Evolution of Boards and Governance Practices

0:00 -- Intro.

1:11-- About this podcast's sponsor: The American College of Governance Counsel.

2:08 -- Start of interview.

2:47 -- Julie's "origin story." She started her work with boards in the early 1980s with Catalyst (a non-profit women's organization whose mission is to promote women in corporate America).

5:46 -- Now she's leading the Board Practice at Spencer Stewart.

6:15 -- About the 2023 U.S. Spencer Stuart Board Index. Now in its 38th year, this index examines the latest data and trends in board composition, board governance practices and director compensation among S&P 500 companies.

7:46 -- Comparing and contrasting board practices in  S&P 500 companies with mid or small cap companies. Example: Spencer Stuart S&P MidCap 400 Index. "The trends are set in the bigger companies, and the smaller companies follow."

10:08 -- Highlights from the 2023 U.S. Spencer Stuart Board Index.

1. Skills: return to the desire to have CEOs and financial skills in the boardroom. "The recruitment of retired or active CEOs rose this year to 30% of the incoming class, which was a big uptick. And boards also recruited more directors with financial backgrounds, and they accounted for about 27% of the new directors. In both categories, retirees outnumbered active executives." "42% of S&P 500 CEOs serve on a board, meaning 58% do not. So when boards are looking for active or retired CEOs, like they were this year, they tend to look more in the retired category because they're just more available."
2. On the practice of overboarding: "It has changed dramatically." "Now there's a restriction on how many boards a CEO can serve on. 
   They can serve on one." "I think now most boards think that [an outside] director can serve on three total, [due to the] time [required] to devote to the company."
3. [14:33] On companies restricting executives on serving on outside boards: "[Some] companies restrict board membership, but they don't forbid it generally."
4. [15:58] Increase in time and commitment for board members:  "It is a much more time-intensive job than it used to be." "There was a survey that was out a while ago that said board members spent 210 hours or something like that, we just did a pulse survey of directors It came back saying they think it's 350 hours now." "So it's a very time intensive job and much different than it used to be."
5. [16:58] Survey on NomGov Chairs: "CEO experience is at the top of their list and financial experience for next year."
6. [18:34] International experience: "International experience has really gone up among independent directors this year, 54% had spent time working outside the US, 18% were from outside the US. So that's a big changeover. If you looked for 10 years ago, that number would have been 8%."
7. [20:18] Low turnover in boardrooms and mandatory retirement age: "We had really low turnover in the boardroom [which I find to be concerning]. This year was 7% of boards seats turned. Yet last year it was 8%, the year before it was 9%." "So boards don't change, they are evolutionary bodies. And not many people leave, which means not many people join." "[Boards] overwhelmingly use mandatory retirement as their refreshment tool. So while the percentages of boards disclosing a mandatory retirement age for directors declined a little this year, it's about 70%, the retirement age of boards with these policies goes up every year. And so now over half of boards with age limits have a mandatory retirement age of 75 or older. And a decade ago, that was 24% or so had that retirement age. So we just keep pushing, pushing the retirement ages up."
8. [22:18] Term limits: "Very few have term limits, 8% have term limits. We get asked this question all the time because obviously, companies overseas or countries have different term limits. And it just doesn't take off here."
9. [23:09] Average board tenure: It hasn't changed a lot [7.8 yrs]. I would say, which is kind of surprising because, you know, people are staying longer. If you look at boards right now, they tend to be a third, a third, a third: a third under five years, a third five to 10 years, and then a third over 10 years. And some of those can be very high, but that's kind of what it looks like."
10. [24:18] On board evaluations: "98% this year reported that they had a board evaluation process. But I guess the real question is, okay, they do a board evaluation of the whole, but how many of them are doing individual assessments and are they using those to try to encourage turnover in the boardroom?"
11. [27:35] On boardroom diversity: "Two thirds of the independent director appointments were diverse and  48% of all directors now are diverse. So it was still a pretty high number this year. But you're right, it was a pullback from the last two years where the numbers were in the 72%. And I think that George Floyd had a lot to do with that and really bringing this issue to the forefront." "I think that boards are recognizing more of the value of having diversity in the room and the value of the message that it sends to their employees, to their customers."

34:01 -- Her take on ESG and the ESG backlash. "Last year, [in our NomGov chair survey] directors said that [one] of the most important thing was to bring somebody on the board that had an ESG background, or they were going to be thinking about that. 
This year, it dropped significantly." "They may not bring somebody onto the board who has an ESG background, but they are talking about ESG.  They're taking it seriously, and some of it depends whether it's the E, the S, or the G, depending on the company, but we are not seeing them look for ESG directors."

35:55 -- On the question of single issue directors from a board composition perspective. "Single-issue directors are less in demand because you don't have a lot of opportunity to bring people into the boardroom, and you really don't want directors who can only speak up on one issue. For a while, we were seeing single-issue directors, and that just has decreased, and technology may be the exception to that."

38:90 -- On the advent of AI for board placements and impact in the boardroom generally. "It's too early, I think, to tell. [I]t's going to have a huge impact on every company. And so they're going to have to figure out how they get smart [and] stay smart about the issues. But again, it might not be that they bring somebody on to the board who's an AI expert." "I think you'll probably start to see boards coming out to Silicon Valley to get smart about it."

41:34 -- On the aging if U.S. boards and lack of turnover: "It's really hard to believe that only 7% of boards should turnover in a year." "The biggest issue right now is that changes are very fast in everything else but it isn't very fast in governance."

43:22 -- Books that have greatly influenced her life: 

1. Books on happiness.
2. Books by David Brooks (eg, The Second Mountain).
3. Writers who have the courage to go up against powerful people and try to write a wrong or expose something (eg, The Empire of Pain, Bad Blood)

44:45 -- Her sponsor: Thomas Neff (former Chairman of Spencer Stuart US and founder of its CEO and Board of Directors Practice).

46:12 -- Quotes that she thinks of often or lives her life by: "Assume good intentions."

46:51 -- An unusual habit or absurd thing that she loves: she's an avid needlepointer. 

47:28 -- The living person she most admires: "People who may not have a profile, those who work with the hungry and the refugees and things like that, and we don't know who they are." "If I had to pick the name of somebody who's well known to the world, I would probably say Nancy Pelosi."

Julie Daum is the leader of the North American Board Practice of Spencer Stuart. She has conducted more than 1,500 board director assignments.

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This podcast is sponsored by the American College of Governance Counsel.

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 You can follow Evan on social media at:

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You can follow Evan on social media at:

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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License