The Spencer Stuart Board Index is an annual study that examines the state of corporate governance among the S&P 500. The 26th edition reveals critical trends in director recruitment, board processes and compensation. Among the notable takeaways from this year’s proxy analysis:
- Declining board turnover: While transitions for the CEO may be on the rise, the same is not the case for the board of directors. 2011 features the smallest number of newly elected directors in a decade.
- More independent board leadership: 41% of boards split the roles of chairman and CEO, choosing not to consolidate power in the hands of one person. Over half of boards feature the CEO as the only non-independent director, a figure that has doubled in only ten years.
- Fewer active CEOs as directors: Less than half of CEOs serve on an outside board, resulting in the need for boards to look beyond their usual sources for new board members.
- Older boards: The average age of all independent directors is now 62.4 years, up from 60.2 years in 2001. 83% of the boards that have a fixed retirement age have set the mark at 72 years of age or older.
- Mixed results in diversity: 9% of boards feature no women, while minorities have failed to land a seat on 12% of boards. However, while the number of African-Americans serving on boards has gone down slightly, more boards have added directors of Hispanic or Asian origin, and 10% of the new directors named in 2011 were born outside the United States.
- Rebound in compensation: The average annual pay for board directors is up 8% over last year, exceeding $232,000. The nature of that compensation is changing, too, as cash retainers rose 11%.
This year’s report also gives special attention to the issue of CEO succession, which respondents to our annual governance survey consistently identify as one of the top issues requiring significant board focus. In the wake of several recent high-profile CEO departures and with S&P 500 CEO transitions on pace to increase for the year for the first time since 2005, succession is perhaps of even greater concern. In fact, triple the percentage of respondents named succession as a major issue confronting boards as did four years ago.
However, the 2011 survey results indicate that many boards have not acted with a diligence reflecting the importance of a smooth transfer of power. With almost a third of companies surveyed admitting that they have neither an emergency nor a long-term succession plan in place.
In addition to our proxy analysis, some of which was summarized in the November 2011 issue of the Harvard Business Review, the 2011 edition of the SSBI includes the results of our annual governance survey of corporate secretaries, general counsels and governance officers.
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