71 Percent of Respondents Cite Crisis Protection as Paramount Concern
   in Corporate Reputation Management, But Survey Reveals Independence and
                        Accountability as Major Issues

    NEW YORK, Sept. 29 /PRNewswire/ -- Withstanding the impact of a crisis is
the key preoccupation of corporate boards today, according to a new survey of
more than 200 board directors at publicly traded companies released today by
Directorship and business communications firm Financial Dynamics.  Crisis
protection is the most critical concern of boards, followed by recruiting and
retaining employees and enhancing shareholder value. In addition, directors
see independence far and away as the quality that has the most salutary impact
on how a company's governance practices are perceived.
    The survey, however, raises questions about the independence of outside
directors, even when they have no business or personal ties to the company or
its management. Nearly all board members receive most information about the
companies on whose boards they serve from inside sources, including the CEO
(92%), other senior management (70%) and board books (63%).  Only 13% actively
seek perspectives from outside parties, and less than one-third look closely
at media coverage.
    The survey also reveals inconsistency in ownership of oversight
responsibility among board members.  Almost three-fifths (59%) of those
surveyed say that they have a formal system in place for monitoring executive
performance.  However, when asked how reputation is actually measured, board
members revealed an ad hoc approach to oversight:  37% say that "informal
feedback from stakeholders" is the most important factor employed in CEO
evaluation; 13% say that formal research is important; and only 2% cite media
coverage - often an indication of prevailing external sentiment - as being
most important.
    "It's open to debate how a director can exercise truly independent
judgment in evaluating management's performance if the information at their
disposal is coming primarily from management itself," says Harlan R. Teller,
Financial Dynamics' US Director of Reputation Management.  "The conflict
between what directors deem important and what happens in practice extends to
their measurement and monitoring of the CEO's performance in managing
reputation," Mr. Teller added.
    Reponses to questions about accountability for oversight demonstrate no
clear ownership of responsibility.  One-half of all respondents said either
the governance committee (29%) or the lead director (21%) is responsible, and
another 20% divided their responses between the audit committee, compensation
committee, non-executive chairman or head of "another committee."  A full 30%
cited "none of the above" or "not sure."
    "It's clear that there is a gap between the importance the board says it
places on reputation management, and the investment and processes put in place
to provide substantive oversight of this function," said J.P. Donlon, Editor-
in-Chief of Directorship.   "Risks to reputation have consequences. Boards
should treat such risks with the same rigor they deal with any other."
    But directors link independence and integrity to good corporate
governance.  Thirty-nine percent of directors equate the concept of
"integrity" with reputation, and they believe that the best way to convey the
perception of integrity is to have boards completely made up of independent
directors, with the exception of the CEO. Sixty-six percent cited independence
as the most important factor in influencing the public's perception of good
corporate governance.
    "Clearly board members think of ethics violations when they think of
crises, which is a distinct reaction to the corporate scandals of the past
several years that have dominated so many headlines," according to Hollis
Rafkin-Sax, Vice Chairman at Financial Dynamics.  "Conventional wisdom
dictates that the board's primary role is to protect shareholder interests;
however, the directors' preoccupation with crisis management marks a
significant change in board priorities.  The open question is: are boards
exercising independent and informed judgment, or do they need more effective
tools at their disposal to ensure their confidence is not misplaced."
    The survey was conducted by Financial Dynamics, in cooperation with
Directorship.  Of the more than 200 board members surveyed, almost 80% serve
on a board of a public company with $1 billion or more in sales and nearly
one-third serve on boards of companies whose revenue exceeds $10 billion.
More than half of those surveyed (53%) currently hold "C-class" or chairman
titles.  The survey represents the most extensive polling of board sentiment
ever on issues relating to the board's role in monitoring, measuring and
holding senior management accountable for reputation management.

    About Directorship Search Group
    Directorship, now in its 31st year as a monthly governance and board
issues resource, is a unit of The Directorship Search Group, a specialist in
high-level executive and board search that advises companies on performance
improvement through elevating the caliber of human talent throughout the
organization. Through its monthly publication, leadership forums and
roundtable series, Directorship offers practical guidance, best practices and
current research to identify over-the-horizon issues and help board decision-
makers navigate in an increasingly complex world.

    About Financial Dynamics
    One of the most highly regarded consultancies in the communications
industry, Financial Dynamics employs more than 350 professional staff and
advises more than 500 clients worldwide through its hub offices in London and
New York, as well as its network of wholly-owned offices in Boston, Chicago,
San Francisco, and Washington, D.C. in the US, as well as Frankfurt, Paris,
Dublin, Manchester, Athens, Bahrain and Stockholm. FD's services include
financial public relations, investor relations, public affairs, crisis and
issues management and corporate, business-to-business and business-to consumer
communications. FD is also a market leader in M&A advisory work. FD is
structured around specialist sector teams operating on an international basis,
covering consumer industries, financial services, basic industries, business
services, life sciences & healthcare, media, technology and
telecommunications.

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