The Investor Responsibility Research Center (IRRC) Institute and Institutional Shareholders Services (ISS) recently issued a joint study titled "Board Refreshment Trends at S&P 1500 Firms," which analyzes demographic trends from 2008 through 2016 for corporate boards of companies in the S&P 1500 Composite Index ("S&P 1500 Companies"). Highlights of the study include the following:
- Board Tenure. Director tenure is steadily
rising. Average and median director tenure were 8.7 years and 7
- Gender Tenure Gap. However, a notable gender tenure gap persists. Average tenure for female directors in 2016 was 6.4 years, compared to 9.2 years for male directors.
- Age of Directors. As of 2016, the average age
of directors was 62.5 years old, which was the highest level during
the study period.
- Widening of Gender Age Gap. Like tenure, the study found a notable age gap regarding gender. The average age of male directors was 63.1 years old, while the average age of female directors was 59.8 years old.
- Age Distribution. The number of "older" directors (i.e., those in their seventies and eighties) was the only age group to increase from 2008 through 2016 in headcount; as of 2016, this group occupied 20.4% of all board seats.
- Renewal and Retention Rates.
- Increase in New Directors. The rate of "new" directors nearly doubled from 2008 to 2016—in 2016, almost one out of every 10 directors had no prior board experience.
- Changes to Board Composition. For the first time since 2008, more than 50% of S&P 1500 Companies added at least one new director to their boards in 2015. From 2012 to 2016, the prevalence of "zero change" boards steadily decreased.
- Demographics of New Directors. From 2008 to 2016, women and persons aged 50 to 59 years old made up the majority of the incoming class of "new" directors.
- Ethnicity and Race.
- Slow, Steady, Increases in Gender Diversity. Gains in gender diversity were gradual among S&P 1500 Companies, as the number of female board members increased from 11.9% (in 2008) to 17.8% (in 2016). In 2008, 33% of all boards were all male—however, this number dropped to 13.8% in 2016.
- Low Minority Representation. As of 2016, minority directors filled slightly more than 10% of all board seats. While S&P 1500 Companies with larger capitalizations typically had at least one minority director, S&P 1500 Companies with smaller capitalizations typically had no minority representation.
A copy of the study is available at: https://irrcinstitute.org/wp-content/uploads/2017/01/IRRCI-Board-Refreshment-Trends-FINAL.pdf.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved