The spotlight on boards is getting even brighter with institutional investors and shareholder activists gaining more access and exerting more influence, according to PwC's 2016 Annual Corporate Directors Survey. The report is based on responses from 884 public company directors to gauge sentiment on board governance in this new age of shareholder empowerment. 

"The board-centric model that took hold in the 1990's due to a number of corporate scandals has continued to transition to an investor-centric model," said Paula Loop, Leader of PwC's Governance Insights Center. "As a result, investor voices continue to get louder, and boards can no longer ignore them. Investors want more director accountability and more emphasis on transparency behind decision-making and performance. Shareholders are looking for a seat at the board table, putting directors in the spotlight and driving change across the governance landscape."

PwC's survey uncovered key findings that are impacting how boards are performing:

• Directors continue to say someone on their board isn't measuring up. Thirty-five percent of directors say someone on their board should be replaced – a sentiment directors have had since 2012. The most common reasons why: they're not prepared for meetings and they lack the right expertise.

• How beneficial is diversity on the board? It depends on who you ask. Nearly all directors agree that diversity is important (96 percent). But how important it is and how much it helps depends on who you are talking to. Eighty-nine percent of female directors believe that board diversity leads to enhanced company performance, compared to just 24 percent of male directors. Ninety-two percent of female directors think board diversity leads to enhanced board effectiveness – only 38 percent of male directors agree.

• A gender imbalance on boards. In 2015, women made up 20 percent of S&P 500 boards, up only five percentage points in a decade. The majority of directors today say anywhere from one-fifth to one-half of the board should be female. But 10 percent of directors believe the optimal female board representation is 20 percent or less; 97 percent of those who believe this are male.

• Are activists good for business? Most directors actually say yes. Eighty percent of directors at least somewhat agree that shareholder activism has compelled them to more effectively evaluate their company's strategy, execution, and capital allocation. A similar percentage at least somewhat agrees that shareholder activism has resulted in improved company operations and capital allocation.

• The search for new directors doesn't extend too far behind the boardroom. The most common source for new directors is fellow board member recommendations (87 percent). However, calls for increased board diversity have prompted some boards to use less traditional sources to find new directors.

• Proxy access: the new normal? Many investors believe proxy access is an essential shareholder right, one that allows them the ability to directly influence board composition. By the end of the 2016 proxy season, about 40 percent of the S&P 500 had adopted a proxy access bylaw, up from less than one percent that had done so two years ago. Despite this trend, about half of directors are concerned about proxy access.

• Investors flex their muscles about board composition. Many investors have become more vocal about who's sitting in the boardroom. Due to investor pressure, 61 percent of directors say their board added a director with a specific skillset, 46 percent say they added a diverse board member, and 34 percent say they added a younger board member.

• Some directors question whether dialogue with investors really matters. Direct engagement between boards and investors has become much more commonplace over the past few years. In fact, 54 percent of directors said their boards engage directly with their investors. However, not all directors think the engagement is useful – 21 percent of directors said they didn't receive any valuable insights from directly engaging with investors.

• Companies respond to investor demands about capital allocation. Forty-eight percent of directors said their company increased share buybacks due to actual or potential investor demands; 38 percent said their companies initiated or increased dividends, and 27 percent said their companies decreased corporate investments.