Annual Index Indicates Minnesota's Companies Look Beyond C-Level Execs to Fill Board Vacancies Time Constraints, Governance Requirements Limit Some Top Executives' Ability

to Serve on Outside Boards



    MINNEAPOLIS, Jan. 4 /PRNewswire/ -- According to Spencer Stuart's sixth
 annual Minnesota Board Index, active chairmen, presidents, chief executive
 officers and chief operating officers are declining as a source of new
 independent directors for Minnesota's 30 largest companies. The study found
 that 43 percent of new directors of these companies were active C-level
 executives, compared to last year when more than half of new directors held
 these positions.
     The experience of Minnesota boards follows a national trend. Active
 senior-level executives accounted for only 32 percent of new directors
 recruited by S&P 500 boards. By comparison, more than half of new directors
 held these positions five years ago.
     "Given the demands of board service today -- including the increased time
 commitment, the additional scrutiny of boards and ongoing corporate governance
 requirements stemming from the Sarbanes-Oxley Act -- it's not surprising that
 it is now much harder to recruit C-level executives to a board," said Susan
 Boren, head of Spencer Stuart's Minneapolis/St. Paul office. "As active
 chairmen, chief executive officers, presidents and chief operating officers
 are less able and less willing to accept outside directorships, boards have
 turned to new prospects, such as retired or up-and-coming executives."
     Of the 23 new directors appointed by Minnesota's largest public companies
 in the past year, one was a minority and two were women. Minorities represent
 10 percent of all board seats, although there is a considerable range among
 boards. Target Corporation and General Mills have approximately 33 percent
 minority representation, while nine boards have no minority directors. The
 average representation of women on Minnesota boards is 16 percent, down
 slightly from 17 percent last year, but ahead of 14 percent in 2000. Among S&P
 500 companies, the average female representation is 15 percent.
     "While this year's group of directors lacks the diversity of past years,
 the overall trend lines are still positive," Boren said.
 
     Among other findings from the survey:
 
     --  Minnesota boards are more likely than in the past to separate the
         chairman and CEO roles. Eleven companies, or 37 percent of the 30
         companies tracked in the index, separate the chairman and CEO roles,
         compared with eight companies, or 27 percent, in 2002. Of the 11
         companies with separate CEOs and chairmen, four have non-executive
         chairs.
 
     --  Turnover in the chairman role has reached an all-time high. It is
         expected that nearly one-third of the boards in the study will name a
         new chairman by year-end.  Chairmen already have departed from six
         companies during the first half of 2005, and two additional chairmen
         have announced they will retire by the end of the calendar year. Two
         other chairmen will retire as soon as their successors are named.
 
     --  Minnesota boards have on average six meetings annually. The number of
         meetings ranges by board from four to 11.
 
     --  Sixty-seven percent of companies elect directors to three-year terms;
         30 percent to one-year terms; and one company to two-year terms.
 
     --  Twelve of the Minnesota companies included in the index have increased
         the annual retainer paid to board members since last year. The average
         increase among these companies was $13,700. Overall, the average
         director retainer increased 11 percent to $44,100, compared to $56,549
         for S&P 500 boards. Minnesota board retainers have increased 48
         percent since 2002.
 
     --  Seven boards began providing an annual retainer to the audit committee
         chair this year, while four boards increased the audit committee chair
         retainer during the past year. The average annual retainer provided to
         audit committee chairs by Minnesota's top boards is $13,000.
 
     --  Ninety percent of the boards include a stock component as part of
         director compensation and 66 percent pay attendance fees for meetings,
         down from 77 percent in 2002.
 
     --  The average board size is 10.3 and the average age is 59. Of the 23
         new directors, 14 were from out of state and nine were from Minnesota.
 
 
     About Spencer Stuart
     Spencer Stuart is the foremost privately held, global executive search
 firm, spanning over 50 offices in 25 countries. Since 1956, Spencer Stuart has
 been providing select clients with a range of human capital solutions,
 including senior-level executive search, board director appointments and
 strategic leadership services. The firm conducts nearly 4,000 assignments each
 year, partnering effectively with clients ranging from the Fortune 500, to
 mid-cap, to emerging growth companies across a broad range of industries and
 sectors.
 
 

SOURCE Spencer Stuart

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