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STUDY FINDS 82 PERCENT OF CEOs BELIEVE THAT INSTITUTIONAL INVESTORS WILL CAUSE BOARDS TO BE MORE CRITICAL OF MANAGEMENT PERFORMANCE

 NEW YORK, April 12 /PRNewswire/ -- An overwhelming majority of American chief executive officers, some 82 percent, believe that pressure from institutional shareholders will "cause corporate boards to become increasingly more critical of management performance." At the same time, these chief executives recognize that boards will be quicker "to act," if necessary, according to the 20th Annual Board of Directors Study issued today by Korn/Ferry International, the world's leading executive search firm.
 "These findings were among many that point to the increasing pressures CEOs and corporate management face as board of directors react to outside influences including powerful institutions and the Securities and Exchange Commission's new disclosure rules concerning executive compensation and greater access to shareholders," said Richard M. Ferry, chairman and chief executive officer of Korn/Ferry International.
 In fact, according to the report, some 73 percent of chief executives believe that institutional investors' "new freedom to communicate more openly with corporate boards and one another will prompt an increase in proxy challenges." And while 65 percent of chief executive offices believe the new SEC disclosure rules are in the shareholders' best interests, a full 72 percent do not believe these regulatory actions and reforms will benefit corporate performance. What 69 percent of chief executive officers do recognize, according to the study, is that the new SEC rules signal a "new era of heightened communications with institutional investors."
 "CEOs are clearly aware that the age of the `rubber stamp' board is over," said Mr. Ferry. "The key will be how CEOs and directors relate in an era when directors are being drawn closer and closer on the side of shareholder interests, not necessarily the CEO's."
 In fact, according to the study, more than 35 percent of chief executive officers said that they would now consider separating the chairman and CEO functions. Only 6 percent of companies do so today. Of those CEOs that favor separating the functions, some 42 percent said that they would prefer a former chief executive officer of the company to hold the position of chairman. Only 5 percent said that they would be willing to have an institutional shareholder hold the position.
 Some 63 percent of chief executives surveyed said that, if the two functions were separated, they believe that their authority as chief executive would be diminished.
 More Companies Move Toward All Outside Directors
 The study revealed that 40 percent of chief executives now believe that the board of directors should consist of the CEO and only outside directors. Just one year ago, CEOs were in favor of having two other insiders besides themselves sit on their boards.
 And qualified women are still very much in demand. This year, 60 percent of the companies have at least one woman on the board. In 1973, when Korn/Ferry published its first study, only 11 percent included a female director.
 CEO Evaluation on the Rise, So Are Director Evaluations
 CEO evaluation has become a major issue over the past several years. Some 74 percent of CEOs studied said there is greater pressure today to conduct formal evaluations or gradings of CEOs. And about 62 percent of the companies surveyed said that such evaluations were presently being carried out at their companies today at least once a year, principally by the compensation committee. Similarly, 47 percent of the CEOs surveyed said that they believe in formally evaluating the board.
 CEOs Limit Outside Boards
 Some 95 percent of CEOs believe that, primarily because of time constraints, they should limit the number of companies on which they serve as an independent director.
 Most CEOs said that they serve on two boards in addition to their own and 54 percent of them said they have refused an invitation to sit on another board of directors over the past year.
 Director Fees Continue to Rise
 Once again, director fees increased. The study revealed that in 1992 annual compensation for directors was $34,276. Billion dollar company fees increased to $38,652 from $36,272 a year ago. At $5 billion, companies fees increased to $50,941 from $45,203.
 About the Study
 Since 1973, Korn/Ferry International has conducted an annual survey of the nation's leading corporations to track significant trends in corporate governance. The study is based on data provided by CEOs of the Fortune 500, the Fortune 500 service companies and selected smaller companies. This year, the study included data from 327 corporations.
 Copies of the 20th Annual Board of Directors study are available from Korn/Ferry International's corporate communications department, 212-687-1834. The study covers a broad range of topics including corporate governance, management succession, board composition, compensation and board issues and policies.
 Headquartered in New York and Los Angeles, Korn/Ferry International specializes in management searches at the senior level. The firm maintains 18 offices in major U.S. cities with a total of 43 offices worldwide in key business centers throughout North America, Latin America, Europe, Asia/Pacific and Australia. In addition to serving its clients' executive recruiting needs, Korn/Ferry provides related consultation services in executive compensation and organizational consulting.
 -0- 4/12/93
 /CONTACT: Stephanie Rosenfelt of Korn/Ferry International, 212-687-1834/


CO: Korn/Ferry International ST: New York IN: SU: ECO

CK-OS -- NYFNS1 -- 4570 04/12/93 07:31 EDT
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Date:Apr 12, 1993
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