Report Sheds Light on Corporate Board Diversity Reporting, Retirement Policies

November 23, 2021

The Conference Board, and several other firms released a comprehensive report on board practices and trends entitled, “Corporate Board Practices in the Russell 3000 and S&P 500: 2021 Edition.” The report includes information on board composition and diversity; director experience; and specific board policies including election, term limits, retirement policies, and onboarding for new directors. The authors of the report collected information from proxy statements and issuer organizational documents like bylaws, articles of incorporation, and board committee charters. Key takeaways from the report include:

In 2021, and for the first time, the majority of S&P 500 companies (59 percent) disclosed the ethnic makeup of their boards. Of those companies who disclosed, less than one-fourth of new directors are non-white. Business sectors with the most diverse boards in the Russell 3000 include information technology (26.3 percent), consumer staples (24.6 percent), and utilities (24.5 percent).
Female directors make up 29.1 percent of the total number of directors serving on S&P 500 boards in 2021, an increase from 27.6 percent recorded in 2020 and 20 percent of 2016. The share of female directors in the Russell 3000 is lower, at 24.4 percent, but up from 21.9 percent in 2020 and 15 percent in 2016. There is an even larger increase in the proportion of female directors in the S&P MidCap 400, from 15.8 percent in 2016 to 26.7 percent in 2020.
As of June 30, 2021, 6.1 percent of S&P 500 companies include in disclosure documents information volunteered by board members on their own sexual orientation. This information was disclosed only by 1.6 percent of S&P 500 companies in 2020 and by 0.2 percent in 2016. For the Russell 3000 index, the figure recorded in 2021 is 2.8 percent; there were no companies providing this disclosure in 2016. In the S&P MidCap 400, the figure recorded in 2021 is 2.9 percent; there were no companies providing this disclosure in 2016.
In 2020, 35.9 percent of S&P 500, 20 percent of Russell 3000, and 29.4 of S&P MidCap 400 companies disclosed a mandatory retirement policy based on the age of the board member. An additional 34.1 percent of S&P 500 companies, 18.5 percent of Russell 3000 companies, and 27.6 percent of S&P MidCap 400 companies disclosed a retirement policy but, unlike the former group of companies, the policy recognizes the authority of the board to permit exceptions. For all three indexes, the historical comparison with 2016 disclosure documents shows a decline in the share of firms enforcing a strict policy of the first type, while the most flexible policy is increasingly popular.
Term limits, or mandatory retirement policies based on tenure, continue to remain uncommon as companies prefer the flexibility to retain valuable board members despite their long service. Only 5.8 percent of S&P 500 companies, 3.6 percent of Russell 3000 organizations, and 5.5 percent of S&P MidCap 400 companies report having such a policy. There has been a very slight increase in the proportion of companies implementing the practice since 2016.
The median reported age of directors is 63 in all three indexes, while the average is 63.1 in the S&P 500, 63.2 in the S&P MidCap 400, and 62.4 in the Russell 3000. In 2020, 35.9 percent of S&P 500, 20 percent of Russell 3000, and 29.4 percent of S&P MidCap 400 companies disclosed a mandatory retirement policy based on the age of the board member.