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E-MailMatteo Tonello is Director of Corporate Governance for The Conference Board, Inc. This post relates to a Survey of Board Practices being led by Dr. Tonello; Frank Hatheway, the Chief Economist and Senior Vice President of NASDAQ OMX; and Scott Cutler, Executive Vice President, Co-Head US Listings & Cash Execution, NYSE Euronext. General counsel, corporate secretaries and corporate governance officers of U.S. public companies are invited to participate in the survey; the survey can be completed online by clicking here.
The Conference Board, NASDAQ OMX and NYSE Euronext announced last week a research collaboration to document the state of corporate governance practices among publicly listed corporations in the United States.
The centerpiece of the collaboration is The 2011 Board Practice Survey, which the three organizations are disseminating to their respective memberships. Findings will constitute the basis for a benchmarking tool searchable by company size (measured by revenue and asset value) and 22 industry sectors. In addition, they will be described in the new edition of The Directors’ Compensation and Board Practices Report, scheduled to be released jointly in the fall.
The Conference Board’s annual benchmark series on director compensation was first released in 1939. In the last decade, the database has been expanded to report on a wide array of governance practices, documenting a steady transformation in the role of public companies’ boards and underscoring the increasing importance of directors’ monitoring responsibilities and the growing influence of shareholders.
Prior editions of the report were also widely cited in academic publications and used by regulators and other governance experts. Major findings from the latest edition of the study include:
Director compensation correlates more with company size than with industry. Median total compensation to board members ranges from $67,500 in the smallest companies to $172,966 in the largest. The range narrows when you look across industries: Non-financial companies pay a median total compensation of $129,415 per director, compared to $149,000 and $150,000, respectively, paid by companies in financial services and manufacturing.
Boards draw on multiple professional backgrounds, with large financial services boards the least diversified. Board composition varies greatly across industries and revenue groups, and encompasses CEOs and other C-Suite executives, bankers and investment professionals, accountants and auditors, lawyers and academics. The boards of financial services companies showed the largest relative proportion of board members who are CEOs, presidents, or board chairs of for-profit companies.
The largest companies (by revenue) predominantly elect directors via majority voting. Among non-financial-services companies, 44.2 percent retain a pure plurality model, compared to 38.3 percent and 37 percent, respectively, in manufacturing and financial services. More than three-quarters of companies in the largest revenue group utilize some form of majority voting, and 95.1 percent of those supplement with a mandatory resignation policy.
Anti-takeover practices remain common, except poison pills. Across industries and revenue groups, the majority of companies say they don’t rely on poison pills or “fiduciary out” provisions. However, other anti-takeover practices remain widespread. For example, only a minority of financial-services companies grant shareholders a right to call special meetings, while most companies in manufacturing and financial services prohibit shareholder action by written consent.
Large companies in particular utilize clawback provisions, while say-on-pay appears to be gaining traction only in financial services. At least 40 percent of companies in the manufacturing and non-financial services industries have adopted clawback provisions, as have 36.6 percent of financial firms, with the largest companies in both sectors more inclined to use them.
Boards increasingly focus on risk oversight. Virtually all financial companies with asset value equal to $10 billion or more have a dedicated chief risk officer, who in most cases reports directly to the CEO. Half of surveyed companies in non-financial services and 46.2 percent of manufacturing companies have instituted an ERM committee at management level.
Companies still resist disclosing succession planning details to shareholders. Approximately 40 percent of the financial-services companies surveyed include succession-planning information in their annual disclosure documents; that drops to 14.7 percent and 18.3 percent in manufacturing and non-financial services, respectively.
General counsel, corporate secretaries and corporate governance officers of U.S. public companies are invited to participate in The 2011 Board Practice Survey. Please complete the survey online by clicking here.
