We recently surveyed 59 S&P 500 nominating/governance committee chairs to gain a first-person perspective on board trends and priorities. We compared some of this year’s findings against similar findings from a survey last year of 113 S&P 500 nominating/governance committee members. This year’s survey targeted committee chairs to capture a unique response per company. Here are the results:
Nominating/governance committee priorities
Amid social unrest and growing attention to racial inequality in the United States, boards are prioritizing increasing racial and ethnic representation, while gender diversity declines as a priority. Notably, last year’s top priority, "Expanding director sector/industry experience," was not ranked in the top five this year.
Top five nom/gov committee priorities over the next three years
Nom/Gov committee priorities rank changes
|
2020 |
2019 |
| Enhancing racial/ethnic diversity |
1 |
3 |
| Developing a boardroom succession strategy* |
2 |
n/a |
| Enhancing board and individual director evaluations |
3 |
4 |
| Increasing gender diversity |
4 |
2 |
| Adding younger directors (50 yrs or younger) |
5 |
5 |
| * New option for 2020. |
|
|
⇧ - denotes increased rank from prior year⇩ - denotes decreased rank from prior year
61% of nom/gov chairs are not satisfied with the current level of racial/ethnic diversity on their board.
How boards are increasing diversity
76
%
Hiring an executive search firm to help identify minority candidates
71
%
Prioritizing diversity as a critical criterion for new searches
66
%
Assessing the skills, experience and expertise of existing board members to identify gaps
Board Refreshment
Making progress on diversity will likely be challenging. Nom/gov chairs anticipate low turnover in the next couple years, consistent with findings from our S&P 500 proxy research that only 16% of sitting independent directors on boards with mandatory retirement are within three years of the age caps.
1 Average number of directors nom/gov chairs expect to retire/join their boards in each of the next two years. When looking at turnover during the 2020 proxy year, however, just over half (55%) of S&P 500 boards appointed one or more new independent directors.
35% of nom/gov chairs report that their board had one or more underperforming directors in the past three years. Despite underperforming, directors are not being asked to leave, as more than half said the board addressed the underperformance by working with directors to change their behavior. As a result, performance issues are unlikely to impact board refreshment.
The biggest drivers of board refreshment
37
%
Replacing retiring director(s) due to mandatory retirement or term limits
34
%
Adding new skills to the boardroom
Recruiting profiles
Nom/gov chairs are keenly aware of the value of diversity in the boardroom, as reflected by the skills and qualifications they expect to be priorities in the next three years. Gender diversity, which was the number-one priority last year, has taken a backseat to racial/ethnic diversity. Global experience, in particular, is in higher demand, perhaps reflecting a sense stemming from the COVID-19 pandemic that the world is more connected than ever.
Top five nom/gov committee recruiting profiles over the next three years
Nom/Gov committee recruiting profiles rank changes
|
2020 |
2019 |
| Minority |
1 |
7 |
| Technology experience |
2 |
2 |
| Female |
3 |
1 |
| Global perspective/experience |
4 |
10 |
| Financial experience |
5 |
4 |
⇧ - denotes increased rank from prior year⇩ - denotes decreased rank from prior year