As 2009 begins, perhaps the best indicator of board structure and corporate governance trends is the annual review of boards of directors recently completed by RiskMetrics Group. RiskMetrics has compiled data from last year’s proxy statements at S&P 1,500 companies, yielding the following trends:
- 50% of companies continue to have classified boards, down 2% from last year.
- 46% of companies have CEOs that do not serve as the leader of the board of directors, up 5% from last year. But, 8% fewer boards than two years ago have the position of some type of “lead” director. Perhaps companies that have different people serving as CEO and chairman of the board see no need to have a lead director; although, RiskMetrics reports only 48% of non-CEO board chairs were considered independent last year (a 10% increase from 2007).
- 88% of companies have a board committee formally charged with CEO succession planning, up 8% from last year.
- 17% of individual directors sit on two or more S&P 1,500 boards, up 5% from last year. It’s difficult to guess what this means, if anything, considering institutional shareholders tend to encourage not being on multiple boards. A closer look at the numbers reveals only the percentage of directors on two boards has increased, not the percentage on more than two boards. Could the up-tick reflect fewer qualified candidates? Fewer willing candidates?
Not surprisingly, most of the trends reflect policies and practices that are supported by the powerful institutional investor advisers.