Spencer Stuart Report: Boards Are Evolving, Becoming More Diverse

Corporate boards are evolving in both their composition and diversity according to a new study from Spencer Stuart, and retirement age is on the uptick.

The 2017 Spencer Stuart U.S. Board Index report, highlighting the findings of its analysis of S&P 500 proxies and the results of its annual S&P 500 governance survey, found that corporate boards are seeing a rise in the number of new directors.

The number of new independent directors elected to S&P 500 boards during the 2017 proxy year rose to 397, the most since 2004 and an increase of 15 percent from 2016, according to the report. A majority (52 percent) of S&P 500 boards added at least one new director.

“Even though the number of new directors is up from last year, it’s still not a lot of new directors,” Julie Daum, who leads the North American Board Practice with Spencer Stuart told Corporate Board Member. “But we did see a change in the composition of that group, and the biggest thing was the high percentage of first-time directors.”

A record high 45 percent of these new directors are serving on their first public corporate board, and they are more likely to be actively employed than other new directors by a margin of 64 percent versus 42 percent. A total of 55 percent of the first-time directors are women or minorities, which marks a significant uptick from 37 percent last year.

“An overwhelming 98 percent of corporate boards report having some form of board evaluation/assessment process in place, but individual director assessments are rare.”

There are a few reasons behind this new wave of directors, according to Daum.

“I think that boards are actually interested in age diversity. They are interested in getting younger people in the room who are not retired, and who are going to stay working,” Daum says. “Because the world is changing so quickly, they want to bring in people who are more current.”

Board Diversity On The Rise

More than half of the new S&P 500 directors are women and/or minorities—a first in the history of the survey. The number of new female directors rose to a 20-year high of 36 percent in 2017, while 20 percent of new independent directors are male and female minorities, which are defined as African-American, Hispanic/Latino or Asian.

“The number is definitely creeping up. In our experience, every board is thinking about diversity, whether it’s to add another woman or a diverse candidate, but it is top of mind for every board,” Daum says.

Slow board turnover is one reason why these numbers aren’t rising to even higher levels. The report found that overall board turnover remains low at 0.81 new directors per board this year, compared with 0.72 in 2016.

“Some of it is a function of low turnover, but when they have a seat open, they think about adding diversity, but they just don’t get that many seats,” Daum says. “And you might be replacing a woman or minority director who is leaving.”

Director Evaluation

An overwhelming 98 percent of corporate boards report having some form of board evaluation/assessment process in place, but individual director assessments are rare.

“We still see very few boards doing individual director performance reviews. They do self-assessments, committee assessments, but very few do individual assessments,” Daum says.

Just 37 percent of S&P 500 companies conduct some form of individual director assessments, a number that is largely unchanged the 36 percent reported in 2012.

A total of 43 percent of respondents to Spencer Stuart’s governance survey said their board assessments include self-appraisals, with 25 percent including peer evaluations on the process.


Spencer Stuart found that 42 percent of S&P 500 companies set their retirement age at 75 or older, a number that is way up from the 22 percent reported in 2012 and 11 percent in 2007.

For the first time, a majority of boards with mandatory retirement policies set the age at 73 or higher.

“It has become the norm, so everybody is doing it,” Daum says. “On some boards, it may very well be because their best director is their oldest director, and because they don’t do board assessments they have to abide by the retirement age. So, if you’re trying to hold on to somebody, you just up your retirement age.”

When it comes to the role of CEOs on the board of directors, the report found that for the first time, S&P 500 boards are more likely to split the chair and CEO roles between two people, with more than half (51 percent) of boards having a separate chair and CEO.

“What it does show is that every time a board does have a succession, they are thinking about this issue,” Daum says. “Do we separate them, do we keep them the same? Because most companies don’t have a CEO turnover each year, you’re not going to see that number go forward very quickly, but it has jumped up. I think everyone is being thoughtful about leadership in the boardroom.”