Latest Hot Topics in Governance Session:Differences That Make a Difference
Jorge Titinger and Pedro Espinoza put our worldview on tilt with their new data about the impact of diversity and inclusion on business performance around the globe. FOr those who missed it, their new book is a worthy read.
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The Myths and Realities of Corporate Cyber-Security
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Governance Trends to Watch
Changes to Watch Around the Globe
Our work studying best practices in governance constantly reminds us of how much experiementation is underway by countries and market sectors to discover ways to improve the results and impact of governance.
Here are some trends to note:
Push for diversity – In the past year, of the 432 independent directors added to S&P 500 boards, 59% are diverse (defined as women and minority men). Canada redefined diversity to expand inclusion and are moving from principle-based to regulatory-based policies to influence diversity-related changes.
Expansion of director experience profiles - The classical c-suite director composition is making way for broader perspectives. Of S&P 500 directors this year, 65% of newly added directors are from outside the ranks of CEO, chair/vice chair, president and COO.
Sitting CEOs narrow their outside board work - Limiting outside board service, 59% of S&P500 CEOs now serve on no outside boards
Boardroom turnover rates slow – Boards continue to raise retirement ages. This year, 46% of S&P 500 companies set etirement age at 75 or older compared to just 15% ten years ago.Since new directors are only 8% of all S&P 500 directors, do not expect to see much change in overall composition of boards for some time.
Executive compensation design leans on grants - Named executive officers (NEOs) at Equilar 500 companies show more weight on stock grants in their compensation packages. The Equilar 500 an index comprised of the largest US-based companies, by revenue trading stock exchanges, show trends in the past five years:
Stock was used in 95.2% of all equity compensation packages granted to NEOs at Equilar 500 companies in 2018.
Fluctuations in amounts of stock or options granted aside, the average value of all equity awards has continually risen in the past five years.
LTIP units account for 63.5% of all performance equity awarded to NEOs at Equilar 500 companies last year.
Options made up 2% of the total performance equity awards in 2018 and were granted to 48.7% of Equilar 500 NEOs.
Let's add to this a new nudge movement, with
The Candor Clause - is an open-source legal disclosure for inclusion in fundraising documents to foster conversations between founders and investors about gender equality. This initiative is to establish open discussion between companies and possible investors before they agree to partner and become governanace partners. Started by one early stage company, here is a link to background information:
The spirit behind this appears to encourage the setting
of common expectations about values and practices
before investments are made and to build more
effective business relationships.
The initial company and law firm involved have made their clause available for others to use and hope to encourage others to adopt transparent, open discussions with potential business partners.
We continue to study the long-term impact and value of governance practices to keep all informed regarding opportunities for best practices in the future.
For more information about best practices in governance, contact us to learn more about our Global Governance support.