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16 Dec. 2010 | Comments (0)

If you haven’t had a chance to download the 2010 version of the Spencer Stuart U.S. Board Index, I would advise you to do so. In its 25th year, the report gives a look back to life in boardrooms in 1986 and how it compares to life today. While there aren’t too many surprises in the annual report, there are some statistical “nuggets” worth noting. For instance, the average board retainer in 1986 was only about $20,000 compared to nearly $80,000 in 2010. Also, the median number of board meetings in 1986 was 11 compared to eight in 2010. And the 1986 report doesn’t even address two of today’s emerging issues: separation of chair and CEO positions and the percentage of minority and female directors. Reading the Spencer Stuart report gave me the idea of looking back at the 2003 Director Compensation and Board Practices report and executive summary and the 1999 Board Diversity in U.S. Corporations, two of the oldest publications produced by The Conference Board Governance Center, and comparing their findings to the 2010 Directors Compensation and Board Practices report. For instance, total annual director compensation, including stock, more than doubled in the past seven years ($61,500 in 2003 vs. $142,000 in 2010), the number of women directors only increased about four percentage points in 12 years (11.1 percent in 1999 vs. 13.8 percent in 2010) and the number of companies reporting the CEO is also the chairman decreased about an average of 20 percentage points (70 percent in 2003 vs. 48.9 percent in 2010) while the number of companies with a lead director increased about an average of 38 percentage points (20 percent in 2003 vs. 58.4 percent in 2010). As for the Spencer Stuart Board Index, there were some interesting statistics and analysis as well. In a November article in Bloomberg Businessweek, Julie Hembrock Daum, co-leader of Spencer Stuart’s North American Board and CEO Succession Practice, pointed out how times have changed. “In 1986, Spencer Stuart analyzed 100 randomly selected companies,” she wrote. “Today, the SSBI analyzes the proxies of all 500 companies in the Standard & Poor's 500-stock index and includes a survey of board practices. In 1986, the independence of boards was not an issue. Spencer Stuart wrote then about their ‘outside/inside composition.’ “Indeed, a substantial number of directors considered ‘outsiders’ at that time would not qualify today as independent. The average board size was then 15, with a three-to-one ratio of outsiders to insiders; the average board now has 11 members, with a five-to-one ratio of independents to nonindependents. … The 1986 index did not address the separation of the chair and CEO roles; the percentage of female and minority members; functional backgrounds of directors; majority voting; succession planning; or board self-evaluation. These issues had not yet surfaced.” Here are some other interesting juxtapositions between 1986 and now, according to the SSBI:
  • Only 3 percent of the boards reviewed in 1986 had the chairman/CEO as the sole insider while today more than half of the S&P 500 boards have the CEO as sole insider.
  • Believe it or not, boards met more frequently in 1986 (median of 11) compared to today (median of eight).
As for some of the SSBI findings in this year’s index, there was the following:
  • Only 26 percent of this year’s new directors are active CEOs, down from 53 percent a decade ago, and there are more retired CEOs appointees (17 percent, up from 9 percent in 2000).
  • Forty percent of the boards split the CEO and chairman roles, up from 23 percent a decade ago.
  • There is large disconnect between the number of boards who say they are looking for women directors (44 percent) and the percentage of S&P 5000 directors who are women (21 percent). The same holds true for minority representation on boards where 47 percent of boards reporting seeking minorities, yet only 12 percent of new directors are minorities.
One other point worth noting from the SSBI: the top 2010 governance issues. They are executive compensation (80 percent), board’s role in corporate strategy discussions (67 percent) and board’s role in risk management (63 percent). The SSBI is based on the recruiter’s analysis of proxy reports filed by the S&P 500 between May 15, 2009 and May 15, 2010.
  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

    Full Bio | More from Gary Larkin

     

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