PwC survey finds shareholder and board communication up, but priorities diverge

Investors and corporate directors are communicating and collaborating more, but boards are not paying adequate attention to shareholders' ESG interests like climate change, according to PwC's 2022 Annual Corporate Directors Survey released Tuesday.

The 704 corporate directors participating in the survey represented more than a dozen industries, and 72% of their companies have more than $1 billion in annual revenues. Of the directors responding to the survey, 73% were men and 27% were women, and 64% of them have been on their boards for more than five years.

First, the good news. The percentage of boards having direct engagement with shareholders increased over the past year to 60% according to directors, and has doubled since the 2017 survey, PwC found.

On the topic of ESG, it's a different story. While 90% of directors said their board understands the company's diversity and inclusion efforts and data privacy and cybersecurity policies and practices, emerging areas like climate risk and related regulation were less understood, particularly when it comes to strategies for dealing with climate risk and the related data collection, while only 56% of directors said they were aware of their company's carbon emissions.

Even fewer directors surveyed (45%) believe that ESG issues have an impact on company performance, even though 65% said that ESG is part of the board's enterprise risk management discussions.

Directors are less likely to see a connection between ESG and company fundamentals, the survey found, with 57% reporting a link between ESG issues and company strategy, down from 64% in 2021. The percentage of directors seeing an impact on company performance was also down from the previous year.

When it comes to addressing climate change, 66% of female directors considered it a priority, even if it impacts short-term performance, while only 45% of male directors did.

"This is a troubling trend when we're seeing record-breaking numbers of shareholder proposals on climate change and could lead to difficult discussions on what businesses must prioritize," the report said.

Companies are responding to the investor push for board diversity, the survey showed, with new independent directors joining S&P 500 boards in 2021 which represented the most diverse group ever.

Nearly all directors (96%) reported their board addressing diversity in the past two years, with the most common action being increased disclosure, while 67% said their boards replaced a retiring director with one who increases the board's diversity, and 36% reported the addition of a director who increases the board's diversity.

In 2021, 78 boards in the S&P 500 expanded their size to add one or more female directors, and 88 increased their size to add racial/ethnic diversity, the survey report said.

The directors also thought that boards could do more to increase shareholder trust, with 71% of directors calling for engaging directly, 70% calling for enhanced disclosure or reporting and 64% recommending increased board diversity.