TAI | The Activist Investor, July 15, 2025, commentary: "A Tale of Two Surveys" [Shareholder advocate reviews studies of director and investor influence on management]

Source: TAI | The Activist Investor, July 15, 2025, commentary

A Tale of Two Surveys

Mind investors, not CEOs

Jul 15, 2025

Should investors care what executives think of BoDs? Should BoDs? Should anyone?

Each year numerous surveys, reports, and analyses assess BoDs. One from PwC landed about the same time as another from SquareWell Partners in the past couple of months, inviting a comparison.

PwC has surveyed CEOs and other executives about BoDs for the past five years. SquareWell surveyed institutional investors about activists this year for the first time since 2019. A close read of their findings reveals which approach makes more sense, at least for activists. At the same time the PwC report reminds us of the fundamental flaws in the relationships among investors, BoDs, and executives.

Executives criticize BoDs

The PwC Governance Insights Center, with The Conference Board, surveys annually CEOs and other executives about their company’s BoD. Of course, PwC advises BoDs and executives about corporate governance. In this year’s report, they find 35% of executives think their company’s BoD is “excellent” or “good”, up from 30% in 2024. Thus, two-thirds of executives thinks their company’s BoD is “fair” or “poor”.

Executives want passive BoDs. 32% think the BoD “oversteps the boundaries of their role”, up from 16% in 2024. The only surprise is the figure is this low.

PwC asks executives whether BoDs refresh themselves well. 50% of executives think their company’s BoD can “very much” or “somewhat” effectively “remove underperforming directors”. Note: they don’t ask anything about removing an underperforming CEO.

The rest of the analysis looks mostly at ways the BoD does and does not do what executives want. PwC asks about the skills the BoD has to advise executives, how it works with management, and how, where, and how well the BoD spends its time.

Conspicuously missing is any mention of investors. The survey barely touches investors, with only three items out of over 120 pertaining to them:

18% of executives think their company’s BoD understands “investor perspectives/priorities” “very well” (Question 3)
19% are “very” confident the BoD can effectively “engage with shareholders” (Question 4)
15% think the BoD needs to evolve in the next five years to “increase transparency and engagement with shareholders” (Question 11).

The entire written report has only four instances of the word “shareholder” and three of “investor”. One mention of “investor” is in the boilerplate description of the PwC Governance Insight Center on the final page.

Look, it’s a decent survey. PwC queried 520 CEOs and other executives in September-November 2024, releasing the results this past May. The sample size, questionnaire, analysis, and report all make sense. Yet, asking CEOs and other executives about BoDs makes no sense at all. It’s at best some upward feedback about the nominal boss (the BoD), worth knowing but hardly the final word or even the first one on the boss’ performance.

Investors like activists

SquareWell Partners also advises BoDs and executives about corporate governance. They surveyed investors, not executives, about activism. It finds much more interesting stuff, at least to us activists. It concludes, “Both passive and active managers increasingly recognize the positive impact of activism in promoting corporate accountability and long-term value.”

It’s gratifying that 100% of survey subjects “consider activism to be a useful market force.” SquareWell also asks what investors like and dislike most about activism, what factors influence their support of an activist, and how they engage with activists. 68% of investors wished they had supported an activist at a portfolio company, while 52% would consider stating publicly support for an activist project. All activists should read this before their next call to an institutional investor.

SquareWell surveyed “over 30” institutional investors representing $35 trillion in AUM. It surveyed both portfolio managers and stewardship team members. It released its report just this month, after an earlier one in 2019.

Ok, the comparison isn’t entirely fair

They obviously have different goals: PwC examines BoD effectiveness, while SquareWell looks at sentiment about activists. We can imagine PwC conducting a different survey, asking investors about BoDs, which would likely elicit as interesting information as SquareWell’s survey of investors did. Or, a survey of executives about investors, which would likely prove as predictable and uninteresting as asking executives about BoDs. Even a survey of BoDs about BoDs might have value.

We question, then, the value of asking executives for these views. Much like the echo chamber The Wall Street Journal inhabits with its director assessment, it seems designed to create fear and worry among BoDs. PwC can then compare a client BoD to the averages, find deficiencies, and advise about rectifying them. As we’ve shown before, these days BoD longevity depends more on the approval of executives than investors. At least BoDs now have this guide about what those executives need and want.