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Directors Grow Reluctant

March 09, 1986|BILL SING

Increased liability, exposure to public censure and time constraints are making corporate executives increasingly reluctant to serve as outside directors of other firms, a survey shows.

Meanwhile, the number of companies with female directors has not grown and minority representation actually has declined, said the survey, conducted by Korn/Ferry International, a management search firm based in Los Angeles and New York.

The annual nationwide survey, conducted in December and released this week, said 20.4% of the 592 firms responding reported that qualified candidates had declined invitations to serve as outside directors. That compared to 16.9% in the 1984 survey.

Nearly 62% of chief executives surveyed said they will reduce the number of boards on which they serve. Of those planning to reduce board service, 96% said they will do so because of increased liability, while 69% said it will be because of exposure to public censure. (This was the first time those questions had been asked, so there are no year-ago comparisons available.)

Sixty-seven percent of the chief executives planning to reduce service said that being a director is taking too much time. However, the survey showed, the average time served by directors declined to 114 hours per year from 121 in 1984. Also, the average director's pay increased by 4%, to $19,500--or $171 an hour--from $18,800.

"One has to ask why anyone would want to be a director these days. The risk may not justify the reward," Korn/Ferry Chairman Lester B. Korn said. "In fact, we predict the day is coming when there may well be an acute shortage of qualified outside directors. If that happens, it will drive outside director fees up substantially."

Korn/Ferry said the end in growth of companies having women and minority directors was the first such result in the study's 13-year history. Women sit on 45% of the boards surveyed, the same as in 1984, while minority representation declined to 25% from 26%. Korn/Ferry estimated that 4% of directors are women and 3% are minorities.

The survey did not suggest reasons for the lack of progress, but a spokeswoman for the firm suggested that there has been less pressure on firms to increase female and minority representation.

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