M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, November 17, 2010

Board trends survey

The executive search firm Spencer Stuart recently released its annual study of the state of corporate governance among the S&P 500 (H/T BusinessWeek/Bloomberg). The 2010 Spencer Stuart study includes information on a host of issues including board size and composition, governance practices and processes and compensation.  

The study also includes a breakdown of comparative board data.  It's a great survey that worth downloading - so get it here.

The study is the 25th such study they've done, so they took advantage of the opportunity to compare corporate governance today with 25 years ago: 

We continue to see a trend toward governance practices favored by shareholders, even though these changes are not yet required by regulators. For example, 72% of boards now elect directors to one-year terms, up from 40% a decade ago. Majority voting is also becoming the norm: 71% of boards — up from 65% last year — require directors who fail to secure a majority vote to offer their resignation.

Assuming an average of nine independent directors, annual compensation for an S&P 500 board is nearly $2 million, or $215,000per director per year. This is up just 1% from last year. 57% of the typical director compensation package is paid in equity — 43% as stock grantsand 14% as options. Fewer boards are paying meeting fees (41%, down from 62% in 2005), but those that do are paying 18% more than theywere five years ago: an average of $2,186 per meeting.

The shift to declassified board structures continues to gather pace: the percentage of boards serving one-year terms has risen every year since 2005, when it stood at 51%. In the past year alone, it rose from 68% to 72%.  Over the past year, 30 additional boards adopted policies requiring directors who fail to secure a majority vote to offer their resignation. Currently, 71% of the S&P 500 have a majority voting/resignation policy in place, up from 65% in 2009 and 56% in 2008.



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