Board Leadership and Composition Becoming More Independent, 22nd Annual Spencer Stuart Board Index reveals board changes

New York, October 3, 2007 - The 22nd annual Spencer Stuart Board Index (SSBI) study of S&P 500 corporations reveals that the profile of new S&P 500 directors continues to shift away from active CEOs and toward other corporate executives and first-time public company directors.

There are fewer active CEOs on boards – 33 percent; down from 41 percent in 2002 and 53 percent in 2000. There are more active and retired other corporate executives (e.g., division managers and functional unit leaders) – 21 percent vs. seven percent in 2002. Meanwhile, 33 percent of new directors are first-time public company directors. The CEO is increasingly likely to be the sole insider on the board and less likely to serve on any outside boards, as compared to five years ago.

Additionally, 35 percent of S&P 500 boards now have a non-executive chair with separate CEO and chair roles, up from 25 percent in 2002. However, only 13 percent of non-executive chairs are independent, as the others are often former CEOs of the company.

Spencer Stuart, one of the world’s leading executive search consulting firms, said the study revealed that in further support of board independence, 94 percent of boards report a lead or presiding director, and one-year board terms are becoming more common. A total of 62 percent of boards now have a one-year term, compared to 40 percent in 2002.

"These data are a measure of increased board independence," said Julie Daum, the leader of the Spencer Stuart North American Board Services Practice. "We are seeing boards move beyond mere compliance with regulatory requirements toward more comprehensive consideration of how the board needs to evolve to further the company’s objectives. The process by which boards identify independent directors has changed and there has also been a shift in the types of people who are joining boards."

Spencer Stuart’s study also revealed that:

• Women directors and women CEOs are at an all-time high. 91 percent of boards have at least one woman director, up from 82 percent in 2002. 55 percent of boards have two or more women directors and 15 percent have three or more women. A total of 15 women serve as CEOs, up from seven in 2002.



• Average board size is converging to between 9 and 13 directors. 75 percent of boards have this range of directors, up from 63 percent in 2002, while average board size is stable at 10.8 directors. A mandatory retirement age for directors is now more prevalent and older; 79 percent of boards have a mandatory retirement age vs. 55 percent in 2002, but 67 percent have set their mandatory retirement at age 72+ vs. 35 percent in 2002. In addition, one-year board terms are becoming more common; 62 percent of boards now have a one-year term, compared to 40 percent in 2002.



• There is more disclosure of the sources of director recommendations. Information on sources of new director recommendations was disclosed for 57 percent of new appointees, and 61 percent came from executive search firms.



• The all-inclusive average total compensation for S&P 500 directors is $211,179. Stock awards account for 41 percent of the total, cash fees for 35 percent, 16 percent for options and 8 percent for other compensation. Total average compensation for directors varied from a low of $168,568 per director for basic-materials companies to a high of $273,809 per director for energy corporations. Healthcare companies averaged $271,544 annually per director, conglomerates $225,639 and technology companies $224,211. New proxy disclosure requirements now make it possible to see and understand total director compensation and its components.



• Meeting fees have declined but fees to committee chairs have increased. A total of 52 percent of boards pay meeting fees, down from 70 percent five years ago. In addition, as more business is done during committee meetings, more boards (88 percent) are paying retainers to committee chairs, and to a lesser extent, all committee members. This is up from 55 percent in 2002.

Spencer Stuart’s study uses data taken directly from company proxies and a survey of the S&P 500. The report covers a broad range of data related to boards, directors, compensation of directors, governance policies, director backgrounds and board organization.

The governance survey, with reporting from 119 of the S&P 500 companies, revealed that more than three-quarters of the companies want new directors with financial expertise and over 50 percent are seeking directors with international experience. The survey further revealed that actual numbers of women directors recruited fall short of expressed demand by boards. While 70 percent of boards surveyed say they seek to bring on women, only 19 percent of new independent directors added in 2007 were women. The survey revealed that directors in the highest demand continue to be active or retired CEOs or Chief Operating Officers.

The 22nd annual Spencer Stuart Board Index will be published in its entirety and posted on Spencer Stuart’s web site (www.spencerstuart.com) by Nov. 15, 2007.

About Spencer Stuart

Spencer Stuart is one of the world’s leading executive search consulting firms. Privately held since 1956, Spencer Stuart applies its extensive knowledge of industries, functions and talent to advise select clients — ranging from major multinationals to emerging companies to nonprofit organizations — and address their leadership requirements. Through 51 offices in 27 countries and a broad range of practice groups, Spencer Stuart consultants focus on senior-level executive search, board director appointments, succession planning and in-depth senior executive management assessments. For more information on Spencer Stuart, please visit www.spencerstuart.com.

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