Our annual survey of S&P 500 nominating/governance committee chairs casts a light on current board trends and priorities. How have things changed — and how have they remained consistent — after a pandemic year? In early 2021, we surveyed 77 committee chairs to find out what is top of mind in the wake of the pandemic and racial justice reckoning, how their recruitment efforts have shifted, and where their board makeup is headed. Here are the highlights:
Nominating/governance committee priorities
Enhancing board diversity remains a high priority, but three new priorities joined the top five list, including today’s top priority for nom/gov committees: overseeing environmental, social and governance (ESG) initiatives. Developing a board succession strategy, enhancing board effectiveness and overseeing diversity, equity and inclusion (DE&I) efforts round out the list.
Top five nom/gov committee priorities over the next three years
40%
2 out of 5 priorities target corporate and boardroom DE&I
10th
Gender diversity as a recruiting profile fell from 3rd place in 2020 to 10th in 2021
43%
Recruitment of women slowed from 47% in 2020
What is missing?
Gender diversity, the fourth priority for nom/gov committees last year, did not rank in the top five this year. In terms of recruiting profiles, it fell far — from 3rd place to 10th.
The change in board priorities is also reflected in 2021 proxy composition trends. The recruitment of women slowed: 43% of the new class of S&P 500 directors are women, compared with 47% last year.
Has this movement had its moment?
Or is recruitment of women simply a given priority at this point?
Board performance
18% The number of nom/gov chairs who reported that their board had one or more underperforming directors fell from 35% last year, suggesting that directors stepped up their contributions in response to the challenges of the pandemic or underperformers left these boards.
Recruiting and refreshment
Board refreshment is always top of mind for nom/gov committees, but boards turn over slowly. On average, nom/gov chairs expect one director role to turn over in each of the next three years.
75% of nom/gov chairs say they start looking for a new director 12+ months before retirement of the current director.
Top five nom/gov committee priorities over the next three years
What the proxies show: The new class of S&P 500 directors is the most racially and ethnically diverse ever
47%
Of new independent directors are Black/African American, Asian, Hispanic/Latino/a, American Indian/Native Alaskan or multiracial, up from 22% in 2020
72%
Of new independent directors are from underrepresented groups (women and Black/African American, Asian, Hispanic/Latino/a, American Indian/Native Alaskan or multiracial male directors), up from 59% in 2020
83% of nom/gov committee chairs report no issues with recruiting directors with diverse backgrounds — either they already feel they have a diverse board or they have not faced any obstacles in recruitment.
How boards are increasing their racial and ethnic representation
37%
Have used a global search firm to identify director candidates with diverse ethnic/racial backgrounds
24%
Have leveraged the personal networks of current board directors and management
What’s shifting and what’s remained constant in recruiting profiles
2nd
Global perspective
10th on the list just two years ago, now it’s #2
5th
Operational experience
Jumped from the #8 spot into the top 5
∞
Financial & Tech experience
Have always been top 5 priorities for nom/gov committee recruitment