This is the first of a series of four blogs reporting on corporate board developments. These posts are based upon remarks at the February 11th breakfast meeting of the National Association of Corporate Directors/New England. This first post relates to developments in the operation of boards of public companies.
Gender diversity. Although boards of all Standard & Poor’s Index Companies over the last five years increased from 12% to 17% female, the gap is obvious notwithstanding compelling documentation that diverse boards simply perform better. In Europe, where gender diversity is sometimes mandated, companies are beginning to recruit qualified United States women for service overseas.
Age, Term Limits. There is an increasing trend to impose age limits on boards, although few boards have instituted term limits. Most boards in larger public companies have enacted declassification and imposed majority voting, developments which favor shareholder activism and which are now cascading into mid-tier and lower-tier public companies.
Risk. The perennial major issue for boards: risk oversight. Much of this effort is confined to committees, and the question therefore is: does the whole board get a complete understanding of its risk profile? The boards tend to get into risk only through discussions of strategy.
Proxies. For the next proxy season, can we be informed by the past? Last year, proposals for dividing CEO and chair functions passed 30% of the time; proposals affecting executive compensation (such as changes in option policy and holding periods) passed 23% of the time; majority voting proposals 60% of the time; declassification 80% of the time; private ordering of inclusion of shareholder-proposed candidates for directorships passed one-third of the time.
Social Media. Many boards these days are seeking experts in the use of “social media.” This is liable to drive a younger cohort of directors. The question was asked: will this effect built-in long term board members, who have a lot of ramp time before retirement? One comment was in the negative; this type of person will not become entrenched. To my mind, an optimistic view of human nature.