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A quick post today to highlight a couple of other posts on board of directors refreshment by friends and fellow bloggers Lynn Jokela and Liz Dunshee. Lynn's post, Director Survey: Room for Improvement with Board Refreshment, refers to PWC's annual survey of nearly 700 U.S. directors. The PWC report indicates that directors support board refreshment, but don't feel that they are doing a good job with it:
- 49% of directors say at least one board member should be replaced
- Only 49% say a board succession plan is shared with the full board
- 10% say their board doesn't have a succession plan at all
- Directors cited board leadership's unwillingness to have difficult conversations with underperforming directors and an ineffective process for director assessments most frequently as potential barriers to board refreshment
Liz's post, Board Evals & Refreshment: Key to Unlocking Diversity Gains, links to a recent Spencer Stuart Board Index, which indicates, among other things, that 81% of boards saying that they want to add diverse directors, but fear it could be a long process due to low turnover among existing directors. Liz's post highlights the following stats from the Spencer Stuart Board Index S&P 500 boards during the 2020 proxy season:
- 55% appointed a new independent director - translating to an overall turnover of 0.84 new directors per board - which is similar to rates during the past 5 years
- Of the 272 boards that appointed new independent directors, 28% increased the size of the board to add women - yet increasing board size for more diversity isn't a sustainable option
- 25% had no change to board composition
- 16% of sitting independent directors on boards with retirement age caps are within 3 years of mandatory retirement
- 6% report having explicit term limits for non-executive directors - the most common limits are 12 or 15 years
- Female representation rose to 28% of all S&P 500 directors - but only 22% of new S&P directors are from underrepresented racial or ethnic groups
- 24% included a commitment in the proxy statement to consider diverse slates when adding a new director
The report goes on to note that the preferred method for board refreshment is a robust board assessment process that includes director self-assessments and peer evaluations. Although director surveys consistently indicate that there's room for improvement with this process.
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