In a recent survey of over 70 nominating/governance committee chairs of S&P 500 and Fortune 500 companies, consultant SpencerStuart asked respondents about how their boards responded to COVID-19 and the nature of any long-term governance changes they anticipated post-pandemic. Somewhat surprisingly, given the issues COVID-19 has created or highlighted for companies, committee chairs do not appear to be in any kind of rush to institute changes—in fact, quite the opposite seems to be the prevailing perspective. Is it just too soon to be thinking about structural or other adjustments to the board? Or, does “stay at home” also mean “stay the course”?
According to a new report from the EY Center for Board Matters, 54% of the 2017 class of directors of Fortune 100 companies served in non-CEO roles and 40% were female. More than half of the Fortune 100 added at least one independent director, slightly less than in 2016, but together, over the two-year period, over 80% of the Fortune 100 added at least one independent director. The result was that, taking director exits into account, “nearly all of the companies experienced some type of change in board composition during this period.” The EY Center’s associate director told the WSJ that the report showed “‘an increase in board diversity along the different dimensions of gender, age, ethnicity and in some cases socioeconomic background,’…. That means demand is growing for people who can offer ‘a more nuanced, multidimensional look’ at what is… happening with regard to consumer demographics, disruptive technology and workforce management, among other areas, she said. ‘The consensus is the best way to provide for boards to be able to see around corners, to ask the right critical questions, to get to the best answer possible, is to have a board that has the right mix of skills, expertise, background and perspective….There’s more openness to considering more and different perspectives.’”
PwC’s 2017 Annual Corporate Directors Survey shows directors “clearly out of step” with institutional investors on social issues
In its Annual Corporate Directors Survey for 2017, PwC surveyed 886 directors of public companies and concluded that there is a “real divide” between directors and institutional investors (which own 70% of U.S. public company stocks) on several issues. More recently, PwC observes, public companies have been placed in the unusual position of being called upon to tackle some of society’s ills: in light of the “new administration in Washington and growing social divisiveness, US public company directors are faced with great expectations from investors and the public. Perhaps now more than ever, public companies are being asked to take the lead in addressing some of society’s most difficult problems. From seeking action on climate change to advancing diversity, stakeholder expectations are increasing and many companies are responding.” But apparently, many boards are not taking up that challenge; PwC’s “research shows that directors are clearly out of step with investor priorities in some critical areas,” such as environmental issues, board gender diversity and social issues, such as income inequality and employee retirement security.