19%







2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

6%

17%

56%

22%

9%

33%

28%

30%

13%

35%

35%

16%






2011 (n=103)

2011 (n=103)

2011 (n=103)

21%

42%

29%

8%

25%

33%

32%

10%

24%

35%

31%

10%






30%

70%

16%

84%

25%

75%

No change

Increasing

79%

21%

79%

21%

79%

21%

Increasing

No change

44%

41%

15%

0%

36%

57%

7%

28%

67%

5%

Don't know


media


media


0%

16%

53%

32%

5%

59%

36%

7%

58%

35%




media

Don't know

66%

52%

59%

57%

61%

70%Yes

Yes

2011 (n=173)




Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)19%

41%

22%

19%

2%

37%

32%

29%

3%

23%

50%

23%

Don't know





communications

26%

37%

32%

5%

25%

37%

33%

5%

25%

37%

33%

5%


communications




Don't know

7%

44%

63%

30%

15%

26%

17%

57%

82%

42%

20%

28%

28%

50%

80%

45%

15%

22%







29%

32%

37%

84%

61%

11%

25%

14%

42%

77%

50%

22%

26%

18%

41%

78%

53%

19%







2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

6%

17%

56%

22%

9%

33%

28%

30%

13%

35%

35%

16%






2011 (n=103)

2011 (n=103)

2011 (n=103)

21%

42%

29%

8%

25%

33%

32%

10%

24%

35%

31%

10%






30%

70%

16%

84%

25%

75%

No change

Increasing

79%

21%

79%

21%

79%

21%

Increasing

No change

44%

41%

15%

0%

36%

57%

7%

28%

67%

5%

Don't know


media


media


0%

16%

53%

32%

5%

59%

36%

7%

58%

35%




media

Don't know

66%

52%

59%

57%

61%

70%Yes

Yes

2011 (n=173)


86


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011 (n=174)

2011 (n=174)

2011 (n=174)

2011 (n=174)19%

41%

22%

19%

2%

37%

32%

29%

3%

23%

50%

23%

Don't know





communications

26%

37%

32%

5%

25%

37%

33%

5%

25%

37%

33%

5%


communications




Don't know

7%

44%

63%

30%

15%

26%

17%

57%

82%

42%

20%

28%

28%

50%

80%

45%

15%

22%







29%

32%

37%

84%

61%

11%

25%

14%

42%

77%

50%

22%

26%

18%

41%

78%

53%

19%







2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

2011

6%

17%

56%

22%

9%

33%

28%

30%

13%

35%

35%

16%






2011 (n=103)

2011 (n=103)

2011 (n=103)

21%

42%

29%

8%

25%

33%

32%

10%

24%

35%

31%

10%






30%

70%

16%

84%

25%

75%

No change

Increasing

79%

21%

79%

21%

79%

21%

Increasing

No change

44%

41%

15%

0%

36%

57%

7%

28%

67%

5%Don't know


media


media


0%

16%

53%

32%

5%

59%

36%

7%

58%

35%




media

Don't know

66%

52%

59%

57%

61%

70%Yes

Yes

2011 (n=173)



SustainabilityIn recent years, companies have experienced pressure and interest from shareholders to establish or enhance corporate responsibility and sustainability (CRS) initiatives. Fifty-seven percent (57%) of large-cap companies have received a shareholder proposal related to CRS for 2011. Some respondents specified the types of CRS proposals received, such as political contributions, global warming/ climate change, human rights, equal employment opportunity, and animal welfare.

The boards of 41% of all public company respondents are involved in reviewing the sustainability efforts of the organization. This represents 24% of financial services and 46% of non-financial services companies, and 11%, 35%, and 63% of small-, mid-, and large-cap companies, respectively.

With regard to whether a separate sustainability report is published, 4% of small-cap companies do so, as compared to 31% of mid-cap companies and 68% of large-cap companies.

22%

67%

11%

6%

59%

35%

5%

32%

63%

Don't know

No

Yes

26%

70%

4%

8%

60%

31%

8%

23%

68%

Don't know

No

Yes

74. Does your organization prepare and file a separate sustainability report?

Small-cap

Mid-cap

Large-cap




74a. If yes, is this report available on your organization's website

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=69)

2011 (n=174)2011 (n=174)

2011 (n=173)

16%

63%

21%

47%

45%

8%

40%

49%

11%

Yes

No

Don't know

76. Is the board and its committees involved with reviewing the sustainability effort maintained by the organization?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

100%

100%

98%

96%

99%

100%Yes

Yes

75. Has your organization received a shareholder proposal related to corporate social responsibility initiatives?

Small-cap

Mid-cap

Large-cap




24%

62%

14%

46%

47%

7%

41%

51%

8%

Yes

No

Don't know

24% 25%

10%

25%

57%

Yes

Yes

4% of mid-cap respondents answered “Don’t know”.

1% and 2% of all public and non-financial services companies, respectively, answered “Don’t know”.

Sustainability

88

22%

67%

11%

6%

59%

35%

5%

32%

63%

Don't know

No

Yes

26%

70%

4%

8%

60%

31%

8%

23%

68%

Don't know

No

Yes


Small-cap

Mid-cap

Large-cap




74a. If yes, is this report available on your organization's website

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011 (n=173)

2011 (n=173)

2011 (n=69)

2011 (n=174)2011 (n=174)

2011 (n=173)

16%

63%

21%

47%

45%

8%

40%

49%

11%

Yes

No

Don't know


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011 (n=172)

2011 (n=172)

2011 (n=172)

100%

100%

98%

96%

99%

100%Yes

Yes


Small-cap

Mid-cap

Large-cap




24%

62%

14%

46%

47%

7%

41%

51%

8%

Yes

No

Don't know

24% 25%

10%

25%

57%

Yes

Yes

100%, 89%, and 43% of small-, mid-, and large-cap respondents, respectively, answered “No”, and 1% of mid-cap respondents answered “Don’t know”.

76%, 74%, and 75% of financial services, non-financial services, and all public companies, respectively, answered “No”.

1% of both all public and non-financial services companies answered “Don’t know”.

Sustainability


Culture/ setting tone at the topThe board plays a crucial role in helping to define and establish an organization’s culture and the ethical environ-ment it promotes. The board’s role in overseeing company compliance programs was most recently affected by whistleblower rules put forth by the SEC, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules, which pertain to how employees report compliance violations, will likely cause companies to take further action to foster a culture of accountability. As of the date of this survey, it is too early to see any results. In fact, 62% of all public company respondents indicated that their boards have not asked management to take specific steps to enhance their culture.

Almost none of the small-cap companies conduct cultural surveys, whereas 54% of mid-cap companies and 68% of large-cap companies do, either annually or in certain circumstances. Fewer financial services companies

conduct such surveys compared to non-financial services companies. Virtually all respondents stated that partici-pants of the cultural survey include all employees (including management), and across all public companies, manage-ment reviews the survey findings with the board.

Boards typically do not communicate directly to employees according to 86% of the companies surveyed. Of the 5% that do in certain circumstances, communications include: directors addressing several employee leadership groups or employee affinity groups; individual directors partici-pating in several employee forums; and female directors speaking to groups focused on the advancement of women in the company.

29%

20%

51%

38%

19%

7%

36%

36%

19%

5%

40%

Management reviews thesurvey findings with the board

Management reviews thesurvey findings with the board in

certain circumstancesManagement does not review

the survey findings with theboard

Not applicable

64%

5%

9%

23%

38%

4%

18%

39%

32%

8%

25%

36%

Not applicable

Management does not reviewthe survey findings with the

board


certain circumstances


49%

0%

51%

65%

1%

35%

61%

1%

39%

All employees(including

management)

All employees underthe management level

The board

Not applicable

64%

0%

36%

36%

1%

62%

32%

70%

Not applicable

The board



management)

19%

27%

54%

29%

29%

42%

27%

29%

45%

Annually

Only in certaincircumstances

We do notconductculturalsurveys

69%

15%

15%

46%

33%

21%

32%

28%

40%



Annually

29%

61%

11%

27%

63%

10%

28%

62%

10%

Yes

No

Don't know

15%

58%

27%

9%

63%

28%

9%

63%

28%

Don't know

No

Yes

77. Given the new SEC whistleblower rules (May 2011), has your board asked management to take specific steps to continue to enhance a culture of candid and open communication?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011 (n=169)

2011 (n=169)

2011 (n=169)

78. How often does your organization conduct cultural surveys?

Small-cap

Mid-cap

Large-cap




78a. If cultural surveys are conducted by your organization, which parties participate? (Select all that apply)

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=168)

2011 (n=168)

2011 (n=168)

2011 (n=145)

2011 (n=145)

2011 (n=145)

78b. If cultural surveys are conducted by your organization, does management review the survey findings with the board?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011 (n=146)

2011 (n=146)

2011 (n=146)

2011 (n=146)

79. How do employees receive communication from the board? (Select all that apply)

Small-cap

Mid-cap

Large-cap




80. Has your company established an anti-hedging policy that applies to directors?

Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=171)

2011 (n=171)

2011 (n=171)

92%

8%

4%

6%

81%

11%

11%

5%

90%

5%

5%


The board does notprovide communications

to employees

Through verbalcommunications (e.g., livemeetings, voicemails, etc.)

Through electroniccommunication

8%

16%

81%

5%

8%6%

87%

5%

8%8%

86%

5%




to employees


16%

16%

68%

15%

26%

59%

12%

18%

70%

We are considering theestablishment of such a

policy

My company has notestablished an anti-hedging

policy that applies todirectors

My company hasestablished an anti-hedging


55%

34%

11%

67%

18%

15%

64%

22%

14%






policy

2011 (n=145)

Culture/ setting tone at the top

90

29%

20%

51%

38%

19%

7%

36%

36%

19%

5%

40%





Not applicable

64%

5%

9%

23%

38%

4%

18%

39%

32%

8%

25%

36%

Not applicable


board




49%

0%

51%

65%

1%

35%

61%

1%

39%


management)


The board

Not applicable

64%

0%

36%

36%

1%

62%

32%

70%

Not applicable

The board



management)

19%

27%

54%

29%

29%

42%

27%

29%

45%

Annually



69%

15%

15%

46%

33%

21%

32%

28%

40%



Annually

29%

61%

11%

27%

63%

10%

28%

62%

10%

Yes

No

Don't know

15%

58%

27%

9%

63%

28%

9%

63%

28%

Don't know

No

Yes


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011 (n=169)

2011 (n=169)

2011 (n=169)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=168)

2011 (n=168)

2011 (n=168)

2011 (n=145)

2011 (n=145)

2011 (n=145)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011 (n=146)

2011 (n=146)

2011 (n=146)

2011 (n=146)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=171)

2011 (n=171)

2011 (n=171)

92%

8%

4%

6%

81%

11%

11%

5%

90%

5%

5%



to employees



8%

16%

81%

5%

8%6%

87%

5%

8%8%

86%

5%




to employees


16%

16%

68%

15%

26%

59%

12%

18%

70%


policy





55%

34%

11%

67%

18%

15%

64%

22%

14%






policy

2011 (n=145)



29%

20%

51%

38%

19%

7%

36%

36%

19%

5%

40%





Not applicable

64%

5%

9%

23%

38%

4%

18%

39%

32%

8%

25%

36%

Not applicable


board




49%

0%

51%

65%

1%

35%

61%

1%

39%


management)


The board

Not applicable

64%

0%

36%

36%

1%

62%

32%

70%

Not applicable

The board



management)

19%

27%

54%

29%

29%

42%

27%

29%

45%

Annually



69%

15%

15%

46%

33%

21%

32%

28%

40%



Annually

29%

61%

11%

27%

63%

10%

28%

62%

10%

Yes

No

Don't know

15%

58%

27%

9%

63%

28%

9%

63%

28%

Don't know

No

Yes


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011 (n=169)

2011 (n=169)

2011 (n=169)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=168)

2011 (n=168)

2011 (n=168)

2011 (n=145)

2011 (n=145)

2011 (n=145)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011 (n=146)

2011 (n=146)

2011 (n=146)

2011 (n=146)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=171)

2011 (n=171)

2011 (n=171)

92%

8%

4%

6%

81%

11%

11%

5%

90%

5%

5%



to employees



8%

16%

81%

5%

8%6%

87%

5%

8%8%

86%

5%




to employees


16%

16%

68%

15%

26%

59%

12%

18%

70%


policy





55%

34%

11%

67%

18%

15%

64%

22%

14%






policy

2011 (n=145)


92

29%

20%

51%

38%

19%

7%

36%

36%

19%

5%

40%





Not applicable

64%

5%

9%

23%

38%

4%

18%

39%

32%

8%

25%

36%

Not applicable


board




49%

0%

51%

65%

1%

35%

61%

1%

39%


management)


The board

Not applicable

64%

0%

36%

36%

1%

62%

32%

70%

Not applicable

The board



management)

19%

27%

54%

29%

29%

42%

27%

29%

45%

Annually



69%

15%

15%

46%

33%

21%

32%

28%

40%



Annually

29%

61%

11%

27%

63%

10%

28%

62%

10%

Yes

No

Don't know

15%

58%

27%

9%

63%

28%

9%

63%

28%

Don't know

No

Yes


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011 (n=169)

2011 (n=169)

2011 (n=169)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=168)

2011 (n=168)

2011 (n=168)

2011 (n=145)

2011 (n=145)

2011 (n=145)


Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011 (n=146)

2011 (n=146)

2011 (n=146)

2011 (n=146)


Small-cap

Mid-cap

Large-cap





Small-cap

Mid-cap

Large-cap




2011

2011

2011

2011

2011

2011

2011

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=170)

2011 (n=171)

2011 (n=171)

2011 (n=171)

92%

8%

4%

6%

81%

11%

11%

5%

90%

5%

5%



to employees



8%

16%

81%

5%

8%6%

87%

5%

8%8%

86%

5%




to employees


16%

16%

68%

15%

26%

59%

12%

18%

70%


policy





55%

34%

11%

67%

18%

15%

64%

22%

14%






policy

2011 (n=145)

Private sessions (Board access to management)**

81. Do non-employee directors have direct access to management below the CEO level (not including boardroom presentations) without CEO approval?

Small-cap

Mid-cap

Large-cap




2011

2008

2011 (n=171)

95%

91%

98%

97%

97%

92%

100% 97% 97%

Yes

Yes

Culture/ setting tone at the top & Private sessions (Board access to management)



Non-public company survey results

Additional informationAdditional information and resources on the topics discussed in the table on the following pages are available at the Deloitte Center for Corporate Governance website at www.corpgov.deloitte.com.

This section of the Report is designated to cover the survey results of board practices specific to non-public companies. While many organizations in this category already voluntarily adopt the governance practices of public companies, this section will provide insight into current non-public company board practices being employed.

Thirty-three participants were included in the “non-public” company sector, which was comprised of 12 nonprofit organizations, 19 private companies, and 2 partnerships. Results in this section of the Report have been refined to the survey questions most applicable to non-public companies. An “n” value has been provided for any question in which fewer than 33 participants responded. An asterisk represents any question where a participant was asked to provide a numerical or text response. These responses have been consolidated into categories or ranges.

Key findingsThe 2008 report had 274 respondents, which included 16 nonprofit companies and 29 private companies. During the three-year period, there have been notable trends in the board practices of these companies as follows:

•9%moreprivatecompaniesareusingaskillsmatrixorsimilar tool to assess board composition.

•26%moreprivatecompaniesareusingwrittencriteriatoselect directors.

•20%morenonprofitorganizationsand9%fewerprivatecompanies are using an executive search/ board director recruiting firm.

•37%morenonprofitcompanyboardmeetingsarelasting6 to 8 hours; 7% and 25% fewer nonprofit companies are meeting 1 to 2 hours and 3 to 5 hours, respectively.

•46%morenonprofitorganizationsaresendingboardmeeting materials between 5-10 business days in advance; 21% fewer are sending at most 5 days in advance, and 25% fewer nonprofit organizations are sending these materials more than 10 days in advance.

•19%morenonprofitorganizationsand14%moreprivatecompanies are assigning responsibility for appointing

committee members and chairs to the board chair/lead director; 17% more in nonprofit organizations are assigning the responsibility to the full board.

•38%fewernonprofitorganizationsand8%moreprivatecompanies have a policy to rotate committee chairs.

•17%ofnonprofitorganizationsnowhavelimitson audit committee members serving on the audit commit-tees of other companies; 7% more private companies have such limits.

•19%morenonprofitorganizationsand27%moreprivatecompanies have a formal orientation program for new directors (beyond supplying a directors’ manual).

•33%morenonprofitorganizationsevaluatetheboardannually, and 27% more nonprofit organizations now conduct board evaluations.

•15%moreinprivatecompaniesthathaveamanagementdisclosure committee.

•50%morenonprofitorganizationsand27%moreprivatecompanies use a board portal to distribute board meeting materials; 27% fewer nonprofit organizations distribute these materials through hard copies; 24% fewer private companies send board meeting materials via unsecured email, and 46% fewer private companies distribute this material at board meetings.

www.corpgov.deloitte.com

94

Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

Organizational criteria1 What is your organization’s industry?

Agriculture or mining 3% 0% 5%Banking or finance 18% 8% 24%Energy 3% 8% 0%Healthcare or pharmaceutical 12% 25% 5%Insurance 21% 17% 24%Manufacturing industrial 6% 0% 10%Nonprofit or public admin 15% 42% 0%Professional services 3% 0% 5%Real estate or construction 3% 0% 5%Retail/Wholesale 6% 0% 10%Technology (including software) 3% 0% 5%Telecommunications 6% 0% 10%

2 Please specify your company type: Nonprofit 36%Partnership 6%Privately held 58%Board practicesBoard selection, recruitment and composition

Yes No N/A

3 Does your organization use a skills matrix or similar tool to periodically assess board composition and fill gaps when selecting new directors?

45% 67% 33% 55% 33% 67%

Yes No N/A

4 Does your organization use written criteria in director selection?

61% 67% 57% 39% 33% 43%

Yes No N/A

5 Does your organization use an executive search/ board director recruiting firm to assist in the recruitment of board directors?

33% 33% 33% 67% 67% 67%

Yes No N/A

6 Does your organization provide a mechanism for shareholders to nominate candidates to the board?

33% 25% 38% 12% 0% 19% 55% 75% 43%

Yes No N/A

7 Do you have a mandatory retirement policy for directors?

42% 42% 43% 55% 58% 52% 3% 5%

7a* If so, at what age is retirement required? (n=13) (n=5) (n=8)

≤70 31% 40% 25%71 0% 0% 0%72 38% 40% 38%73 8% 0% 13%74 0% 0% 0%≥75 23% 20% 25%Independent chairman

8 Is the independent board chairman also the chairman of the nominating and governance committee?

The independent board chairman is also the chairman of the nominating and governance committee

6% 8% 5%

No, but our policy would not restrict the same individual from holding both positions

36% 50% 29%

Our policy does not permit the same individual from holding both positions

6% 8% 5%

Not applicable — we do not have an indepen-dent chairman

52% 33% 62%


Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

9 Who is responsible for the periodic evalua-tion and development of the independent chairman?

(n=32) (n=11)

The nominating and governance committee 16% 27% 10%The full board 25% 36% 19%Another committee 3% 9% 0%No formal evaluation is performed 9% 9% 10%Not applicable — we do not have an Independent chairman

47% 18% 62%

9a* If another committee, please specify:•Executivecompensationcommittee •

10 How often is periodic evaluation of the independent chairman performed?Annually 30% 42% 24%Periodically, as needed 9% 17% 5%No formal evaluation is performed 12% 17% 10%Not applicable — we do not have an Independent chairman

48% 25% 62%

11 Does your policy specify a rotation policy or term limit for the independent chair?Rotation policy 3% 0% 5%Term limit 15% 25% 10%Neither 33% 50% 24%Not applicable — we do not have an indepen-dent chairman

48% 25% 62%

Board meetings and materials12 Does your company permit shareholders to

call special shareholder meetings? (n=27) (n=8) (n=19)

Permitted without any restriction 26% 13% 32%Permitted but with minimum ownership threshold percentages

22% 13% 26%

Not permitted 52% 75% 42%12a* If permitted with a minimum ownership threshold, please specify the threshold percentage

(e.g. 10, 15, 20, 25%):10% 20% 100% 0%25% 40% 0% 50%Depends on situation 20% 0% 25%Majority of shares 20% 0% 25%

13 How many hours does a typical board meeting last? (Do not count time spent on committee meetings on a board meeting day).1-2 hours 15% 8% 19%3-5 hours 39% 25% 48%6-8 hours 33% 50% 24%9-10 hours 3% 0% 5%More than 10 hours 9% 17% 5%

14 How far in advance are board meeting materials provided to board members?At most five business days before meeting 30% 17% 38%Between five to ten business days before meeting

67% 83% 57%

More than ten business days before meeting 3% 0% 5%Materials are not distributed prior to board meetings

0% 0% 0%

96

Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

15 What is the most common form of board meetings for your organization?Live, face-to-face meetings 94% 100% 90%Live, face-to-face meetings with some directors attending via web-conference or video conference

0% 0% 0%

Live, face-to-face meetings with some directors attending via telephone

3% 0% 5%

Tele-conference calls 3% 0% 5%16 How often do you hold board meetings

outside of the country in which your company is headquartered?

(n=32) (n=20)

Frequently (five or more times a year) 0% 0% 0%Sometimes (two to four times a year) 3% 0% 5%Rarely (once a year) 9% 0% 15%We do not hold board meetings outside of the country in which our company is headquartered

88% 100% 80%

Yes No N/A

17 Do you make company owned aircraft available to directors for travel to meetings? 9% 8% 10% 30% 42% 24% 61% 50% 67%

18 What amount of reimbursement does your company provide to directors for travel to meetings?Full reimbursement 82% 83% 81%Partial reimbursement 0% 0% 0%None 18% 17% 19%Committee structures and roles

19 How many standing committees does your board have? (n=33)Two or less 15% 17% 14%Three to five 58% 25% 76%Five or more 27% 58% 10%

20 SEE PAGES 97 & 9821 Which of the following has the primary responsibility for appointing committee members

and chairs?Full board 58% 42% 67%Nominating/ corporate governance committee 18% 33% 10%Board chair/ lead director 15% 25% 10%Other 9% 0% 14%

21a* If Other, please specify:•Executivecommittee ••Nominating/corporategovernancecommittee

makes recommendations; board approves •Yes No N/A

22 Does your board have a policy to rotate committee chairs?

18% 17% 19% 82% 83% 81%

Yes No N/A

23 Does your board have a policy to rotate committee membership?

24% 17% 29% 76% 83% 71%

Yes No N/A

24 Does your board have limits on audit committee members being able to participate on other organizations’ audit committees?

15% 17% 14% 85% 83% 86%


Committee

Number of members

All

no

n-p

ub

lic

com

pan

ies

No

np

rofi

t

Pri

vate

and

p

artn

ersh

ip Meeting frequency in a year

All

no

n-p

ub

lic

com

pan

ies

No

np

rofi

t

Pri

vate

and

p

artn

ersh

ip

Audit committee

1-4 15 / 48% 4 / 36% 11 / 55% 1-6 24 / 80% 8 / 73% 16 / 80%

5-9 16 / 52% 7 / 64% 9 / 45% 7-11 4 / 13% 2 / 18% 2 / 10%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 2 / 0% 1 / 9% 1 / 5%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 1 / 5%


1-4 14 / 48% 2 / 22% 12 / 60% 1-6 27 / 100% 9 / 100% 18 / 90%

5-9 15 / 52% 7 / 78% 8 / 40% 7-11 0 / 0% 0/0% 0 / 0%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 0 / 0% 0/0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 2 / 10%

Nominating / corporate governance

1-4 11 / 48% 3 / 30% 8 / 62% 1-6 20 / 91% 8 / 80% 12 / 92%

5-9 12 / 52% 7 / 70% 5 / 39% 7-11 0 / 0% 1 / 10% 0 / 0%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 2 / 0% 1/ 10% 0 /0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 1 / 8%

Executive committee

1-4 3 / 20% 0 / 0% 3 / 33% 1-6 8 / 73% 4 / 67% 6 / 75%

5-9 11 / 73% 5 / 83% 6 / 67% 7-11 1 / 9% 1 / 33% 2 / 25%

≥10 1 / 0% 1 / 17% 0 / 0% ≥12 2 / 0% 0/ 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 0 / 0%

Science & technology

1-4 1 / 50% 0 / 0% 1 / 50% 1-6 2 / 100% 0 / 0% 2 / 100%

5-9 1 / 50% 0 / 0% 1 / 50% 7-11 0 / 0% 0 / 0% 0 / 0%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 0 / 0%

Risk committee

1-4 0 / 0% 0 / 0% 0 / 0% 1-6 3 / 75% 1 / 100% 2 / 67%

5-9 4 / 100% 1 / 100% 3 / 100% 7-11 0 / 0% 0 / 0% 0 / 0%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 1 / 0% 0 / 0% 1 / 33%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 0 / 0%

Strategy committee

1-4 0 / 0% 0 / 0% 0 / 0% 1-6 4 / 100% 3 / 100% 1 / 100%

5-9 3 / 75% 2 / 67% 1 / 100% 7-11 0 / 0% 0 / 0% 0 / 0%

≥10 1 / 0% 1 / 33% 0 / 0% ≥12 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 0 / 0%


1-4 0 / 0% 0 / 0% 0 / 0% 1-6 0 / 0% 0 / 0% 0 / 0%

5-9 0 / 0% 0 / 0% 0 / 0% 7-11 0 / 0% 0 / 0% 0 / 0%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 0 / 0%


1-4 0 / 0% 0 / 0% 0 / 0% 1-6 2 / 100% 1 / 100% 1 / 100%

5-9 2 / 100% 1 / 100% 1 / 100% 7-11 0 / 0% 0 / 0% 0 / 0%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 0 / 0%

Disclosure

1-4 0 / 0% 0 / 0% 0 / 0% 1-6 0 / 0% 0 / 0% 0 / 0%

5-9 1 / 100% 0 / 0% 1 / 100% 7-11 1 / 100% 0 / 0% 1 / 100%

≥10 0 / 0% 0 / 0% 0 / 0% ≥12 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0% Other 0 / 0% 0 / 0% 0 / 0%

20 Please complete the following table with regard to the specific committee practices of your boardNote: For each committee in the following tables, the count of respondents (n value) and this percentage of the total count of respondents for the committee is provided as “n value/ percentage”.

98

Committee

Average length of meetings (hrs) A

ll no

n-

pub

lic

com

pan

ies

No

np

rofi

t

Pri

vate

and

p

artn

ersh

ip Auditor attendance in meetings (Y/N)

All

no

n-

pub

lic

com

pan

ies

No

np

rofi

t

Pri

vate

and

p

artn

ersh

ip

Audit committee

0.5-1.5 6 / 19% 2 / 18% 4 / 20% Yes 27 / 90% 19 / 95%

2-3 19 / 61% 6 / 55% 13 / 65% No 3 / 10% 1 / 5%

≥4 6 / 0% 3 / 27% 3 /15%

Other 0 / 0% 0 / 0% 0 / 0%


0.5-1.5 11 / 38% 3 / 33% 7 / 35% Yes 0 / 0% 0 / 0%

2-3 13 /45% 5 / 56% 9 / 45% No 27 / 100% 19 / 100%

≥4 5 / 0% 1 / 11% 4 / 20%

Other 0 / 0% 0 / 0% 0 / 0%

Nominating / corporate governance

0.5-1.5 12 / 52% 5 / 50% 7 / 54% Yes 0 / 0% 0 / 0%

2-3 9 / 39% 5 / 50% 4 / 31% No 21 / 100% 12 / 100%

≥4 2 / 0% 0 / 0% 1 / 8%

Other 0 / 0% 0 / 0% 0 / 0%

Executive committee

0.5-1.5 8 / 73% 3 / 60% 5 / 83% Yes 0 / 0% 0 / 0%

2-3 3 / 27% 2 / 40% 1 / 17% No 14 / 100% 8 / 100%

≥4 0 / 0% 0 / 0% 0 /0%

Other 0 / 0% 0 / 0% 0 / 0%

Science & technology

0.5-1.5 1, 50% 0 / 0% 1 / 50% Yes 0 / 0% 0 / 0%

2-3 1 / 50% 0 / 0% 1 / 50% No 2 / 100% 2 / 100%

≥4 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0%

Risk committee

0.5-1.5 0 / 0% 0 / 0% 0 / 0% Yes 1 / 33% 1 / 33%

2-3 4 / 100% 1 / 100% 3 / 100% No 2 / 67% 2 / 67%

≥4 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0%

Strategy committee

0.5-1.5 1 / 25% 1 / 33% 0 / 0% Yes 0 / 0% 0 / 0%

2-3 3 / 75% 2 / 67% 1 / 100% No 4 / 100% 1 / 100%

≥4 0 / 0% 0/ 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0%


0.5-1.5 0 / 0% 0 / 0% 0 / 0% Yes 0 / 0% 0 / 0%

2-3 0 / 0% 0 / 0% 0 / 0% No 0 / 0% 0 / 0%

≥4 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0%


0.5-1.5 0 / 0% 0 / 0% 0 / 0% Yes 0 / 0% 0 / 0%

2-3 2 / 100% 1 / 100% 1 / 100% No 1 / 100% 1 / 100%

≥4 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0%

Disclosure

0.5-1.5 0 / 0% 0 / 0% 0 / 0% Yes 0 / 0% 0 / 0%

2-3 1 / 100% 0 / 0% 1 / 100% No 1 / 100% 1 / 100%

≥4 0 / 0% 0 / 0% 0 / 0%

Other 0 / 0% 0 / 0% 0 / 0%


Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

24a* If yes, please specify the limit: (n=5) (n=2) (n=3)2 40% 0% 67%3 40% 50% 33%Directors should hold participation in other boards to a level that does not adversely impact their ability to serve the company’s board and avoid accepting director responsibilities that would create the opportunity for/appearance of a conflict.

20% 50%

Audit committee25 How often does the audit committee meet annually via:

In-person meetings (n=31) (n=11) (n=20)1-4 81% 55% 95%5-9 19% 45% 5%10-14 0% 0% 0%

By video or web conference (n=1) (n=1)1-4 100% 0% 100%5-9 0% 0% 0%10-14 0% 0% 0%

By tele-conference calls (n=20) (n=6) (n=14)1-4 95% 83% 100%5-9 5% 17% 0%10-14 0% 0% 0%

26 How has the frequency of audit committee meetings changed since last year?Increased substantially 3% 8% 0%Increased slightly 12% 25% 5%Decreased 0% 0% 0%No change 85% 67% 95%

28 Does your organization’s audit committee hold a separate meeting to review the earnings release vs. quarterly reviews or are they combined?

(n=19) (n=6) (n=13)

Separate meetings 16% 17% 15%Combined meetings 84% 83% 85%

29 How often do external auditors attend your company’s audit committee meetings?Frequently (all or almost all audit committee meetings)

64% 67% 62%

Sometimes (two to three audit committee meetings a year)

21% 17% 24%

Rarely (one audit committee meeting a year) 12% 8% 14%Never 3% 8% 0%Don’t know 0% 0% 0%

30 How often does your audit committee meet separately with management?

(n=32) (n=11)

Frequently (all or almost all audit committee meetings)

59% 45% 67%


28% 27% 29%

Rarely (one audit committee meeting a year) 3% 9% 0%Never 9% 18% 5%Don’t know 0% 0% 0%

100

Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

31 Which members of management meet separately with the audit committee? (Check all that apply)

(n=29) (n=10) (n=19)

Head of internal audit 72% 80% 68%General counsel 45% 70% 32%Chief executive officer 38% 40% 37%Chief financial officer 66% 70% 63%Chief compliance officer 31% 50% 21%Other 14% 20% 11%

31a* If Other, please specify:•Controller ••Controller/principalaccountingofficer ••Secretaryandtreasurer •

32 How often does your company’s audit committee engage specialists for specific matters on their agenda?

(n=31) (n=11) (n=20)

Frequently (five or more times a year) 3% 0% 5%Sometimes (two to four times a year) 16% 9% 20%Rarely (once a year) 68% 73% 65%Never 13% 18% 10%Don’t know 0% 0% 0%

33 How often does the audit committee receive reports on internal tips from a compliance hotline?

(n=31) (n=11) (n=20)

Frequently (five or more times a year) 29% 45% 20%Sometimes (two to four times a year) 26% 9% 35%Rarely (once a year) 23% 18% 25%Never 16% 9% 20%Don’t know 6% 18% 0%Board orientation and training

Yes No N/A

34 Does your organization have a formal orientation program for new directors (beyond supplying a directors’ manual)?

59% (n=32)

82% (n=11)

48% 41% 18% 52%

34a If yes, please check the orientation programs sponsored by your organization for directors: (Choose all that apply)

(n=19) (n=9) (n=10)

Live, in-house session led by an individual serving on the board and/or a staff member of the organization

95% 100% 90%

Live training by a third party 0% 11% 0%Internet-based training 5% 11% 10%

35 Does your company train directors on: (Choose all that apply)

(n=26) (n=11) (n=15)

Anti-corruption policies (e.g. FCPA, UK Anti-bribery Act)

27% 9% 40%

Insider trading 12% 9% 13%Political contributions 15% 18% 13%Company policies 88% 82% 93%Other regulatory issues related to your business such as privacy, etc.

65% 73% 60%

Other formal training 27% 36% 20%


Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

35a* If Other, please specify:•Annualcompliancetraining ••Backgroundonthecompany,boardpractices,

introductions to executives ••BaselII ••Financialoverview ••Reinsurance,investmentmanagement,

marketing •36 Which of the following best describes your board’s director education program?:

(Choose all that apply)Provided in-house by management 64% 67% 62%Provided in-house by a third party 9% 0% 14%Directors are reimbursed for public forums or peer group sessions attended

30% 58% 14%

The full board collectively attends a single public forum

0% 0% 0%

Our board does not have a formal director education program

24% 8% 33%

Other 6% 17% 0%36a* If Other, please specify:

•Eachboardmemberinathreeyearperiodoftime is encouraged to participate in educa-tional programs relevant to the director’s committee assignment and/or recommended best governance practices

•

•Providedbycorporatesecretary •37 How do your directors learn about director

education programs? (Choose all that apply)(n=29) (n=17)

From the corporate secretary or management 90% 100% 82%From other directors 19% 33% 24%From third party mailings 24% 8% 35%Other 39% 0% 6%

37a* If Other, please specify:•Otherresponsepertainedtopaymentof

director memberships to a governance organization.

•Board evaluations

38 How are your directors evaluated? (Choose all that apply)

(n=32) (n=20)

Self-evaluation 50% 58% 45%Individual peer-evaluation led by corporate secretary or other in-house personnel

16% 25% 10%

Individual peer-evaluation led by a third party facilitator

13% 0% 20%

Our organization does not have a formal board performance evaluation process

34% 25% 40%

Other 13% 25% 5%38a* If Other, please specify:

•Boardevaluation-evaluationofboard’spractices •

•Chairofthegovernancecommitteemeetswith all committee chairs and evaluates directors’ performance and participation

••Fullboardselfevaluation •

102

Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

39 To whom does the evaluation pertain? (Select all that apply)Individual board members 33% 42% 29%Board committees 36% 33% 38%Full board as a whole 55% 67% 48%Not applicable 36% 25% 43%

Yes No N/A

40 Have you had a third party evaluate the board’s performance?

18% 25% 14% 52% 58% 48% 30% 17% 38%

41 How often is the board evaluated?More frequently than once a year 0% 0% 0%Once a year 55% 58% 52%Not evaluated 33% 17% 43%

Strategy42 How often are strategic objectives discussed with the board?

Annually 30% 25% 33%Quarterly 30% 33% 29%At every meeting 39% 42% 38%Other 0% 0%

43 How often does your board participate in an off-site strategy meeting with management? (n=32) (n=20)

More frequently than once a year 9% 17% 5%Less frequently than once a year 22% 8% 30%Once a year 44% 58% 35%We do not hold off-site strategy meetings with management

25% 17% 30%

44 How is strategy set at your organization?Management develops strategy and the board advises, challenges and approves

94% 92% 95%

The board and management develop strategy together

6% 8% 5%

The board develops the strategy and manage-ment approves and executes

0% 0% 0%

Other 0% 0% 0%45 Is the level of board involvement in setting

strategy increasing or decreasing?(n=32) (n=11)

Increasing 56% 55% 57%Decreasing 0% 0% 0%Remains the same 44% 45% 43%Risk oversight, disclosure committee, and political contributions**

46 How does your board assign risk oversight for the organization’s risk management program? (Select all that apply)

We have a board risk committee 9% 8% 10%The audit committee has primary responsibility for risk oversight

61% 67% 57%

Risk oversight responsibilities are spread across all board committees

18% 17% 19%

The full board is responsible for risk oversight 36% 17% 48%We have not considered board responsibility for risk oversight

3% 8% 0%

Other 15% 25% 10%



Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

46a* If Other, please specify:•Committeesarealsochargedwithriskoversight

for the risks within their committee charters ••Currentlyevaluating ••Executivecommitteeisresponsibleforrisk

oversight ••Internalauditormanages/designsrisk

management •Yes No N/A

47 Does your organization have a manage-ment disclosure committee as recom-mended by the SEC for public companies?

21% 8% 29% 9% 8% 10% 70% 83% 62%

Yes No N/A

47a If yes, does the management disclosure committee report to either the board or a board committee?

14% (n=7)

0% (n=1)

17% (n=6)

86% 100% 83% 0% 0% 0%

47b If yes, how often? (n=1) (n=1)Monthly QuarterlySemi-annuallyAnnuallyNo determined frequency; only when needed 100% 100%

48 Does the company align risk oversight/ risk management with the company’s strategy?Yes 79% 75% 81%No 9% 17% 5%Don’t Know 12% 8% 14%

49 Does your company’s board oversee political contributions and donations made by the company — or oversee the political action committees (or similar) of the company?

(n=31) (n=11) (n=20)

Yes 32% 36% 30%No 55% 45% 60%Don’t Know 13% 18% 10%

50 Has your company imposed any limita-tions, or reporting obligations, to the company on political contributions by director?

(n=31) (n=19)

Yes 26% 33% 21%No 65% 67% 63%Don’t Know 10% 0% 16%CEO succession planning

51 How often does the full board review CEO succession plans?

(n=31) (n=11) (n=20)

More than once a year 13% 9% 15%Once a year 45% 36% 50%Less than once a year (e.g. every two years) 6% 9% 5%Only when a change in circumstance requires 22% 18% 25%Never 13% 27% 5%

52 Who has the primary responsibility over the CEO succession planning process? Entire board 40% 17% 48%Compensation committee 23% 25% 24%Nominating/ corporate governance committee 10% 33% 0%Independent directors 3% 0% 5%CEO 13% 8% 14%Other 10% 17% 10%

104

Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

52a* If Other, please specify:•Asapartnership,themajoritypartner’s

chairman decides ••Humanresourceandgovernancecommittee •CEO performance evaluation

53 How often does the full board review the CEO’s performance?

(n=32) (n=20)

More than once a year 3% 8% 0%Once a year 81% 83% 80%Less than once a year (e.g. every two years) 0% 0% 0%Only when a change in circumstance requires 6% 0% 10%Never 9% 8% 10%

54 Who has the lead responsibility over the CEO performance evaluation process?

(n=31) (n=19)

Entire board 16% 8% 21%Compensation committee 48% 42% 53%Nominating/ corporate governance committee 13% 25% 5%Independent chair or lead director 10% 8% 11%Other 13% 17% 11%

54a* If Other, please specify:•Executivecommittee ••Humanresourceandgovernancecommittee •Directors and officers liability insurance

Yes No N/A

65 Does your organization have directors and officers (“D&O”) liability insurance?

94% 92% 95% 6% 8% 5%

Yes No N/A

65a If yes, does the D&O insurance cover more than designated directors and officers of the organization? (n=29)

31% 22% 35% 69% 78% 65%

65a* Please list who else is covered under the D&O policy: Representative responses include:•Allemployees • ••Employeesservingontheboardofthe

company’s subsidiaries, portfolio companies, or affiliates

••Representativeemployees ••Retirementplancommittee(internal);others

with approval of board. •66 Do any of your directors own individual director liability insurance?

Yes 3% 0% 5%No 21% 33% 14%Don’t know 76% 67% 81%

66a If yes, which statement best describes how the individual director liability insurance policies gets funded?

(n=1) (n=0) (n=1)

The director funds his/ her own insurance policy 0% 0% 0%The company funds his/ her own insurance policy 100% 0% 100%Don’t know 0% 0% 0%

67 Please indicate how your liability insurance policy limits have changed in the past 12 months:

(n=32) (n=20)

Increased 16% 8% 20%Decreased 0% 0% 0%No change 59% 67% 55%Don’t know 22% 17% 25%Not applicable 3% 8% 0%


Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

Board’s use of technology68 What level best describes your board’s involvement with information technology?

No involvement besides basic email communications

15% 8% 19%

Aware of the benefits technology can provide 42% 50% 38%Frequently engaged and up-to-date on latest technology applications

42% 42% 43%

Don’t know 0% 0% 0%69 Please specify how your organization distributes board materials. (Select all that apply)

Through unsecured e-mail, e.g. Internet 18% 33% 10%Through secure e-mail, e.g. company intranet 27% 25% 29%Through an internal or external board portal 48% 50% 48%Through mailing of hardcopies 73% 67% 76%In-person at board meetings 36% 42% 33%Using an application for the iPad or other tablet device

24% 33% 19%

70 If your organization does not have a board portal, which statement below best explains your company’s view on the tech-nology platform?

(n=21) (n=8) (n=13)

We have considered the use of board portals but do not currently see a need for this technology

14% 0% 23%

We are currently considering the benefits of the use of board portals

38% 50% 31%

We will be introducing this technology in the near future

29% 38% 23%

We have not considered board portal technology 19% 13% 23%71 Would you assess the board’s use of technology to be:

Increasing 79% 75% 81%Decreasing 0% 0% 0%No change 21% 25% 19%

72 Do your directors engage in social media associated with your organization?Directors engage in social media 6% 8% 5%Some directors engage in social media 12% 17% 10%Directors do not engage in social media 55% 50% 57%Don’t know 27% 25% 29%

Yes No N/A

73 Does your company have a social media policy?

63% (n=32)

67% 60% (n=20)

38% 33% 40%

Sustainability74 Does your organization prepare and file a separate sustainability report?

Yes 15% 8% 19%No 64% 58% 67%Don’t know 21% 33% 14%

74a If yes, is this report available on your organi-zation’s website

(n=5) (n=1) (n=4)

Yes 60% 100% 50%No 20% 0% 25%Don’t know 20% 0% 25%

76 Is the board and its committees involved with reviewing the sustainability effort maintained by the organization?

(n=30) (n=9)

Yes 20% 11% 24%No 67% 67% 67%Don’t know 13% 22% 10%

106

Question All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

All

no

n-p

ub

lic

com

pan

ies

(n=33)

No

np

rofi

t (n

=12)

Pri

vate

and

par

t-ner

ship

(n=21)

Culture/ setting the tone at the top77 Given the new SEC whistleblower rules

(May 2011), has your board asked manage-ment to take specific steps to continue to enhance a culture of candid and open communication?

(n=29) (n=9) (n=20)

Yes 41% 33% 45%No 55% 56% 55%Don’t know 3% 11% 0%

78 How often does your organization conduct cultural surveys?Annually 24% 25% 24%Only in certain circumstances 27% 17% 33%We do not conduct cultural surveys 48% 58% 43%

78a If cultural surveys are conducted by your organization, which parties participate? (Select all that apply)

(n=32) (n=20)

All employees (including management) 53% 42% 60%All employees under the management level 0% 0% 0%The board 0% 0% 0%Not applicable 47% 58% 40%

78b If cultural surveys are conducted by your organization, does management review the survey findings with the board?

(n=31) (n=19)

Management reviews the survey findings with the board

29% 33% 26%

Management reviews the survey findings with the board in certain circumstances

16% 8% 21%

Management does not review the survey findings with the board

6% 0% 11%

Not applicable 48% 58% 42%79 How do employees receive communication

from the board? (Select all that apply)(n=32) (n=20)

Through electronic communication 16% 25% 10%Through verbal communications (e.g., live meetings, voicemails, etc.)

6% 8% 5%

The board does not provide communications to employees

72% 50% 85%

Only in certain circumstances 16% 25% 10%79a* If certain circumstances apply, please specify

•CEOischairmanoftheboard ••Onlywhenamajorissuearisessuchasthe

departure of a CEO ••ThroughchairmanandCEOcommunications ••Typicallyanemailcommunicationthatis

forwarded by the CEO or corporate secretary - but it is rare

•Private sessions (Board access to management)**

Yes No N/A

81 Do non-employee directors have direct access to management below the CEO level (not including boardroom presentations) without CEO approval?

94% (n=31)

100% 90% (n=20)

6% 0% 10%



Director qualifications survey results

Additional informationTo learn more about director qualifications, read the Deloitte Center for Corporate Governance publication “Creating the board your company deserves", available at www.corpgov.deloitte.com.

Creating the board your company deservesThe art – and science –to choosing directors

The degree to which a board has diverse experience and demographics can affect how effectively it functions and provides oversight to the company. The SEC’s enhanced proxy disclosures are shining a spotlight on how boards approach their composition. These rules, which became effective February 2010, require companies to explain why they have nominated certain individuals to the board, why existing directors are qualified to serve on the board, and how diversity is considered in the nomination process. This section of the Report takes a look at the composition of directors serving on the boards of the survey respondents with respect to age, gender, and ethnicity, in addition to Leadership qualifications, Technical skills, and Professional experience.

For each of the leadership qualifications, technical skills, and professional experience categories, results are broken down by financial services and non-financial services industries, as well as by board sizes of less than or equal to 10, and greater than 10. Results relating to age, gender, and ethnicity categories have been analyzed in terms of market capitalization and industry, and these results specifically apply to the public company participants.

The total number of directors in this analysis (leadership qualifications, technical skills, and professional experience) sections is 1,505. The percentages in the categories do not sum to 100% as a director can possess more than one of the skills present. The total number of directors referenced in the gender, age and ethnicity sections varied, and as such, an “n” value has been provided to show the actual number of respondents in these categories.

As this is the first year that a director qualifications section has been included, no comparative data is available.

http://www.corpgov.deloitte.com/site/us/nominating-corporate-governance-committee/board-composition-and-recruitment/

108

Leadership Qualifications*

Technical Qualifications

Professional Qualifications


Non-financial services industry

(n=1,505)

Financial Services Industry

Non-Financial Services Industry

(n=1505)

Board size ≤ 10

Board Size > 10

(n=1,505)

Board size ≤ 10

Board Size > 10

(n=1,505)



(n=1,505)

Board size ≤ 10

Board Size > 10

(n=1505)

18%

15%

1%

39%

37%

4%

Diversity ofthought

perspective

Ethics andcompliance

Other

26%

22%

2%

31%

30%

3%

Diversity ofthought

perspective


Other

6%

5%

4%

6%

8%

6%

4%

3%

5%

3%

3%

3%

2%

2%

2%

1%

2%

3%

4%

1%

2%

1%

2%

1%

1%

30%

27%

23%

21%

18%

18%

13%

13%

10%

10%

8%

8%

8%

7%

7%

8%

7%

5%

4%

5%

4%

3%

2%

2%

2%

Operations

International Business Exposure

Mergers and Acquisitions

Industry (similar to respective company)

Risk Management

Corporate Governance

Business Restructuring

Marketing

Other Financial Services

Compensation and Benefits

Certified Public Accountant (CPA)

Investment Banking

Juris Doctor (JD, Esq)

Technology/ IT

Human Resources

Engineering, Scientific

Public Relations

Management Consulting

Commercial Banking

Research and Development

Environmental and Sustainability

Other

Medical Profession

Certified Financial Analyst (CFA)

Medical Doctor (e.g, MD, DO, DDS)

19%

16%

13%

13%

11%

11%

8%

7%

8%

6%

6%

5%

4%

6%

4%

5%

5%

4%

3%

3%

3%

2%

2%

2%

1%

17%

16%

14%

14%

15%

13%

9%

9%

7%

7%

5%

6%

6%

3%

5%

4%

4%

4%

5%

3%

3%

2%

2%

1%

2%

Operations




Risk Management



Marketing




Investment Banking


Technology/ IT

Human Resources


Public Relations


Commercial Banking



Other

Medical Profession



7%

10%

11%

7%

7%

7%

7%

7%

7%

6%

3%

6%

3%

1%

3%

1%

2%

1%1%

37%

33%

31%

30%

25%

25%

24%

21%

19%

13%

10%

6%

7%

7%

5%

6%

4%

4%

4%

2%

1%1%

1%

1%<1%

<1%<1%

Outside Public Company Board Service

Strategic Planning

Outside Not-for-profit Board Service

Company CEO (Chief Executive Officer)

Audit Committee

Compensation Committee

Nominating & Corporate Governance Committee

Business Development

Outside Private Company Board Service

Entrepreneurial

Finance Committee

Community Affiliation/Access

Government Relations/ Service/ Regulatory Agency

Company COO (Chief Operating Officer)

Academia

Company CFO (Chief Financial Officer)

Risk Committee

Other

Environmental

Lobbying

Military Service (4 armed forces)

Labor Union

Company CTO (Chief Technology Officer)

Company CIO (Chief Information Officer)

20%

23%

17%

17%

15%

16%

14%

13%

13%

9%

4%

3%

3%

4%

4%

4%

1%

2%

1%

<1%

<1%

<1%

1%

1%

1%

<1%<1%

24%

20%

25%

20%

17%

16%

17%

15%

13%

10%

9%

9%

7%

4%

4%

3%

5%

2%

4%

2%

1%


Strategic Planning



Audit Committee





Entrepreneurial

Finance Committee




Academia


Risk Committee

Other

Environmental

Lobbying


Labor Union



Leadership qualificationsWith respect to leadership qualifications among the participants’ boards, two types of attributes were studied: the degree to which directors had diversity of thought perspective and the experience related to ethics and compliance. Both can be viewed as critical for boards having an open mindset and leading to thorough and productive boardroom discussions. Further, directors play a role in setting tone at the top and much of this is done though the oversight of an ethics and compliance program.

While no significant differences existed with board size, there was at least a 21% difference between the financial services and non-financial services

companies with respect to both categories, with non-financial services placing emphasis on both categories.

Some participants noted specific other leadership skills possessed by the directors on their boards, which included having an independent opinion, the ability to analyze organizational and strategic challenges, and being inquisitive and knowledgeable about business.

*An answer choice in the Leadership qualifications chart has been modified from the original survey questionnaire. The word "and" has been replaced with "of" where it reads "Diversity and thought perspective". We believe survey participants understood it as such.


Leadership Qualifications

Technical skills

Professional experience



(n=1,505)



(n=1,505)

Board size ≤ 10

Board Size > 10

(n=1,505)

Board size > 10

Board size ≤ 10

(n=1,505)

18%

15%

1%

39%

37%

4%

Diversity andthought

perspective


Other

26%

22%

2%

31%

30%

3%


perspective


Other

20%23%17%17%15%16%14%13%13%

9%4% 3% 3% 4% 4% 4%

1%<1%

2%1%

1% 1%

24%20%25%

20%17%16%17%

15%13%

10%

9% 9% 7% 4% 4% 3%5% 2% 4% 2%

1%<1%

1%<1%

<1%<1%

7% 10% 11% 7% 7% 7% 7% 7% 7% 6%

3%

6%

3%3% 2%

1%

37% 33% 31%30% 25% 25% 24% 21% 19%

13%10% 6% 7% 7%

5%

6%

4%4% 4% 2%1% 1%

1% <1%1%

1%1%1%

<1%<1%

20% 23%17% 17% 15% 16% 14% 13% 13% 9%

4% 3% 3% 4% 4% 4%2%

24% 20%25% 20%

17% 16% 17% 15% 13%10%

9% 9% 7%

4% 4% 3%

5%

2% 4% 2%1% <1% 1% 1% 1%1% <1%

1%<1%

<1%<1%

6% 5% 4% 6% 8% 6% 4%

3%

5%

3% 3% 3% 2% 2% 2% 1% 2% 3% 4% 1% 2% 1% 2% 1% 1%

30%27%

23% 21% 18% 18%13% 13% 10%

10% 8% 8% 8% 7% 7% 8% 7% 5% 4% 5% 4% 3%

2% 2% 2%

19% 16% 13% 13% 11% 11% 8% 7% 8% 6% 6% 5% 4% 6% 4% 5% 5% 4%

3% 3% 3% 2% 2% 2%1%

17%16%

14% 14% 15% 13%9% 9% 7%

7% 5% 6% 6%3%

5% 4% 4% 4% 5%

3% 3% 2% 2% 1%2%



(n=1,505)

Board size > 10

Board size ≤ 10

(n=1,505)

Technical skillsThe purpose of the technical qualifications section was to gain perspec-tive as to the types of expertise and training that could be found on the boards of the participants’ companies. There was little distinction between boards comprised of 10 or fewer directors and those comprised of more than 10 directors.

Analysis from an industry perspective shows a wider variation across most technical qualifications. Compared to the financial services companies, more non-financial services boards had directors with skills in the areas of operations, international business exposure, mergers and acquisi-tions, industry experience (relevant to the respective company), risk

management, and corporate governance. It is not surprising that these are prevalent skills given a current business environment that is facing heightened mergers and acquisitions activity, increased focus on global expansion, and greater exposure to enterprise risks.

Some of the common responses in the “Other” category included accounting, MBA/financial expertise, manufacturing experience, and management.

110

Professional experienceResults in this section provide insight into the various types of career and work experience among the boards of directors of survey participants. The most common types of professional experience were outside public and nonprofit board service, strategic planning, CEO experience, and audit and compensation committee service.

Compared to smaller boards, larger boards tended to have more external directors with outside nonprofit board service, CEO experience, finance committee experience, and community access and affiliation. There was much more discrepancy between the financial services and non-financial services industries. The most common qualification in this category was

outside public board service (37%) and strategic planning (33%) for non-financial services companies, and outside nonprofit board service (11%) and strategic planning (10%) for financial services companies.

The common “Other” responses received in this section were broad business experience, executive experience, high-level managerial experi-ence, and financial oversight.


Technical skills

Professional experience



(n=1,505)



(n=1,505)

Board size ≤ 10

Board Size > 10

(n=1,505)

Board size > 10

Board size ≤ 10

(n=1,505)

18%

15%

1%

39%

37%

4%


perspective


Other

26%

22%

2%

31%

30%

3%


perspective


Other

20%23%17%17%15%16%14%13%13%

9%4% 3% 3% 4% 4% 4%

1%<1%

2%1%

1% 1%

24%20%25%

20%17%16%17%

15%13%

10%

9% 9% 7% 4% 4% 3%5% 2% 4% 2%

1%<1%

1%<1%

<1%<1%

7% 10% 11% 7% 7% 7% 7% 7% 7% 6%

3%

6%

3%3% 2%

1%

37% 33% 31%30% 25% 25% 24% 21% 19%

13%10% 6% 7% 7%

5%

6%

4%4% 4% 2%1% 1%

1% <1%1%

1%1%1%

<1%<1%

20% 23%17% 17% 15% 16% 14% 13% 13% 9%

4% 3% 3% 4% 4% 4%2%

24% 20%25% 20%

17% 16% 17% 15% 13%10%

9% 9% 7%

4% 4% 3%

5%

2% 4% 2%1% <1% 1% 1% 1%1% <1%

1%<1%

<1%<1%

6% 5% 4% 6% 8% 6% 4%

3%

5%

3% 3% 3% 2% 2% 2% 1% 2% 3% 4% 1% 2% 1% 2% 1% 1%

30%27%

23% 21% 18% 18%13% 13% 10%

10% 8% 8% 8% 7% 7% 8% 7% 5% 4% 5% 4% 3%

2% 2% 2%

19% 16% 13% 13% 11% 11% 8% 7% 8% 6% 6% 5% 4% 6% 4% 5% 5% 4%

3% 3% 3% 2% 2% 2%1%

17%16%

14% 14% 15% 13%9% 9% 7%

7% 5% 6% 6%3%

5% 4% 4% 4% 5%

3% 3% 2% 2% 1%2%



(n=1,505)

Board size > 10

Board size ≤ 10

(n=1,505)


Ethnicity, gender, and ageA director’s ethnicity, gender, and age could have an impact on a board’s composition similar to the effect of the directors’ technical and professional expertise. Directors with differing ethnicity, gender, and age bring about a unique experience and perspective to the boardroom.

Currently, white males in the age ranges of 51 to 60 and 61 to 70 represented 18% and 28%, respectively, of all directors. There is an indication that this may be changing. Increasingly, boards are adding more diversity, whether of ethnicity, gender, or age. According to survey results, non-white board members represented about 17% of all directors, and women represented 19%. With respect to age, directors between 61 to 70 years old made up 48% of all boards, followed by 35% in the 51 to 60 range. Age is also a changing board demographic. While some boards appear to be tapping into the knowledge and insight of Generation Xers, it nevertheless appears that, on average, board members are aged 51 or older.

Ethnicity

Gender

Age

Hispanic or LatinoNative Hawaiin or other Pacific Islander

Two or more races

American Indian or Native American

AsianBlack

White

(n=1,330)

7%3%

1%

4% <1%

83%

3%

81%

19%

Female

Male

(n=1,291)

0% 1%

6%

35%

48%

10%

Age range (61-70)Age range (71+)

Age range (41-50)

Age range (51-60)

Age range (23-30)Age range (31-40)

(n=1,267)

0%

2%

2%

5%

1%

91%

3%

1%

4%

6%

4%

80%

4%

1%

9%

3%

83%

Native Hawaiian orother Pacific Islander

Hispanic or Latino

American Indian orNative American

Two or more races

Black

Asian

White

Small-cap

Mid-cap

Large-cap



All public companies (n=1,137)

Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




0%

2%

4%

7%

2%84%

4%

1%

2%

7%

3%

83%

4%

1%

3%

7%

3%

83%


Hispanic or Latino


Two or more races

Black

Asian

White

85%

15%

82%

18%

80%

20%

Male

Female

80%

20%

82%

18%

82%

18%

Male

Female

1%

7%

37%

42%

13%

1%

6%

42%

43%

9%

0%

6%

28%

56%

9%

Age range(23-30)

Age range(31-40)

Age range(41-50)

Age range(51-60)

Age range(61-70)

Age range(71+)

1%

7%

35%

46%

11%

6%

37%

48%

9%

1%

6%

36%

48%

10%

Age range(23-30)

Age range(31-40)

Age range(41-50)

Age range(51-60)

Age range(61-70)

Age range(71+)

0%

112

Ethnicity

Gender

Age


Two or more races


AsianBlack

White

(n=1,330)

7%3%

1%

4% <1%

83%

3%

81%

19%

Female

Male

(n=1,291)

0% 1%

6%

35%

48%

10%


Age range (41-50)

Age range (51-60)


(n=1,267)

0%

2%

2%

5%

1%

91%

3%

1%

4%

6%

4%

80%

4%

1%

9%

3%

83%


Hispanic or Latino


Two or more races

Black

Asian

White

Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




0%

2%

4%

7%

2%84%

4%

1%

2%

7%

3%

83%

4%

1%

3%

7%

3%

83%


Hispanic or Latino


Two or more races

Black

Asian

White

85%

15%

82%

18%

80%

20%

Male

Female

80%

20%

82%

18%

82%

18%

Male

Female

1%

7%

37%

42%

13%

1%

6%

42%

43%

9%

0%

6%

28%

56%

9%

Age range(23-30)

Age range(31-40)

Age range(41-50)

Age range(51-60)

Age range(61-70)

Age range(71+)

1%

7%

35%

46%

11%

6%

37%

48%

9%

1%

6%

36%

48%

10%

Age range(23-30)

Age range(31-40)

Age range(41-50)

Age range(51-60)

Age range(61-70)

Age range(71+)

0%


Ethnicity

Gender

Age


Two or more races


AsianBlack

White

(n=1,330)

7%3%

1%

4% <1%

83%

3%

81%

19%

Female

Male

(n=1,291)

0% 1%

6%

35%

48%

10%


Age range (41-50)

Age range (51-60)


(n=1,267)

0%

2%

2%

5%

1%

91%

3%

1%

4%

6%

4%

80%

4%

1%

9%

3%

83%


Hispanic or Latino


Two or more races

Black

Asian

White

Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




Small-cap

Mid-cap

Large-cap




0%

2%

4%

7%

2%84%

4%

1%

2%

7%

3%

83%

4%

1%

3%

7%

3%

83%


Hispanic or Latino


Two or more races

Black

Asian

White

85%

15%

82%

18%

80%

20%

Male

Female

80%

20%

82%

18%

82%

18%

Male

Female

1%

7%

37%

42%

13%

1%

6%

42%

43%

9%

0%

6%

28%

56%

9%

Age range(23-30)

Age range(31-40)

Age range(41-50)

Age range(51-60)

Age range(61-70)

Age range(71+)

1%

7%

35%

46%

11%

6%

37%

48%

9%

1%

6%

36%

48%

10%

Age range(23-30)

Age range(31-40)

Age range(41-50)

Age range(51-60)

Age range(61-70)

Age range(71+)

0%

114

Board practices

2008 2005 2002 1999

Yes No N/A Yes No Yes No Yes No

Written criteria for use in director selection 65% 35% 72% 28% 37% 63% 35% 65%

Skills matrix or other method to peri-odically assess board composition and fill gaps when selecting new directors

49% 51% 48% 52% 39% 61% 21% 79%

Mandatory retirement age for directors 55% 45% 67% 33% 54% 46% 57% 43%

All directors elected annually 49% 51% 43% 57%

Policy requiring attendance of non-employee directors at annual meeting of shareholders

60% 24% 15% 47% 53%

Chairman and CEO positions split (as policy, not just transition situation)

49% 51% 41% 59% 23% 77% 17% 83%

Lead outside director (formally designated; more than informal leadership)

49% 51% 13% 87% 10% 90%

Materials sent <5 business days before meeting

57% 60% 40% 49% 51%

Materials sent 5-10 business days before meeting

37% 37% 63% 69% 31%

Materials sent >10 business days before meeting

5% 3% 97% 8% 92%

Are board materials distributed electroni-cally through e-mail?

34% 66% 47% 53%

Are board materials distributed electroni-cally through secure Intranet?

18% 82% 9% 91%

Are board materials distributed as print copies?

88% 12% 97% 3%

Does your organization distribute board materials through an externally hosted board portal?

15% 85%

Are materials distributed in person at board meetings?

72% 28%

Non-employee directors have direct access to management below CEO level (more than boardroom presentations) without CEO approval

93% 7% 83% 17%

Formal orientation program for new directors (more than supplying a directors’ manual)

60% 40% 37% 63% 40% 60%

Does your organization use an outside executive search/ board director recruiting firm to assist in the recruitment of board directors?

50% 50%

Appendix A — Comparison table of prior year survey results

This table presents results to the “Yes” and “No” questions that were asked in prior surveys. Blank areas, where a percentage is not provided, indicates a question that was not asked for that particular year.


Board practices

2008 2005 2002 1999

Yes No N/A Yes No Yes No Yes No

Policy to rotate chair 22% 78%

Policy to rotate committee membership 19% 81%

Does your board have limits on audit committee members being able to participate on other organizations’ audit committees?

27% 73%

Does your organization have a manage-ment disclosure committee as recom-mended by the SEC for public companies?

68% 13% 19%

Does the disclosure committee periodically report to the board or a board committee?

61% 39%

Have you had a third party evaluate the board’s performance?

9% 91%

Have board members had direct contact with shareholder groups over the past year?

29% 67% 3%

Does your organization provide a mechanism for shareholders to nominate candidates to the board?

82% 15% 3%

Has your organization implemented a majority vote director election policy in non-contested elections?

42% 54% 4%

Provide quarterly earnings per share estimates

24%

Provide annual earnings per share estimates

25%

Provide other types of forward looking information (e.g., net income, revenue, operating cash flow, etc.)

17%

Do not provide EPS 28%

Does your company provide stock-based compensation to non-employee directors?

76% 7% 18%

Does your organization have directors and officers (D&O) liability insurance?

96% 4%

Does the D&O insurance cover more than designated “directors and officers” of the organization?

24% 76%

Does your organization have directors and officers (D&O) liability insurance?

96% 4%

Does the D&O insurance cover more than designated “directors and officers” of the organization?

24% 76%

116

Appendix B — 2011 Board practices survey questionnaire

2011 Board Practices Survey Questionnaire

2


Please complete this survey on your company's board practices - answering all questions to the best of your ability.The results of this survey will be used for our 2011 Board Practices Report.

Part A: Organizational Criteria

These questions will allow us to track all the following responses by company type/ industry.

1.Please specify your organization's industry:

(Choose one)

Advertising and publishing Professional services

Agriculture or mining Public utility/utility holding

Banking or finance Real estate or construction

Energy Retail/Wholesale

Healthcare or pharmaceutical Service industries (misc.)

Insurance Technology (including software)

Manufacturing consumer Telecommunications

Manufacturing industrial Transportation or distribution

Media/communications Other

Non-Profit or public admin

a) If Other, please specify:

2.Please specify your company type:

Public company

Privately held

Partnership

Non-profit

a) If public, please provide your ticker symbol:


3

Part B: Board Practices

Board Selection, Recruitment and Composition


Yes

No


Yes

No

5. Does your organization use an executive search/board director recruiting firm to assist in the recruitment of board directors?

Yes

No


Yes

No

Not applicable


Yes

No

Not applicable

a) If so, at what age is retirement required?

Independent Chairman

8. Is the independent board chairman also the chairman of the Nominating and Governance committee?

The independent board chairman is also the chairman of the Nominating and Governance committee

No, but our policy would not restrict the same individual from holding both positions

Our policy does not permit the same individual from holding both positions




5


1-2 hours

3-5 hours

6-8 hours

9-10 hours

More than 10 hours





Materials are not distributed prior to board meetings


Live, face-to-face meetings

Live, face-to-face meetings with some directors attending via web-conference or video conference




Frequently (five or more times a year)

Sometimes (two to four times a year)


We do not hold board meetings outside of the country in which our company is headquartered

17.Do you make company owned aircraft available to directors for travel to meetings?

Yes

No

No applicable


4


The Nominating and Governance committee

The full board

Another committee

No formal evaluation is performed


a) If another committee, please specify:


Annually

Periodically, as needed

No formal evaluation is performed



Rotation policy

Term limit

Neither


Board Meetings and Materials


Permitted without any restriction

Permitted but with minimum ownership threshold percentages

Not permitted

a) If permitted with a minimum ownership threshold, please specify the threshold percentage (e.g. 10, 15, 20, 25%):

118


6


Full reimbursement

Partial reimbursement

None

Committee Structures and Roles


Two or less

Three to five

Five or more

20. Please complete the following table with regard to the specific committee practices of your board:

Committee Number of members

Meeting frequency


Auditor attendance in

meetings (Y/N)

Audit

Compensation

Nominating/ Corporate Governance

Executive

Science & Technology

Risk

Strategy

Environmental

Corporate Responsibility

Disclosure

Other: Please specify:






Full Board

Nominating/Corporate Governance Committee

Board Chair/Lead Director

Other


5


1-2 hours

3-5 hours

6-8 hours

9-10 hours

More than 10 hours





Materials are not distributed prior to board meetings


Live, face-to-face meetings

Live, face-to-face meetings with some directors attending via web-conference or video conference







We do not hold board meetings outside of the country in which our company is headquartered

17.Do you make company owned aircraft available to directors for travel to meetings?

Yes

No

No applicable



8

28. Does your organization’s audit committee hold a separate meeting to review the earnings release vs. quarterly reviews or are they combined?

Separate meetings

Combined meetings

29. How often do external auditors attend your company’s audit committee meetings?



Rarely (one audit committee meeting a year)

Never

Don’t know




Rarely (one audit committee meeting a year)

Never

Don’t know


Head of Internal Audit

General Counsel

Chief Executive Officer

Chief Financial Officer

Chief Compliance Officer

Other



7


Yes

No


Yes

No

24. Does your board have limits on audit committee members being able to participate on other organizations’ audit committees?

Yes

No

a) If yes, please specify the limit:

Audit Committee


Frequency In-person meetings By video or web conference By tele-conference calls


Increased substantially

Increased slightly

Decreased

No change


Yes

No

120


10

36. Which of the following best describes your board’s director education program?: (Choose all that apply)



Directors are reimbursed for public forums or peer group sessions attended

The full board collectively attends a single public forum

Other

Our board does not have a formal director education program

a) If Other, please describe:


From the corporate secretary or management

From other directors

From third party mailings

Other


Board Evaluations


Self-evaluation

Individual peer-evaluation led by corporate secretary or other in-house personnel

Individual peer-evaluation led by a third party facilitator

Our organization does not have a formal board performance evaluation process

Other

a) If Other, please describe:


Individual board members

Board committees

Full board as a whole

Not applicable


9

32. How often does your company’s audit committee engage specialists for specific matters on their agenda?




Never

Don’t know

33.How often does the audit committee receive reports on internal tips from a compliance hotline?




Never

Don’t know

Board Orientation and Training


Yes

No

a) If yes, please check the orientation programs sponsored by your organization for directors: (Choose all that apply)

Live, in-house session lead by an individual serving on the board and/or a staff member of the organization

Live training by a third party



Anti-corruption policies (e.g. FCPA, UK Anti-bribery Act)

Insider trading


Company policies

Other regulatory issues related to your business such as privacy, etc.





12


Increasing

Decreasing

Remains the same

Risk Oversight

46. How does your board assign risk oversight for the organization’s risk management program? (Select all that apply)


The audit committee has primary responsibility for risk oversight

Risk oversight responsibilities are spread across all board committees

The full board is responsible for risk oversight

We have not considered board responsibility for risk oversight

Other



Yes

No

Not applicable

a) If yes, does the management disclosure committee report to either the board or a board committee?

Yes

No

i) If yes, how often?

Monthly

Quarterly

Semi-annually

Annually

No determined frequency; only when needed


11

40. Have you had a third party evaluate the board's performance? (Choose one)

Yes

No

Not applicable



Less frequently than once a year

Once a year

Not evaluated

Strategy


Annually

Quarterly

At every meeting

Other



Less frequently than once a year

Once a year

We do not hold off-site strategy meetings with management


Management develops strategy and the board advises, challenges and approves

The board and management develop strategy together

The board develops the strategy and management approves and executes

Other


122


14

CEO Performance Evaluation

53. How often does the full board review the CEO’s performance?

More than once a year

Once a year

Less than once a year (e.g. every two years)

Only when a change in circumstance requires

Never


Entire board



Independent Chair or Lead Director

Other

b) If Other, please specify:

Shareholder Engagement and Shareholder Activism


Yes

No

Not applicable


Yes

No

Not applicable


13

48. Does the company align risk oversight/ risk management with the company’s strategy?

Yes

No

Don’t know 49. Does your company’s board oversee political contributions and donations made by the company — or oversee the

political action committees (or similar) of the company?

Yes

No

Don’t know


Yes

No

Don’t know

CEO Succession Planning


More than once a year

Once a year

Less than once a year (e.g. every two years)

Only when a change in circumstance requires

Never


Entire board




CEO

Other




16

62. Is your organization considering adopting a policy or by-law providing reimbursement of expenses related to director election campaigns in light of proxy access? (Choose one)

Reimbursement would be provided when the nominee is successful

Reimbursement would be provided when the nominee achieves a certain percentage of the vote

Not considering adopting a policy or by-law

Not applicable

Earnings guidance


Quarterly earnings per share estimates are provided

Annual earnings per share estimates are provided

Other types of forward-looking information (e.g., net income, revenue, operating cash flow, etc.) are provided

EPS estimates nor other types of forward-looking information (e.g., net income, revenue, operating cash flow, etc.) are not provided

Not applicable


There is no intention to change the amount of information provided

We intend to reduce the amount of information provided

We intend to increase the amount of information provided

Don’t know

Not applicable

Directors and Officers Liability Insurance

65. Does your organization have directors and officers (“D&O”) liability insurance?

Yes

No


15


Board members have had direct contact

Direct contact was made only as arranged or suggested by company management

Board members did not have direct contact

Not applicable


Yes

No

Not applicable

59. Has your board considered holding what is known as a “Fifth Analyst” call with investors?

Yes

No

Not familiar with the term

Not applicable

Voting and Proxy Issues


Yes

No

Not applicable


Reimbursement is provided when the nominee is successful

Reimbursement is provided when the nominee achieves a certain percentage of the vote

Never

Not applicable

124


18


Through unsecured e-mail, e.g. Internet

Through secure e-mail, e.g. Company Intranet

Through an internal or external board portal

Through mailing of hardcopies


Using an application for the ipad or other tablet device

70. If your organization does not have a board portal, which statement below best explains your company’s view on the technology platform?

We have considered the use of board portals but do not currently see a need for this technology

We are currently considering the benefits of the use of board portals

We will be introducing this technology in the near future

We have not considered board portal technology

71. Would you assess the board’s use of technology to be:

Increasing

Decreasing

No change


Directors engage in social media

Some directors engage in social media

Directors do not engage in social media

Don’t know


Yes

No


17

a) If yes, does the D&O insurance cover more than designated directors and officers of the organization?

Yes

No

i) Please list who else is covered under the D&O policy:


Yes

No

Don’t know

a) If yes, which statement best describes how the individual director liability insurance policies gets funded?

The director funds his/ her own insurance policy

The company funds his/ her own insurance policy

Don’t know


Increased

Decreased

No change

Don’t know

Not applicable

Board’s Use of Technology

68. What level best describes your board’s involvement with information technology?

No involvement besides basic email communications

Aware of the benefits technology can provide

Frequently engaged and up-to-date on latest technology applications

Don’t know



20

a) If cultural surveys are conducted by your organization, which parties participate? (Select all that apply)

All employees (including management)

All employees under the management level

The board

Not applicable

b) If cultural surveys are conducted by your organization, does management review the survey findings with the board?

Management reviews the survey findings with the board

Management reviews the survey findings with the board in certain circumstances

Management does not review the survey findings with the board

Not applicable


Through electronic communication

Through verbal communications (e.g., live meetings, voicemails, etc.)

The board does not provide communications to employees

Only in certain circumstances

a) If certain circumstances apply, please specify:


My company has established an anti-hedging policy that applies to directors

My company has not established an anti-hedging policy that applies to directors

We are considering the establishment of such a policy

Private Sessions

81.Do non-employee directors have direct access to management below the CEO level (not including boardroom presentations) without CEO approval?

Yes

No


19

Sustainability


Yes

No

Don’t know

a) If yes, is this report available on your organization’s website

Yes

No

Don’t know


Yes

No

Don’t know

a) If yes, please specify:


Yes

No

Don’t know

Culture/ Setting the Tone at the Top


Yes

No

Don’t know


Annually

Only in certain circumstances

We do not conduct cultural surveys

126

22

Director

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Investment Banking


Technology/ IT

Human Resources





Medical Profession


Other Technical 1 (Please specify):



Professional Qualifications

Entrepreneurial

Strategic Planning




Labor Union


Lobbying

Academia



21

PART C: Director Qualifications Matrix Please check boxes in the matrix below to indicate the qualifications, ethnicity, gender, and age of each of the directors that serves on your company’s board. Director names do not need to be disclosed.

Director

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15


Diversity and thought perspective

Ethics and compliance

Other leadership 1 (please specify):



Technical Qualifications





Operations


Risk Management



Marketing

Public Relations



Commercial Banking


24

Director

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Age range (23-30)

Age range (31-40)

Age range (41-50)

Age range (51-60)

Age range (61-70)

Age range (71+)

Survey Completed! Thank you for completing our 2011 Board Practices Survey. Please submit your completed form to the conference registration desk, or you may mail or fax it back to:

Society of Corporate Secretaries and Governance Professionals 521 Fifth Avenue New York, NY 10175 Fax: (212) 681-2005 Attn: Russell Benasaraf

About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Copyright © 2011 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

23

Director

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15




Audit Committee



Risk Committee

Environmental

Finance Committee




Other professional 1 (please specify):



Ethnicity, gender, and age

Black

Asian


Hispanic or Latino

Native Hawaiian or other Pacific Islander

White

Two or More Races

Gender (Male)

Gender (Female)

About Deloitte Deloitte refers to one or more of Deloitte LLP. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright © 2011 Society of Corporate Secretaries and Governance Professionals and Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

2011 board pracices report by deloitte

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