The good news is that boards have responded to concerns about compensation.
The increased focus on executive compensation has resulted in a number of changes at publicly traded companies in 2011. Equilar recently released a list of current trends at the boards of S&P 1500 firms:
- Board turnover: Over half of the S&P 1500 firms studied had at least one change in membership in the last fiscal year.
- Meeting frequency: Board meeting frequency has decreased slightly over the past three years, from an average of 8.3 meetings per year in 2008 to an average of 7.8 in 2010.
- Female representation: Over 75 percent of S&P 1500 boards have at least one female director, but only 3 percent of firms have four or more female directors. (The majority of S&P 1500 boards have eight to ten directors.)
- Committees: 68 percent of S&P 1500 boards have either three or four committees. The average board has four committees.
The good news is that boards have responded to concerns about compensation by making some changes over the last fiscal year. The question is whether these changes are in the long-term best interests of the companies and their shareholders and whether they will help companies do a better job of setting fair and effective executive compensation plans.
It appears that boards are open to the idea of bringing in new blood, as reflected by 50 percent of S&P 1500 firms changing at least one board member. This is generally a positive move for the governance of a company. However, it doesn’t appear many companies are bringing in female board members as other directors leave. The fact that 75 percent of S&P 1500 firms have at least one female board member means that 25 percent have no female representation at all. Given the amount of evidence available of the positive attributes women add to corporate boards, it is clear that more must be done in this area.
The fact that boards are meeting less often and have an average of four committees seems to bode well for governance. Four board committees composed of an average of eight to ten members means each director should be on at least two committees and thereby able to make a real contribution to the growth of the company. And we can only hope that the reason boards are meeting less often is that they have become more effective when they do meet, with the aid of new technology such as board portals and conferencing technology.
While there are no guarantees, these trends suggest that boards are moving in the right direction when it comes to improving overall governance. Boards at S&P 1500 firms seem to have put themselves in position to improve their compensation plans. We’ll see how companies actually fare once proxy season 2012 begins.
