Corporate Boards Spooked by String of Cyber Breaches, Poll Shows

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By Andrea Vittorio

Corporate boards today are more concerned about cybersecurity but less confident in their company’s ability to safeguard against an attack, according to a poll released Nov. 30.

Thirty-eight percent of the nearly 600 public company directors surveyed by the National Association of Corporate Directors picked cyber threats as a top trend likely to have the biggest impact on their companies in 2018, up from 34 percent the year before.

But fewer directors than last year said they feel confident or very confident in their cyber-risk preparedness amid a string of breaches at companies such as Verizon Communications Inc.’s Yahoo! Inc., Equifax Inc., and most recently Uber Technologies Inc. More directors said they were only moderately or slightly confident in their cyber defenses while a few reported no confidence.

“They’re certainly spooked by what’s happening in the external environment,” NACD’s research director Friso van der Oord told Bloomberg Law. “Nobody is immune in this environment.”

NACD said this lack of confidence may be driven by the fact that existing defenses can quickly become obsolete amid rapidly mutating threats. It could also be due to boards’ better understanding of the issue, since fewer directors said in 2017 than in 2015 that they had no or very little cyber knowledge.

Directors ‘Simply Smarter’

“They’re simply smarter,” van der Oord said. Cybersecurity is now a fixed item on most board agendas, he said, and directors are increasingly interested in educating themselves on the issue.

The survey also showed that more than one-fifth of directors are dissatisfied with the quality of cyber risk information that company management is providing them. One of the most common reasons given was that the information didn’t provide enough transparency into security problems.

“Even management isn’t entirely comfortable with where the real problems are,” van der Oord said.

The survey, conducted over the summer, covered other issues such as how boards are planning for their company’s next chief executive officer. More directors than last year consider this an area in need of improvement following a number of high-profile CEO departures at companies including Uber and Wells Fargo & Co.

Both of these companies have also faced scandals related to their corporate culture, a topic where NACD found what it called a potentially “risky disconnect.” While the vast majority of directors surveyed said they have a good grasp of the cultural tone at the top, only about half of them can gauge the mood among lower-level employees.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bloomberglaw.com

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