NEW YORK, Oct. 31, 2013 /PRNewswire/ -- The average age of independent directors on S&P 500 boards has risen to 63 years from 60 a decade ago and in 2013, for the first time, nearly half of the 339 newly elected directors are retired, according to the 28th annual Spencer Stuart Board Index.
The 62-page study revealed that more retired CEOs, COOs, presidents and chairs than active executives in those roles joined boards in the past year – 79 retired vs. 77 active. Boards are also raising mandatory retirement ages to allow experienced directors to serve longer. A total of 88 percent of boards with an established mandatory retirement age set it at 72 or older, versus 46 percent a decade ago. Furthermore, nearly one-quarter of boards have raised their retirement age to 75 or older versus 3 percent a decade ago.
Board renewal is also an area of attention and, in some cases, concern. "It is essential for boards to have the right expertise in the boardroom. Natural director turnover provides opportunities to refresh a board with new skills as the economic and competitive landscape changes — and to increase the diversity of perspectives," said Julie Hembrock Daum co-leader of the North American Board & CEO Practice.
"While we saw an increase in the number of new directors joining corporate boards over the past year, only 3 percent of S&P 500 boards specify term limits," Daum said. "Given the relatively low director turnover from 2008 to 2012, boards need think about how they refresh their composition. They need new skills to compete in today's changing times, particularly in technology."
Daum added that governance observers and boards themselves are beginning to consider how to promote ongoing board renewal.
Among other findings of the report are:
- 91 percent of S&P 500 boards now have annual director elections, but this has not contributed to board turnover.
- 53 percent of S&P 500 CEOs serve on no outside corporate boards. This has contributed to recruitment of retired CEOs.
- 38 percent of newly elected directors are serving on their first public company board.
- Minority, female and active CEO candidates still top boards wish lists as director backgrounds; 56 percent, 54 percent and 54 percent of respondents to a separate survey of corporate secretaries, general counsel and chief governance officers cited these profiles as a top priority for new directors.
- There is movement toward appointment of functional finance experts for audit committee leadership. Today, 35 percent of audit chairs are CFOs, treasurers and public accounting executives compared with 7 percent a decade ago.
- More boards split the role of chair and CEO – 45 percent in 2013 compared to 23 percent a decade ago. It is a growing practice to separate the roles when a new CEO is first appointed and, in many cases after a time, the CEO then assumes the chair duties.
- 25 percent of boards have a truly independent director, a non-executive or a former executive director who over time has met the NYSE or NASDAQ independence standards.
- Total average compensation rose three percent over the past year to $249,168. The average board retainer rose 6 percent to $102,507. Offering equity in addition to a cash retainer continues to be a trend, however the composition has shifted toward share grants and away from stock options.
About the Spencer Stuart Board Index
The Spencer Stuart Board Index tracks trends in board service, the careers and backgrounds of new directors, and the policies and processes of S&P 500 boards. The 2013 index was compiled from the proxies of 493 companies filed between May 15, 2012 and May 15, 2013, and responses from 107 companies to Spencer Stuart's governance survey conducted in the second quarter of 2013. Survey respondents are typically corporate secretaries, general counsel or chief governance officers.
The SSBI will be published in its entirety and posted on Spencer Stuart's website (www.spencerstuart.com) in November 2013.
About Spencer Stuart
Spencer Stuart is one of the world's leading executive search consulting firms. Privately held since 1956, Spencer Stuart applies its extensive knowledge of industries, functions and talent to advise select clients — ranging from major multinationals to emerging companies to nonprofit organizations — and address their leadership requirements. Through 54 offices in 29 countries and a broad range of practice groups, Spencer Stuart consultants focus on senior-level executive search, board director appointments, succession planning and in-depth senior executive management assessments. For more information on Spencer Stuart, please visit www.spencerstuart.com .
SOURCE Spencer Stuart