“Driving Board Excellence” from The Conference Board, in collaboration with data analytics firm ESGAUGE, along with Debevoise & Plimpton; KPMG; Russell Reynolds Associates; and the University of Delaware Weinberg Center for Corporate Governance, provides insights on board/director education, evaluations, overboarding policies, and committee member rotation practices and policies among S&P 500 and Russell 3000 (R3000) companies based on data from SEC filings and other publicly available sources as of November 10, 2023, and associated insights from a recent discussion with leading in-house corporate governance professionals.
Among the key takeaways:
Board/director education
Although board/director education programs organized in-house are still the predominant practice, companies are increasingly relying on a combination of in-house and outside resources for their director education. The use of in-house-only programs for both company groups declined over the six year period 2018 – 2023 (to 61% S&P 500 | 64% R3000), while the use of a mix of in-house and outside resources increased 12% and 11%, respectively, for S&P 500 and R3000 companies (to 37% and 23%, respectively).
Board/director evaluations
A majority of S&P 500 companies conducted full board, committee, and individual director evaluations (including both peer assessments and self-assessments) as of 2023, compared to just 38% of R3000 companies. However, the trend is on the rise for both company groups, reflecting a 19% (S&P 500) and 20% (R3000) increase in prevalence since 2018.
Notably, disclosure of the use of an independent facilitator for board evaluations has risen steadily for both company groups over the past six years from 14% in 2018 to 36% in 2023 for the S&P 500 and from 5% in 2018 to 17% in 2023 for the R3000.
Director overboarding policies
A majority of S&P 500 and R3000 companies have a director overboarding policy applicable to all directors (75% S&P 500 and 53% R3000 as of 2023). For those that have them, the policy most commonly limits directors to three additional board seats, with four additional board seats being a close runner up.
Committee member rotation
Committee member rotation policies (including, e.g., term limits, rotation criteria, reappointment criteria or limitations) have trended up steadily since 2018. As of 2023, 33% of the S&P 5000 and 26% of the R3000 have such a policy, up from 24% and 16%, respectively, in 2018. Term limits, for those that have them, are most commonly limited to five.
The report suggests why and how companies may consider evolving their practices across each of the foregoing topics.