Board Refreshment Gains Traction as Key Focus Area for Members; Increasing Representation of Women and Minorities Helps to Change the Face of Governance

50 percent of board respondents reveal a new director has joined within the past year, according to newly released 2014 Board Practices Report

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Deloitte

Dec 15, 2014, 08:51 ET

NEW YORK, Dec. 15, 2014 /PRNewswire/ -- A new report issued by Deloitte's Center for Corporate Governance and the Society of Corporate Secretaries and Governance Professionals (the Society) identifies board refreshment and composition as a significant focus area for board members this coming year. With the increased scrutiny of board composition by shareholders and corporate governance advocates alike, the survey finds foreseeable — and significant — data trends with respect to board makeup. Predictably, survey results noted age limits as the most prevalent mechanism contributing to board turnover, and such limits continue to rise. Even so, the survey also found very few boards with directors aged 40 or younger, citing more than half of companies reporting their youngest director as older than 50. For 53 percent of all companies, however, director retirement is the reason for change in board composition.

Nonetheless, respondents noted refreshment trends with respect to diversity. In reviewing the data, the number of women on boards appears to be increasing. Eighteen percent of respondents, overall, increased the number of women on their boards in the past year. This is particularly true among large and small caps where women comprise 26-50 percent of their board composition. Similar movements, but on a smaller scale, can be found for minority representation, particularly with financial services companies. Since 2012, financial services companies saw a 9 percent point increase in representation in minorities. Comparing these results to the report's 2008 survey, where one-quarter of respondents indicated no women or racial/ethnic diversity, boards are recognizing and embracing the value of diverse perspectives as an avenue to enhance board performance.

"It's a welcome trend to see that the needle has moved positively on gender and ethnicity composition in the boardroom," said Deb DeHaas, national managing partner, Center for Corporate Governance and chief inclusion officer, Deloitte LLP. "This year, nearly one-quarter of companies surveyed indicated that women make up 26 percent to 50 percent of the board, up from 18 percent in 2012, alongside the favorable gains in minority representation. While these results are cause for optimism, there is room for continued improvement and it is incumbent on directors, who are often at the front-line for companies seeking recruitment recommendations, to continue to actively seek, support and mentor diverse candidates."

Results from the "2014 Board Practices Report: Perspectives from the boardroom," are based on the responses from 250 public companies represented in the Society's membership. Encompassing findings from 16 board governance areas, this ninth "Board Practices Report" explores key topics such as shareholder activism, director tenure policies and other mechanisms for board refreshment, diversity in the boardroom, board leadership, key skill sets for directors and board education on topics such as "big data" and data analytics.

Alongside board composition as a key focus for board members in the upcoming year, strategy is also a significant consideration. In fact, more than half the survey respondents acknowledged strategy as a key agenda item at every board meeting.

Respondents also noted enhanced information on strategic risk being provided to boards over the past year, as well as ongoing briefings on strategic alternatives. Rounding out the list of top board priorities for the year ahead are risk oversight, CEO succession planning and cybersecurity.

"With 85 percent of respondents acknowledging strategy as a priority focus, it demonstrates the recognition of significant complex operational, economic and geo-political risks and uncertainties facing companies and their boards. Society members help their boards to navigate those risks and opportunities," said Darla Stuckey, executive vice president and general counsel of the Society.

Additional interesting findings revealed in the survey include:

Board leadership. A combined chairman and CEO role exists in 60 percent of large cap boards, and most of those have a lead director, while mid and small cap companies have combined roles 53 percent and 50 percent of the time, respectively — an apparent increase in the number of small and mid-cap companies having a combined leadership structure from the 2012 report.
Board training. Boards are receiving education on a number of topics, but for 2014, the most reported training topics included company policies, fiduciary duties, insider trading, and industry-specific topics. Compared to the 2012 report, training topics that have gained in popularity are ethics, company policies and regulatory issues, with 12, 15 and 17 percent point increases, respectively.
Big data and analytics training. One-third of the companies surveyed educate their boards on big data and data analytics, and this is particularly true among large-cap companies at 48 percent. Further, 28 percent said they are incorporating advanced analytics into company strategy and 7 percent are considering doing so.
Board skill sets. The three most sought-after board skills and backgrounds remain unchanged from the 2012 report: related industry experience, C-level experience and international business exposure. Notably, one-third of small caps selected mergers and acquisitions experience as significant, highlighting a focus area for these companies.

To download a copy of the report, please visit www.deloitte.com/us/boardpractices2014 .

About the Society of Corporate Secretaries and Governance Professionals
Founded in 1946, the Society of Corporate Secretaries and Governance Professionals is a professional association of over 3,300 governance professionals who serve 1,800 public, private and not for profit companies of most every size and industry. Its members support the work of corporate boards and executive management regarding corporate governance and disclosure, compliance with the corporate and securities laws and regulations, and stock exchange listing requirements. More information is available at www.governanceprofessionals.org

About the Deloitte Center for Corporate Governance
Deloitte's Center for Corporate Governance fosters dialogue and knowledge sharing, and develops thought leadership on governance issues to help advance collaboration among corporations, board members, the accounting profession, academia and government. Timely, relevant, and balanced governance information is available on the Center for Corporate Governance website at www.corpgov.deloitte.com

As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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SOURCE Deloitte