Corporate Governance Survey: 2018 Proxy Season

David A. Bell is partner at Fenwick & West LLP. This post is based on portions of a Fenwick memorandum titled Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies (2018 Proxy Season).

Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly‑traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the technology and life science companies included in the Silicon Valley 150 Index (SV 150). [1]

Significant Findings

Governance practices and trends (or perceived trends) among the largest companies are generally presented as normative for all public companies. However, it is also somewhat axiomatic that corporate governance practices should be tailored to suit the circumstances of the individual company involved. Among the significant differences between the corporate governance practices of the SV 150 technology and life science companies and the uniformly large public companies of the S&P 100 are:

Dual-Class Voting Stock Structure

  • Adoption of dual-class voting stock structures has emerged as a recent clear trend among Silicon Valley technology companies—among the mid-to-larger SV 150 companies—though it is still a small percentage of companies.
  • Historically, dual-class voting stock structures have been significantly more common among S&P 100 companies than among SV 150 companies, though the frequency in the SV 150 (10.9% in 2017 to 13% in 2018) has surpassed the S&P 100 (9.0% in 2016, 2017 and 2018) in recent years. This is largely a function of the recent significant trend in IPO companies with dual‑class structures who then join the SV 150 with such structures in place.

Classified Boards

  • Classified boards are now significantly more common among SV 150 companies than among S&P 100 companies. Compared to the prior year, classified boards remained fairly consistent, holding steady at 50.7% for the full SV 150 and 6.7% for the top 15 companies in the SV 150 while the S&P 100 has dropped to 3.0% in the 2018 proxy season after holding steady at 4.0% between 2016 and 2017.

Majority Voting

  • The rate of implementation of some form of majority voting has risen substantially over the period of this survey.
  • The increase has been particularly dramatic among S&P 100 companies, rising from 10% to 95% between the 2004 and 2018 proxy seasons. Among SV 150 companies, the rate has risen from zero in the 2005 proxy season to 57.9% in the 2018 proxy season (a small drop from 59.9% in the 2017 proxy season).

Stock Ownership Guidelines

  • The prevalence of stock ownership guidelines has generally increased over time in both groups but the SV 150 only recently surpassed the level of the S&P 100. For the second year in a row, the survey includes additional detail regarding the minimum holding amount and period requirements for executives and directors.

Board Diversity

  • 2018 continued the long-term trend in the SV 150 of increasing numbers of women directors and declining numbers of boards without women members.
  • The rate of increase in women directors for SV 150 overall continues to be higher than among S&P 100 companies. When measured as a percentage of the total number of directors, the top 15 of the SV 150 now slightly exceed their S&P 100 peers (the top 15 averaged 25.8% women directors in the 2018 proxy season, compared to 24.7% in the S&P 100).
  • Companies with at least one woman director went from 78.2% to 82% over the past year for the SV 150. Over a two-year period the percentage of companies with at least one woman director grew by 8 percentage points.

Compliance with New California Statute

  • Most companies in the SV 150 would meet the new standard affecting California-based public companies set out by a new law mandating inclusion of women on boards of directors in 2019.
  • Our data show that most SV 150 companies will need to add women to meet the law’s 2021 standard.

Executive Officers

  • The number of executive officers tends to be substantially lower among SV 150 companies than among the S&P 100, and there continues to be a general decline in the average number of executive officers per company in both groups.
  • By contrast, the percentage of companies including General Counsel, Chief Legal Officer or a Chief Technology Officer or engineering executive as “executive officers” have been on a long-term upswing, though rising more slowly in recent years (with a small decline in CTOs among the SV 150 in recent years).

Fees Paid to Auditors

  • Companies in the SV 150 paid on average a fraction of the audit fees paid by companies in the S&P 100, with SV 150 companies paying on average $4.8 million compared to $22.2 million paid by S&P 100 companies.
  • The larger the SV 150 company by revenue, the higher its audit fees. The average audit fees of $15.2 million among the top 15 companies of the SV 150 (by revenue) were more similar to the fees paid by their peers in the S&P 100 (though still significantly lower on average).

Complete Coverage

In complete publication, available here, we present statistical information for a subset of the data we have collected over the years, updating for the 2018 proxy season. These include:

  • makeup of board leadership
  • number of insider directors
  • gender diversity on boards of directors
  • size and number of meetings for boards and their primary committees
  • frequency and number of other standing committees
  • majority voting
  • board classification
  • use of a dual‑class voting structure
  • frequency and coverage of executive officer and director stock ownership guidelines
  • frequency and number of shareholder proposals
  • number of executive officers

In each case, comparative data is presented for the S&P 100 companies and for the high technology and life science companies included in the SV 150, as well as trend information over the history of the survey. In a number of instances we also present data showing comparison of the top 15, top 50, middle 50 and bottom 50 companies of the SV 150 (in terms of revenue), [2] illustrating the impact of company size or scale on the relevant governance practices.

The complete publication is available here.


1The S&P 100 is a cross‑section of companies across industries, but is not a cross‑section of companies across all size ranges (it represents the largest companies in the United States). While the SV 150 is made up of the largest public companies in Silicon Valley by one measure—revenue, it is actually a fairly broad cross‑section of companies by size, but is limited to the technology and life science companies based in Silicon Valley. Compared to the S&P 100, SV 150 companies are generally much smaller and younger, have lower revenue. The 2018 constituent companies of the SV 150 range from Apple and Alphabet with revenue of approximately $239B and $111B, respectively, to Intevac and Aquantia, with revenue of approximately $113M and $103M, respectively, in each case for the four quarters ended on or about December 31, 2017. Apple went public in 1980, Alphabet (as Google) in 2004, Intevac in 1990 and Aquantia in 2004, with the top 15 companies averaging 18 more years as a public company than the bottom 15 companies in the SV 150. Apple and Alphabet’s peers clearly include companies in the S&P 100, of which they are also constituent members (eight companies were constituents of both indices for the survey in the 2018 proxy season), where market capitalization averages approximately $308B.3 Intevac and Aquantia’s peers are smaller technology and life sciences companies that went public relatively recently and have market capitalizations well under $1B. In terms of number of employees, the SV 150 averages approximately 8,900 employees, ranging from Oracle Corp with 138,000 employees spread around the world in dozens of countries, to companies such as Aemetis with 140 employees in the United States and India, as of the end of their respective fiscal years 2017 (Innoviva, ranked 128 in the SV 150, has the fewest full time employees – 12).(go back)

2The top 15, top 50, middle 50 and bottom 50 companies of the SV 150 include companies with revenue in the following respective ranges: $11B or more, $1.6B or more, $400M but less than $1.6B, and $103M but less than $399M. The respective average market capitalizations of these groups are $220B, $81B, $3.4B and $1.3B.(go back)


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