Tag: Board of Directors

What Changing Director Demographics Tell Us about Board Work

The forces that are shaping business are changing as much as they are intensifying, and with that comes evolving needs for board oversight. Given the extreme turbulence of 2020, NACD partnered with Main Data Group to empirically describe the size, shape, and structure of Russell 3000 boards. MyLogIQ also provided additional data to supplement our work. The research, which is collected in the forthcoming NACD publication Inside the Public-Company Boardroom, looks at the dimensions of market capitalization and three-plus year market trends to assess how boards are changing. Board turnover in particular illuminates shifts in board demographics, in terms of gender diversity, skill sets, and overall size.

Boards and Committees Are Getting Larger

According to Main Data Group, the average board size has grown steadily between 2017 and 2020. In 2017, the average board size consisted of 9.88 members, and today that figure stands at 10.13; in the Russell 3000, this means the addition of more than 1,000 board seats. Small- and mid-cap companies have largely driven this trend, whereas large- and mega-cap companies have seen, on average, a slight decrease in board size: 12.29 members down to 12.12.

Uptick in CEOs Retiring to Exec Chair

In the past decade, the number of outgoing CEOs who’ve stepped into executive chair roles has quietly tripled from single digits to two dozen or more. So far this year, there have been 13 such moves, with a few more companies still to file corporate proxies. In 2020, the list includes chair appointments at blue… Continue reading Uptick in CEOs Retiring to Exec Chair

Boards Check the CEO-Chair ‘Body Chemistry’

Boards are formalizing the approaches they take in evaluating and assessing the performance of independent chairs and lead directors, at times even decoupling succession planning for the role from CEO transitions as governance processes and structures evolve.

Boards traditionally have looked to the director with the longest tenure who is also a former CEO to wear the mantle of independent chair or lead director, with a CEO transition serving as the fulcrum around which the governance structure might shift, depending on the circumstances. However, forward-looking boards are contemplating — typically as part of a board evaluation process or an executive development deep dive — whether the board has directors who have the skills needed to complement a potential new CEO as the chair or lead director. They are also determining if board recruitment might be needed in certain cases and whether the current relationship dynamic between the sitting CEO and current board leader is enhancing the CEO and company’s performance.

Vinod Khilnani, former CEO and chairman of CTS Corp. who now chairs the board of Materion Corporation, points out that the knowledge, experience and maturity of the person in the lead director or board chair role are equally as important as the style and soft side of the person.

…Similarily, a review of 2020 filings by public company intelligence provider MyLogIQ found that 196 S&P 500 companies currently have non-executive chairs, with an average tenure of six years in the role.

How Women Will Save The Future, One Corporate Board at a Time

Getting more women into the corporate boardroom has been a high priority governance issue for several years globally.

While there has been progress, has it been enough?

According to data from MyLogiq, 30% of corporate directors are female for the companies in the Dow 30, while only 23% are female for companies in the Russell 3000 index.

Deloitte reports that women only hold 16.9% of board seats globally even though between 2008 and 2015, 32 countries enacted some type of boardroom gender quota.

As a macro benchmark, the World Bank estimated that 50.52% of America’s population and 49.58% of the global population was female in 2018. Deloitte’s research reports that Norway and France come closest to these percentages, with female directors comprising 41% and 37% of the boardroom.

Boards Face ‘Gut-Wrenching’ Talks on Dividends

The biggest companies in the United States are about to report an overall negative earnings quarter for the first time since the Great Recession of 2009. In the wrenching wake of the pandemic, boards had better conserve cash against a sharp recession and corporate losses, financial experts say. That puts dividends in the cross hairs.… Continue reading Boards Face ‘Gut-Wrenching’ Talks on Dividends

CEOs, Boards Forgo Cash Retainers in Liquidity Squeeze

Companies are taking steps to shore up balance sheets with more cash on hand by drawing on credit facilities, suspending dividends, cutting spending and in some cases eliminating cash payments to CEOs, executives and board members as employees deal with business shutdowns.

At such companies as Boeing, Booking Holdings, Darden Restaurants, Delta Air Lines, Kama Corp., United Airlines Holdings, Sabre Corp. and Steelcase, executives and some board members have decided to cut base salaries and board cash retainers, and in some cases executives will go unpaid until the end of the year. The compensation cuts provide relatively small amounts of liquidity for companies and are likely intended to send a message to employees who are unpaid and uncertain.

Where Does ESG Oversight Fit on the Board?

As investors continue to pressure boards to take up environmental, social and governance (ESG) issues, directors are facing the question of where that responsibility lies on the board. Should the full board be responsible for ESG oversight, or is the subject important enough for a stand-alone committee? Or, should already established committees take responsibility? Agenda readers are divided, but about half think it’s a full-board job, according to the latest quarterly Directors’ and Officers’ Outlook Survey.

Out of 66 respondents, the largest segment (45.5%) says their full board has responsibility for ESG risk oversight. Meanwhile, 10.6% say audit committees should oversee ESG and the same proportion would assign ESG to risk committees, while 22.7% say they would designate it to an “other” committee.

Companies are also increasingly establishing ESG, sustainability or corporate social responsibility (CSR) committees to handle the heavy workload required for these issues. According to data from public company intelligence provider MyLogIQ, in 2019, 174 Russell 3000 companies disclosed having a stand-alone sustainability-focused committee, up from 142 in 2018. So far in 2020, 35 Russell 3000 companies have disclosed a sustainability-focused committee in public disclosures. However, according to the D&O survey, only 3% of the 66 respondents indicated their board had a stand-alone sustainability or ESG committee. The other 7.6% say their board had not discussed the issue.

COVID-19 Pulse Survey Reveals Boards Have Confidence in Management

NACD this week polled nearly 200 members to better understand how directors and their boards are responding to the coronavirus disease 2019 (COVID-19) pandemic. While the economic, social, and political impacts remain in flux—evidenced in one dimension by the S&P 500 declines and gains of nearly 10 percent last week—corporate boards are in a unique position to help management respond effectively to the short- and long-term implications of the crisis.

Director responses to the pulse survey reflect the early actions boards are taking to combat the crisis, and their responses may have shifted in the time since. NACD’s Resource Center: Responding to the COVID-19 Crisis can help directors govern more effectively through these uncertain times. And NACD’s March 2020 poll reveals how boards have been doing so in real-time over the last week.

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Many anticipate a short-term business impact.

As of March 16, about a third of S&P 500 companies had disclosed COVID-19 in their risk factors (30%) and earnings calls (33%), according to MyLogIQ, a public company disclosure information aggregator. Numbers are similar for the Russell 3000, where risk-factor mentions jumped from 29 percent to 39 percent between March 12 and 16, per MyLogIQ. In the NACD poll, most directors saw the largest likely disruption in the demand for their products (28%) followed by employee productivity (19%), and impacts to their supply chain (16%) and the capital markets (14%).