A new study released by executive search firm Spencer Stuart says that the turnover on corporate boards has declined 25 percent over the last five years, with 2011 showing the lowest board turnover in the last 10 years.
The Spencer Stuart Board Index governance survey for 2011 says only 294 new directors joined boards of S&P 500 companies during the 2011 proxy season. The lack of turnover among board members is a bit surprising given the recent increased concerns about shareholder activism. It also raises questions about which governance practices might be contributing to the lack of changeover among board members.
‘Reasons for this downtrend may include the downsizing of boards, the raising of director retirement ages and less voluntary director resignations during the economic downturn,' said Julie Hembrock Daum, practice co-leader for the North American Board & CEO Practice of Spencer Stuart in a statement. ‘The lack of board turnover creates a very real challenge for board renewal and getting new skills on the board.’
The survey showed that the size of S&P 500 boards has declined from an average of 11.1 members in 2001 to an average of 10.7 directors today. The survey also showed that the average age of board members is up slightly from 60.2 years of age in 2001 to 62.4 years of age today. Overall, 37 percent of S&P 500 boards have an average age of 64 or older, more than double the percentage in 2001.
One thing that hasn’t changed in 10 years: representation of women and minorities on boards. The study showed that 9 percent of S&P 500 companies still have no women directors and 12 percent have no minority directors. Of the 294 new independent directors selected in 2011, 21 percent were women and 14 percent minorities.
On the positive side, the trend toward separation of the chairman and CEO roles has increased, with 41 percent of S&P 500 boards now splitting the roles, up from 26 percent in 2001. And director pay is trending up as well. Average all-inclusive compensation for S&P 500 directors is up 8 percent over last year, reaching more than $232,000; and cash retainers for board members are up 11 percent since last year, now averaging more than $88,850.
