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Annual Survey Reveals Mounting Concern toward IT/Cyber Risk and Data Security; Different Perspectives between Boardroom and General Counsel around Social Media
FTI Consulting, Inc. (NYSE:FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, and NYSE Governance Services, publisher of Corporate Board Member magazine, released new findings from the 14th annual Law in the Boardroom Study.
This year’s data revealed that emerging issues, including cyber threats, social media and shareholder engagement, are of increasing concern.
The study, which is the only one of its kind, asked directors and general counsel to identify the latest and most pressing governance trends and legal matters in today’s boardroom. Notable findings include:
Increasing Concern around Information Technology/Cyber Risk and Data Security Threats
– With 34% of general counsel and 27% of directors unconvinced their company is secure and impervious to hackers, 41% of directors and 33% of general counsel indicated IT/cyber risk as an issue upon which they will spend significant time this year. However, half of both directors and general counsel expressed confidence or extreme confidence in their board’s ability to ask the right questions of management regarding the risk and status associated with the company’s IT strategy.
Varied Views on Social Media
– While general counsel have a better grasp on the procedures and protocols around social media at their own company, with 73% of general counsel acknowledging the existence of a formal corporate social media policy, 27% of directors surveyed are unsure if their company even has a social media plan. Forty-five% of directors indicated that they have discussed social media in the boardroom but need more information to have a good understanding of the strategies and risks, while only 22% of directors indicated that they have a good understanding of strategies and risks around social media.
Directors Increasingly Engaging Shareholders
– In the wake of continuing calls for board-level access over the past decade, 81% of directors believed their company is effective at responding to shareholder concerns in a constructive manner. Fifty-seven percent of directors reported their board had proactively engaged in dialogue with shareholders regarding mergers and acquisitions (“M&A”) and growth strategies in the past 12 months.
M&A Leads Boardroom Discussion
– M&A ranked high in terms of overall time spent on boardroom discussions, replacing executive compensation as the issue that is likely to require a great time commitment according to 54% of directors and 51% of general counsel. M&A strategy also made directors’ top-five list in terms of areas where the board needs better information and processes to be as effective as possible.
“Massive data breaches and other cyber-attacks against U.S. companies have captured some of the biggest headlines in the past year, and companies of every size and in every industry are taking note of the devastating impact these events have had on those businesses,” said Thomas G.A. Brown, Senior Managing Director in FTI Consulting’s Global Risk and Investigations Practice. “This year’s findings demonstrate that boards are paying closer attention to this issue to mitigate the operational, reputational and financial risks associated with data breaches and cyber-attacks. Directors and general counsel will need to work together to address these areas of concern with better transparency and understanding of the company’s protocols and response plans for such events.”
Jean-Marc Levy, NYSE Euronext, Senior Vice President and Head of Global Issuer Services, said, “It’s clear that there is a need for education in the boardroom around social media — from understanding risks and strategies to awareness of the policies that are in place. The bottom line is that social media cannot be ignored — especially with the U.S. Securities and Exchange Commission recognizing social media channels as an appropriate means to communicate with shareholders — and it will be integral to the success of every company to ensure that directors, executives and employees are on the same page.”
