Building Better Board of Directors
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Building Better Boards February 27, 2014 © C opyright 2007. C B IZ , In c. N Y S E Liste d: C B Z . A llrigh t d. Angie Salmon, EFL Associates CBIZ Human Capital Services, Inc.
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Angie Salmon leads the Corporate Directors Search practice at EFL Associates. She facilitated a panel discussion at a recent National Association of Corporate Directors (NACD) meeting covering corporate board succession planning, director recruitment, composition and diversity, board leadership structures and board assessments.
Transcript of Building Better Board of Directors
Building Better Boards
February 27, 2014
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Angie Salmon, EFL Associates
CBIZ Human Capital Services, Inc.
• Leadership Structures
• Succession Planning
• Board Composition/Diversity
• Director Development
• Service Restrictions
Trends in Board Governance
www.eflassociates.com
• Define board/committee chair qualifications to utilize for evaluation and recruitment
• Independent chairs are a hot topic for shareholders
– Ranked third for proposals put forth in the 2012 proxy season
• Boards are trending toward splitting chair and CEO roles
– 45% in 2013 versus 23% ten years ago
Board Leadership
Spencer Stuart US Board Index 2013
Deloitte. “The Split CEO/Chairman Structure Debate.” The Wall Street Journal, CFO Journal 2012
www.eflassociates.com
• Responsibility of nominating/governance committees
• Lack of planning can lead to:
– Entrenchment
– Challenges to re-election of directors
– Shareholder proposals
• Institutional investors are increasingly expecting boards to have and disclose director succession plans
Board Succession Planning
Respelier, Patrick and Scott Gootee “Nominating & Corporate Governance Committee Update”Stinson Morrison Hecker Director’s Institute & 2014 Proxy Season Workshop. 4 December 2014
www.eflassociates.com
Board Succession Planning
www.cbiz.com
• Plan ahead
• Determine preferences rather than replicating
background of departing directors
• Consider long term company strategy and
emerging trends against the current and future board
composition
Hanson, Lee & Les Csorba. Heidrick & Struggles Governance Letter “Be Strategic…” 2013
Board Composition Matrix
www.eflassociates.com
Director/Candidate
Critical Requirements Preferred Attributes Totals
Cultural/Gender Diversity
Financial Expert (Audit Chair)
Industry Operations
Social Media EntrepreneurialCustomer
KnowledgeIPO Experience M&A
Sales/Business Development
Total Critical Overall Total
Illbe There 1 1 1 2 3
Justin Case 1 1 1 1 3 4
Helen Back 1 1 1 1 3 4
Ima Example 1 1 1 2 3
John Doe 1 1 1
Brian Melby 1 1 1
Jack Nimble 1 1 1 2
Industry, financial, and operational expertise cited most often
Board Composition - Diversity
www.cbiz.com
• Boardroom diversity is progressing slowly
• Customer demographics ≠ director diversity
– 73% of Fortune 500 directors are white men and four of five new board appointments are filled by men
• Lack of diverse perspectives can pose a governance risk…and PR problems (Apple, Twitter, Facebook)
• Forward-thinking boards consider skills/experience - not just titles
Catalyst, “Setting the Record Straight.” 2012
Alliance for Board Diversity. “Missing Pieces: Women & Minorities on Fortune 500 Boards” August 2013
Director Development• Orientation needs to prepare new directors for more
immediate impact
• Continued director education is critical in dynamic business environments
• Board Assessments & Evaluations
– Most significant listed companies in the US have an annual assessment process – not all are robust
– 35% of directors believe that someone on their board should be replaced
Spencer Stuart US Board Index 2012
www.eflassociates.com
Rogers, Mark. Forbes “Sarbanes-Oxley Ten Years Later” July 2012
• Limitations on executive outside board service are becoming more prevalent
• US companies are trending away from mandatory retirement and term limits– Companies with a mandatory retirement age dropped from 79% to
73% in the past five years– Only 16 companies on the S&P 500 had director term limits in
2013, none shorter than 10 years (down from 25 companies in 2009)
– 64% of directors have served 10-15 years and another 5% have served 15+ years
Service Restrictions
Hymowitz, Carol & Jeff Green. Businessnweek “Corporate Directors Get Older, Hold Their Seats Longer” May 2013
www.eflassociates.com
• Tim Barton– Executive Chairman & Founder, Freightquote.com
• Robert Druten– Audit, Finance, and Nominating/Corporate Governance Committee
Member, Kansas City Southern– Board Chair & Nominating/Corporate Governance Committee
Member, EPR Properties
• William Lyons– Nominating/Governance Committee Chair, NIC, Inc.– Nominating/Governance and Compensation Committee Member,
Morningstar, Inc.
Panel
Questions?
www.cbiz.com
