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Why aren’t boards diversifying faster?
The findings in this report underscore the main reasons progress on board refreshment and diversity remains slow: average director tenure continues to be quite long, board seats rarely become vacant and, when a spot is available, it is often taken by a seasoned director rather than a newcomer with no prior board experience.
The report documents corporate governance trends and developments at 2,854 companies registered with the SEC that filed their proxy statement between January 1 and November 1, 2018 and, as of January 2018, were included in the Russell 3000 Index, as well as select findings from 494 companies listed in the S&P 500.
The project is a partnership between The Conference Board and data-mining firm ESGAUGE and was developed in collaboration with the John L. Weinberg Center for Corporate Governance (successor to the Investor Responsibility Research Center Institute [IRRCi]), Debevoise & Plimpton, and Russell Reynolds Associates.
Despite the demand for refreshment and more diversity, the makeup of many public company boards remains unchanged
Corporate governance has undergone a profound transformation in the last two decades, as a result of the legislative and regulatory changes that have expanded director responsibilities as well as the rise of more vocal shareholders. Yet the composition of the board of directors has not changed as rapidly as other governance practices, and to this day many public company boards do not see any turnover that is not the result of retirement at the end of a fairly long tenure.
According to a comprehensive review of SEC filings made in 2018, 50.4 percent of Russell 3000 companies and 42.5 percent of S&P 500 companies disclosed no change whatsoever in the composition of their board of directors. More specifically, they neither added a new member nor replaced an existing one. In those cases where a replacement or addition did happen, it rarely affected more than one board seat; and only one-quarter of boards elected a first-time director who had never served on a public company board before. More specifically:
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