Slow Pace of Demographic Change on Public Company Boards

The Conference Board reviewed SEC filings made in 2018 and found that 50 percent of Russell 3000 companies and 43 percent of S&P 500 companies disclosed no change in the composition of their board of directors. The Conference Board found that these firms neither added a new member to the board nor did they replace an existing member, and only one-quarter of boards elected a first-time director who had never served on a public company board before.  The Wall Street Journal reporting on the research noted that the “data highlight a boardroom convention that has gone largely overlooked as shareholder pressure grows on companies to add more diversity of experience and backgrounds to their boards.” As stagnation persists, board composition is slow to change. A lack of term limits and other methods meant to spur turnover have not gathered much momentum, according to experts quoted by the WSJ. The Conference Board research included the following other findings on board practices:

• Directors’ average tenure exceeds 10 years. About one-fourth of Russell 3000 directors who step down do so after more than 15 years of service. The longest average board member tenures are seen in the financial (13.2 years), consumer staples (11.1 years), and real estate (11 years) industries.
• Companies continue to value prior board experience. Only a quarter of organizations elect a director who has never served on a public company board before. Companies with annual revenue of $20 billion or higher are twice as likely to elect two first-time directors as those with an annual turnover of $1 billion or less (7.3 percent versus 3.2 percent).
• Younger directions still in minority. Only 10 percent of Russell 3000 directors and 6.3 percent of S&P 500 directors are aged 50 or younger, and in both indexes about one-fifth of board members are more than 70 years of age. These numbers show no change from those registered two years ago.  Regarding data on the adoption of retirement policies based on age, only about one-fourth of Russell 3000 companies choose to use such policies to foster director turnover.