TheCorporateCounsel.net

According to the latest Spencer Stuart Board Index, 68% of S&P 500 boards included a director skills matrix in their proxy this spring. That’s up from 56% last year and just 38% in 2020! The trend is responsive to investors’ desires to better understand how each director’s expertise supports the company’s overall board composition.

This WSJ article likens the challenge of assembling a strong board – consisting of directors who have experience across all of the relevant categories – to solving a “Rubik’s Cube.” The article parses through the new Spencer Stuart Index and several other recent studies on board composition & diversity. Here’s one trend that jumps out:

Among last year’s newly appointed directors, CEO experience is less common, at just 43%, among the lowest figures since at least 2015, Heidrick & Struggles found.

The share of directors with CEO experience declined in 60% of companies and nearly every sector of the S&P 500 from 2019 to 2022, a Wall Street Journal analysis of data from BoardEx found.

That’s in part because more employers now let lower-level executives join the boards of other companies as boards simultaneously seek executives with specific experiences and skill sets, says John Wood, a Heidrick & Struggles vice chairman who recruits CEOs and directors.

Where in the past there was concern that such appointments would distract executives from their day jobs, Wood says, now “boards and management [are] saying: Can we give her some board experience? Because she could be in consideration for CEO succession.”

All that said, the Spencer Stuart analysis finds that boards continue to rely on retirement policies as their primary refreshment tool, so turnover is slow despite the rapidly changing business environment. I suppose that means that it’s more important than ever for directors to possess skills that can withstand the test of time.

– Liz Dunshee