S&P 500 boards appointed 428 new independent directors in the 2018 proxy year, up 8% from last year, and increasingly they are casting a wider and deeper net to identify talent, according to a new study by Spencer Stuart, one of the world's leading executive search and leadership advisory firms. However, low boardroom turnover persists. With new directors representing just 8% of all board seats, the overall composition of S&P 500 boards continues to gradually shift, according to the 2018 U.S. Spencer Stuart Board Index.
In response to a variety of challenges and pressures, including a rapidly changing business environment and the intensifying investor focus on the composition and quality of the boardroom, U.S. boards are adding directors with new skills, qualifications and perspectives.
"The best boards consider board composition a strategic asset and view boardroom succession planning as an ongoing imperative," said Julie Hembrock Daum, leader of Spencer Stuart's North American Board Practice. "They are determining the boardroom competencies that best match the forward-looking corporate strategies and refreshing the boardroom by adding directors with different perspectives and skills in emerging areas."
Experience as a CEO or top executive is no longer a must-have credential. Only 35.5% of the new S&P 500 directors are active or retired CEOs, chairs, vice chairs, presidents or COOs, down from nearly half (47%) a decade ago. Board experience is also no longer a pre-requisite. One-third of the incoming class are serving on their first public company board.
Spencer Stuart's research also found:
- Only 57% of S&P 500 boards added at least one director in the past year. As a result, despite the record number of new directors, the percentage of women on S&P 500 boards again increased only incrementally to 24% of all directors, up from 22% in 2017 and 18% in 2013.
- Directors with financial backgrounds are a priority, representing 25.5% of the new S&P 500 directors in 2018, up from 18% in 2008. Experienced CFOs/financial executives and investment professionals are in demand.
- Tech savvy, "digital directors" are in high demand, and boards are tapping younger "next gen" candidates with these skills. Seventeen percent (17%) of the incoming class are 50 or younger.
- Female representation among new S&P 500 directors rose to 40%, the highest since Spencer Stuart began tracking this data in 1998. Minority males (defined as African-American, Hispanic/Latino or Asian) experienced a slowdown, representing 10% of the new independent directors, down from 14% last year.
- Today 87% of S&P 500 boards have two or more women directors. Ten have 50% or more women directors. Three have no women directors.
- For the second year in a row, half of S&P 500 boards split the chair and CEO roles. Independent board chairs continue to gain momentum. Slightly more than 30% of S&P 500 boards are now chaired by an independent director, up from 28% last year and 16% in 2008.
- Companies are increasingly disclosing the use of outside experts to assist with board evaluations. This year 9% of S&P 500 companies disclosed retaining an independent expert to assist with boardroom assessments, up from 2% last year.
- Mandatory retirement policies continue to proliferate, and retirement ages continue to rise. Retirement policies are in place at 71% of S&P 500 boards. Of those boards with mandatory retirement policies, 43.5% set the retirement age at 75 or older, compared with just 11% in 2008. Three boards have a retirement age of 80, and more than half mandate retirement at age 73 or higher.
The 2018 Spencer Stuart U.S. Board Index is available on the Spencer Stuart web site: https://www.spencerstuart.com/research-and-insight/ssbi-2018.
SOURCE: Press release