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Half of Russell 3000 Companies Report No Change in Board Composition

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A new study by The Conference Board illustrates why progress remains slow in achieving gender diversity on companies’ board of directors.

The study – Corporate Board Practices in the Russell 3000 and S&P 500: 2019 Edition – documents corporate governance trends and developments at 2,854 companies registered with the SEC that filed their proxy statement in the January 1 to November 1, 2018, period and, as of January 2018, were included in the Russell 3000 Index.

According to a comprehensive review of SEC filings made in 2018, 50% of Russell 3000 companies and 43% of S&P 500 companies disclosed no change in the composition of their board of directors, The Conference Board reports.

More specifically, The Conference Board notes that companies neither added a new member to the board nor did they replace an existing member. In those cases where a replacement or addition did happen, it rarely affected more than one board seat. The Conference Board also finds that only one-quarter of boards elected a first-time director who had never served on a public company board before.

These findings provide some important context to the current debate on gender diversity and board refreshment.

“Corporate governance has undergone a profound transformation in the last two decades, as a result of the legislative and regulatory changes that have expanded director responsibilities as well as the rise of more vocal shareholders,” said Matteo Tonello, Managing Director of Environmental, Social and Governance Research at The Conference Board and author of the report. “Yet the composition of the board of directors has not changed as rapidly as other governance practices. To this day, many public company boards do not see any turnover that is not the result of retirement at the end of a fairly long tenure.”

While progress on gender diversity of corporate directors is being reported, a “staggering” 20% of firms in the Russell 3000 index still have no female representatives on their board, according to the study.

The study also finds that almost all board chair positions remain held by men (only 4.1% of Russell 3000 companies have a female board chair).

The report underscores the main reasons why progress remains slow when it comes to board diversity.

For instance, average director tenure continues to be quite extensive. The report finds that their average tenure exceeds 10 years. According to the study, about one-fourth of Russell 3000 directors who step down do so after more than 15 years of service. The longest average board member tenures are seen in the financial (13.2 years), consumer staples (11.1 years), and real estate (11 years) industries.

This finding shows how rarely board seats become vacant. However, when a spot is available, the study finds it is often taken by a seasoned director rather than a newcomer with no prior board experience.

Only a quarter of organizations elect a director who has never served on a public company board before, according to the study.

Corporate boards also remain quite inaccessible to younger generations of business leaders.

According to the study, only 10% of Russell 3000 directors and 6.3% of S&P 500 directors are aged 50 or younger, and in both indexes about one-fifth of board members are more than 70 years of age. And, the report notes that these numbers show no change from those registered two years ago.

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