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Spencer Stuart S&P MidCap 400 Board Report

Our 2021 analysis of the composition and governance of S&P MidCap 400 companies finds a significant focus on increasing ethnic and racial diversity, mirroring the trend at large-cap companies.

At a glance

  • Similar to larger companies, mid-cap boards are focusing on enhancing their diversity. Of the 300 independent directors added to mid-cap boards, two-thirds are from historically underrepresented groups.
  • Forty percent (40%) of the new mid-cap directors are serving on their first public company board, 76% of whom come from underrepresented groups.
  • Women constitute 28% of all mid-cap directors, compared with 30% of S&P 500 directors.
  • Sixty percent of mid-cap companies disclosed information about the ethnic/racial composition of their boards, a significant change from about one-quarter in 2020.

 

Spencer Stuart’s 2021 survey of S&P MidCap 400 boards finds a significant focus on appointing independent directors from underrepresented communities, mirroring the trend at large-cap boards. Some differences between the mid- and large-cap boards remain, with mid-cap boards generally smaller in size and less diverse than the boards of larger S&P 500 companies. However, the profiles of directors joining mid- and large-cap boards in 2021 are increasingly similar — including similar professional and industry backgrounds — due largely to the changing profile of large-cap directors to resemble mid-cap directors.

Focus on directors from underrepresented communities

Similar to larger companies, mid-cap boards are focusing on enhancing their diversity. Of the 300 independent directors added to S&P MidCap 400 boards during the 2021 proxy season, two-thirds (67%) are from underrepresented groups (defined as women and Black/African American, Asian and Hispanic/Latino men). This represents a significant increase from 58% in 2020 but lags behind the 72% of the 2021 incoming class of independent S&P 500 directors.

Women represent 43% of the S&P MidCap 400’s incoming class of independent directors, a decline from 48% last year. Black/African American, Asian and Hispanic/Latino/a directors constitute 42% of the new independent mid-cap directors, more than double last year’s 18% but below the record-breaking 47% of S&P 500 2021 boardroom appointments.

Of directors joining mid-cap boards in 2021, 28% are Black/African American, 9% are Asian and 5% are Hispanic/Latino/a.

S&P MidCap 400 S&P 500 
New directors elected 300 456
% Female 43% 43%
% Black/ African American, Asian or Hispanic/ Latino/a 42% 47%
% Female  18% 18%
% Male  24% 30%
Percentage of newly elected directors from underrepresented communities (female or Black/ African American, Asian, Hispanic/ Latino men) 67% 72%

Boardroom diversity enhanced by first-time directors

Forty percent (40%) of the new mid-cap directors are serving on their first public company board, down slightly from 43% last year. In contrast, the percentage of first-time directors joining S&P 500 boards increased from 28% in 2020 to 35% in 2021.

Of the mid-cap’s 2021 first-time director group, 76% come from underrepresented groups (45% women and 31% Black/African American, Asian and Hispanic/Latino men), up significantly from 54% last year. This compares to 86% of first-time directors in the S&P 500 2021 incoming class.

Backgrounds of mid- and large-cap new directors aligning

The backgrounds of the 2021 incoming class of independent S&P mid-cap directors stayed relatively unchanged from the prior year. In contrast, the backgrounds of independent directors joining the S&P 500 in 2021 changed significantly and now resemble the new class of mid-cap directors in many ways.

Mid-cap boards appointed a similar percentage of active and retired CEOs, but a higher percentage of line/functional leaders, investors and consultants, compared to large-cap boards.

More than half (55%) of new directors joining mid-cap boards are actively employed, similar to the 56% of directors joining S&P 500 boards. Last year, 57% of new mid-cap directors were actively employed, compared to 50% of directors joining S&P 500 boards.

MidCap 400 S&P 500
2021 2020 2021 2020
Top executives 26% 28% 26% 35%
Retired CEOs 12% 14% 10% 16%
Active CEOs 10% 9% 12% 13%
Retired chairs/ presidents/ COOs 2% 1% 2% 3%
Active chairs/ presidents/ COOs 2% 4% 2% 3%
Line/ functional executives 33% 32% 33% 23%
Line and functional leaders 27% 22% 21% 16%
Division/ subsidiary leaders 6% 10% 12% 7%
Financial executives 26% 23% 27% 27%
Financial executives/ CFOs/ treasurers 7% 6% 13% 14%
Investment managers/ investors 13% 13% 8% 8%
Bankers/ investment bankers 3% 1% 3% 4%
Public accounting executives 3% 3% 3% 1%
Legal executives 2% 3% 4% 3%
Other 15% 12% 10% 12%
Consultants 5% 5% 1% 2%
Academics/ nonprofit executives 5% 4% 4% 3%
Military/ others 5% 3% 5% 7%

New directors come from a wide range of industries

Industry backgrounds of the 2021 mid- and large-cap incoming classes are generally similar, with about 60% of new directors coming from five industries:

  • Consumer
  • Technology
  • PE/investment management
  • Industrial/manufacturing
  • Financial services

While the industry backgrounds of new mid-cap directors stayed generally unchanged from 2020, the S&P 500 class changed significantly year over year, with a notable decline in technology backgrounds.

New Independent Director Top Industry Backgrounds
MidCap 400 S&P 500
2021 2020 2021 2020
Consumer  17% 15% 16% 14%
Technology 16% 13% 15% 24%
Private equity/ investment management 12% 13% 7% 7%
Industrial/ manufacturing 9% 11% 10% 6%
Financial services 8% 11% 9% 10%
Healthcare/ pharmaceuticals 7% 7% 6% 6%
Energy/ utilities 6% 6% 7% 7%
Education/ nonprofit 6% 5% 4% 4%
Real estate construction/ services 5% 4% 4% 4%

Low boardroom turnover persists

Boardroom turnover rates are consistently low across mid- and large-cap boards, with new independent directors representing 8-9% of all directors. As a result, moving the needle on boardroom composition — among both mid-cap and S&P 500 boards — is slow.

Formal turnover mechanisms differ by company size. Only 55% of mid-cap boards have adopted a mandatory retirement age for directors, compared with 70% of large-cap boards. Among boards with mandatory retirement policies, 58% of mid-cap boards set the age cap at 75 or older, compared with 51% of the large-caps with mandatory retirement. Director term limits are rare, with only 6% of mid- and large-cap boards adopting limits on independent directors’ years of service.

Slow progress continues for boardroom gender diversity

S&P MidCap 400 boards continue to lag behind large-cap boards by one year in the representation of women. Women constitute 28% of all mid-cap directors, up from 26% last year, compared with 30% of large-cap directors, up from 28% in 2020. Two mid-cap boards have no women directors. A narrow majority (51%) have three or more female directors. In contrast, all S&P 500 boards have at least one female director, and 72% have three or more women.

Women continue to hold a minority of the committee leadership positions at mid- and large-cap boards.

Female Chairs of Key Committees
S&P MidCap 400 S&P 500 
Audit committee  27% 30%
Compensation committee 26% 28%
Nominating/ governance committee 31% 29%

Mid-cap boards enhancing transparency of boardroom diversity

Responding to growing calls from investors and other stakeholders for boardroom diversity details, 60% of S&P MidCap 400 companies disclosed information about the ethnic/racial composition of their boards, a significant change from about one-quarter last year. Of the companies disclosing this information, most (71%) provided aggregate data, while 29% disclosed director-specific details.

Nineteen percent (19%) of mid-cap companies report commitments for including women and people of color in director searches, up from 10% last year. The commitments vary from formal policies to general good-faith efforts to include diverse candidates on lists of directors under consideration for board seats. In contrast, 39% of S&P 500 boards disclosed a “Rooney Rule”-like commitment to include candidates from underrepresented groups in director searches.

Of the 234 mid-cap companies that disclosed the ethnicity, race and gender of directors:

  • 41% of directors are from historically underrepresented groups — including women and Black/African American, Asian, Hispanic/Latino/a, American Indian/Alaska native or multiracial men.
  • 29% are women, including 6% female Black/African American, Asian, Hispanic/Latina, American Indian/Alaska native or multiracial directors. 12% are men from underrepresented racial and ethnic groups.
  • Among the directors from historically underrepresented racial and ethnic groups,
    • 9% Black/African American
    • 4% Asian
    • 3% Hispanic/Latino/a
    • 2% Pacific Islander, Native American, Native Hawaiian or Alaska Native
  • In comparison, 21% of the directors serving on S&P 500 boards are Black/African American, Asian or Hispanic/Latino/a.
  • 14 boards (6%) reported no Black/African American, Asian and Hispanic/Latino/a directors.
  • Seven companies disclosed that their boards include directors who identify as LGBTQ+, and one board disclosed director-specific details.

The racial/ethnic composition of mid-cap boards falls short of U.S. demographics, where, according to the U.S. Census Bureau, 51% of the population are women and 38% of the U.S. population are from underrepresented ethnic and racial groups, including 13.4% Black/African American, 5.9% Asian and 18.5% Hispanic/Latino/a.

Racial/Ethnic Diversity of Top U.S. Boards vs. US Census
Top U.S. Boards with at Least One Director from an Underrepresented Racial/Ethnic Group

Independent chairs are more prevalent at mid-cap boards

Independent chairs continue to gain acceptance. Independent directors now chair 46% of mid-cap boards (44% last year), compared with 37% of S&P 500 boards (34% last year). Lead independent directors are in place at 70% of large-cap boards and 50% of mid-cap boards.

Board meetings and committee structures are consistent across company size

S&P 500 and S&P MidCap boards generally hold a comparable number of meetings — a little more than nine. Similar to large cap boards, S&P MidCap boards have an average of four committees, in the following order of prevalence:

˟ 11 companies combine compensation and nominating committee functions.

How S&P MidCap 400 and S&P 500 Boards Compare

Board composition

2021 S&P MidCap 400  2021 S&P 500 
Average board size 9.5 10.8
Independent directors 83% 86%
Average age of independent directors 63.2 63.1
Average tenure of independent directors 8 7.7
Oldest board (average age of independent directors) 75 74
Longest tenured board (average tenure of independent directors) 24 20
Board turnover (% new independent directors to total directors) 8% 9%
Total number 300 456
Underrepresented 67% 72%
Women 43% 43%
Black/ African American, Asian and Hispanic/ Latino/a 42% 47%
— Men 24% 29%
— Women 18% 18%
Average age 57 57.5
Oldest new director 79 79
Youngest new director 34 33
Active CEO/ chair/ president/ COO 12% 14%
Retired CEO/ chair/ president/ COO 14% 12%
Financial backgrounds 26% 27%
Functional/ division/ subsidiary corporate executives 33% 33%
# of first-time directors  119 159
% of all new directors 40% 35%
Average age 55 54.1
Women as % of all directors 28% 30%
Boards with at least one woman director 99% 100%
Boards with at least two women directors 90% 96%
Boards with at least three women directors 51% 72%
Women as a % of board leadership roles:
Independent board chairs 3% 8%
Lead directors 6% 13%
Audit committee chairs 27% 30%
Compensation committee chairs 26% 28%
Nominating/ governance committee chairs 31% 29%
% of CEOs serving on one or more outside boards 28% 40%
# of women CEOs 30 29
Boards where CEO is the only non-independent 60% 64%
Average age 57.7 58.2
Average tenure with company 16.2 19.8
Chair/ CEO combined roles 29% 41%
Independent chair 46% 37%
Lead/ presiding director 50% 70%
Average number of board meetings 9.1 9.4
Median number of board meetings 8 8
Boards with mandatory retirement age 55% 70%
Average retirement age 73.9 73.7
Boards with mandatory retirement age of 75+ 58% 51%
Boards with mandatory retirement age of 72+ 95% 97%
Boards with tenure policies 6% 6%
Average tenure limit 14.8 14.6
Boards with tenure policy of 15+ years 64% 75%
Average number of committees 3.9 4.2
Audit committees
Size 4.1 4.5
Meetings  7.3 8.4
Compensation committees
Size 3.9 4.3
Meetings  5.9 6.2
Nominating committees
Size 4.1 4.4
Meetings  4.4 4.7

Editor’s Note: The Spencer Stuart MidCap 400 Index is based on our analysis of the most recent proxy reports from the S&P MidCap 400 Index. This edition draws on the latest proxy statements from 400 companies filed between June 1, 2020, and June 1, 2021. Data for the S&P 500 is taken from the 2021 U.S. Spencer Stuart Board Index.

Data in tables and charts may not total 100% due to rounding.