2021 U.S. Board Index

Julie Hembrock Daum and Kathleen M. Tamayo are consultants and Ann Yerger is senior adviser at Spencer Stuart. This post is based on their Spencer Stuart memorandum.

The 2021 U.S. Spencer Stuart Board Index finds boards responding to a growing chorus of calls for enhanced boardroom diversity, with men from historically underrepresented racial and ethnic communities and women comprising 72% of directors joining S&P 500 boards in the past year. But boardroom turnover remains persistently low, with new independent directors once again representing only 9% of all S&P 500 directors. As a result, changes to overall composition continue at a slow pace.

Key Takeaways – 2021 U.S. Spencer Stuart Board Index 

  • The incoming class of directors is the most diverse Nearly half (47%) of new directors are Black/African American, Asian, Hispanic/Latino/a, American Indian/Alaska native or multiracial, and 43% are women. Together directors from these historically underrepresented groups account for 72% of all new directors—up from 59% last year and 31% ten years ago.
  • Nearly all the gains in the diversity of the new class of directors are due to the increase in Black/African American directors.
    • One-third (33%) of all new independent directors are Black/African American, three times more than last year (11%) and the highest since 2008.
    • The representation of Asian directors among new directors fell slightly to 7% from 8%.
    • Hispanic/Latino/a directors make up 7% of new directors, an increase from 3% last year. The representation of Hispanic/Latino/a directors among new directors has vacillated between 3% and 5% since we began collecting this data in 2008, not reaching above 6% before this year.

  • Female representation among the new class of S&P 500 directors dropped to 43% from 47% last year. Women now represent 30% of all S&P 500 directors—a record high—up from 28% last year and 16% a decade ago.
  • 21% of all S&P 500 directors are Black/African American, Hispanic/Latino/a, Asian, American Indian/Native Alaskan or multiracial, versus 42% of the U.S. population. Of all S&P 500 directors:
    • 11% are Black/African American
    • 5% are Hispanic/Latino/a
    • 5% are Asian
  • Boards are enhancing their disclosures of and commitment to boardroom
    • 60% of boards disclosed their ethnic/racial composition, with 28% of those boards providing director-specific details.
    • 32 boards included LGBTQ+ disclosure in their proxy statement, with 5 LGBTQ+ directors identified by name.
    • 39% have adopted some type of commitment to diverse slates when considering new directors, up from 24% last year.
  • S&P 500 boards are tapping new talent pools for directors.
    • CEO experience not required: the lion’s share ( 74%) of the 2021 incoming class came from outside the top executive ranks of CEO, chair/vice chair, president and COO, up from 43% ten years ago.
    • Other corporate leadership skills are valued: 33% have experience as division/subsidiary/functional leaders, an increase from 21% ten years ago.
    • Financial talent remains a priority: 27% have financial backgrounds, with boards less interested in accounting and banking backgrounds and more focused on candidates with experience as CFOs/finance executives or investment professionals
    • Board experience is not a requirement: 35% of the 2021 incoming class are serving on their first public company board, up from 21% ten years ago
    • Active employment is favored: 56% of the new independent directors are actively employed.
  • Active CEOs are increasingly not serving on outside boards. A majority (60%) of current S&P 500 CEOs do not serve on a public board in addition to their own board, up from 54% 10 years ago.
  • Age diversity is lower 16% of the new S&P 500 directors are “next-generation,” defined as 50 or younger, unchanged for a decade.
  • Mandatory retirement policies remain the dominant formal mechanism for board turnover .
    • 70% of S&P 500 boards disclosed a mandatory retirement age for directors, a slight decline from 73% in 2011.
    • Retirement ages of boards with these policies continue to rise , with half of boards with age limits setting the cap at 75 or older, compared with 20% a decade ago.
    • Meanwhile, the average age of an independent director of an S&P 500 board is 3 years, a long runway for boards with retirement ages of 70-plus years.
  • Tenure limits remain rare, with only 31 S&P 500 boards (6%) reporting explicit term limits for non-executive directors, just two more than last year.
    • Term limits range from 10 to 20 years, with 73% set at 15 years or higher.
    • Meanwhile the average tenure of an S&P 500 independent director is 8 years.
  • Against a background of more board and committee meetings, director pay was flat in 2021.
    • The average number of board meetings increased by nearly 20%, with boards meeting on average 4 times in the past year, up from 7.9 times the prior year.
    • Average total pay for directors other than chairs is just under $306,000 a year , with stock representing more than half of pay on average.

Looking ahead: Continued progress on boardroom ethnic/racial diversity, possible slowdown in gender diversity

Our annual survey of nominating and governance committee chairs found that the top boardroom recruiting priority over the next three years are directors from historically underrepresented racial/ethnic groups. Gender diversity fell to 10th place, a significant decline from the 3rd highest priority last year and the top priority two years ago.

Global experience is also in higher demand, jumping to a 2nd place recruiting priority from 4th place last year. Filling out the list of five highest recruiting priorities are technology experience, financial experience and operational experience.

Enhancing oversight of environmental, social and governance (ESG) issues landed at the top of issues prioritized for consideration over the next three years by the surveyed chairs of nominating and governance committees.

However, all of the other issues prioritized by the surveyed nominating and governance committee chairs fall under umbrella of ESG issues.

  • 2nd place: enhancing the racial/ethnic diversity of the boardroom
  • 3rd place: developing a board succession strategy
  • 4th place: enhancing board effectiveness
  • 5th place: enhancing the oversight of company-wide diversity, equity and inclusion

Increasing gender diversity has been a top issue for nominating and governance committees in recent years, ranked the 4th highest committee priority last year. However, consistent with the survey’s findings on recruiting profiles, enhancing boardroom gender diversity is now a lower priority, slipping to 7th place.

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