Press Release / News
Report: Proxy Advisors Largely See Board Director’s Role Through Split, Segmented Lens
12 July, 2017

Today, The Conference Board’s Governance Center released a report that details the perspectives of proxy advisors on the board director’s job description. The findings of the report, Just What Is The Corporate Director’s Job?, result from a recent roundtable by the organization, in which it convened 50-plus leaders from the corporate governance community for a private discussion with the five leading proxy advisory firms. Among the takeaways, the proxy advisor cohort largely views the position through a disjointed, non-holistic lens. The report marks the first of several that feature insights about the director’s role from roundtables with boardroom stakeholders.

As the report points out, a lack of consensus about the job description comes in part from America’s public companies having undergone a sweeping shift in ownership. Over the past six decades, the move from predominantly individual retail shareholders to institutional investors has led to a rise in shareholder activism. More activism, in turn, has changed how each stakeholder views the director role.

“Today, as companies face a high risk of crises, the competency and composition of their boards have been called into question by key stakeholders,” said Gary Larkin, report author and research associate at The Conference Board. “They were asking, ‘Where was the board? What did they know?’ So we thought it was time to ask the stakeholders what it is they think boards should do and what they are not doing.”

Highlights from the March 2017 roundtable of proxy advisors include the following:

  • Proxy advisors are concerned by the trends of a lower refreshment rate, higher director age, and predominance of white males on public company boards. The average director tenure of S&P 500 boards in 2016 was seven years for white male directors versus six years for minorities and five years for women; the average age for those same boards in 2016 was 62.8 for white males, 60.8 for minorities, and 60.2 for females. Some are worried that boards lack the composition of younger and more global directors that their companies will need to be competitive in a more technological and international marketplace. While the board refreshment rate at S&P 500 companies has increased over the past eight years, it has taken a new direction over the past year as companies with zero new nominees rose three percentage points and the rate of companies with 10 percent refreshment fell more than three percentage points.
  • There are several forces affecting director expectations. Increased regulatory pressures following accounting scandals and the financial crisis, geopolitical risks, IT governance and cybersecurity risks, and shareholder activism all influence what is expected.
  • Proxy advisors agreed that a company’s engagement with shareholders is now trending toward more in-person meetings that include board members. Until recently, shareholder engagement typically only happened around proxy voting, proxy fights, and shareholder lawsuits. Now, companies and investors are communicating about a whole litany of strategy, ESG and governance-related topics and more board members are becoming directly involved.
  • One proxy advisor who studied 10 recent company crises found some common director attributes. High levels of insider control and low levels of board independence, relatively short tenure, and poor communication and public disclosure during the crisis were recurring elements.
  • One observer questioned the need for an executive compensation expert on the board. Others said it was critical that directors be knowledgeable enough about the linkage between executive compensation and business outcomes.
  • An investor pointed out the danger of crises on boards with the same directors. The investor said a case can be made that boards can be affected by contagion, where the same directors serving on multiple common boards can increase the chances that each company will experience a failure.

“The Governance Center aims to methodically isolate specific stakeholders’ expectations of public company boards and analyze the gaps among those stakeholders,” said Doug Chia, Executive Director of the Governance Center at The Conference Board. “As a major influencer in shaping expectations for boards, the proxy advisory industry and its approaches to this are important to examine closely.”

In addition to highlights from the roundtable, the report includes empirical research on such issues as board composition, gender diversity, and refreshment, along with examples of proxy advisor voting recommendation policies and company board diversity policies. Members of the press can e-mail Joseph DiBlasi or Carol Courter for a copy of the new report.

Learn more about The Conference Board’s Governance Center here.

The conversation continues on Twitter: @TCBCorpGov  I  @ConferenceBoard    

About The Conference Board’s Governance Center

The Conference Board’s Governance Center draws upon authoritative research from The Conference Board.

Our mission is to work in the public interest to provide knowledge and thought leadership on global corporate governance issues for boards and c-suite leaders, investors, and other leading organizations.

About The Conference Board
The Conference Board is a global, independent business membershipand research association working in the public interest. Our mission is unique: To provide the world’s leading organizationswith the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. 

For further information contact:

Carol Courter
1 212 339 0232

Jonathan Liu
1 212 339 0257


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