The Society recently conducted a survey among its public company members to explore how companies gather data and disclose information in their proxy statements about their directors' skills and experiences.
Among the key takeaways, which will inform a NYSE governance publication as well as Society programming and resources:
Information Gathering (n=92) – Nearly all companies represented by respondents use online or paper questionnaires to gather information on their directors’ skills and experiences. Many also review publicly accessible disclosures from other organizations with shared directorships (54%) and other publicly available online information (47%). Less common are in-person or phone interviews and the use of LinkedIn or other social media.
Information Compilation (n=86) – Companies that use questionnaires to gather information on director skills and experiences most commonly compile information by pre-populating each director's qualifications based on the prior year’s questionnaire or proxy statement and asking directors to review and update as needed (74%). Less common methods include asking directors to confirm skills and experiences from an enumerated list, rank their proficiency on a scale, or select from multiple levels of expertise.
Accuracy of Qualifications (n=83) – Most companies instruct directors to review and approve their reported skills and experiences intended for inclusion in the proxy statement before finalizing the proxy statement (86%). Additionally, 43% cross-check against other proxy statements for directors on multiple boards and 40% involve the Nom/Gov Committee in the process. Fewer companies cross-check publicly available online information or seek full board review and approval.
Relevance of Qualifications (n=80) – The most important criteria in assessing the relevance of director skills and experience in relation to board composition for disclosure purposes are the alignment of director skills and experiences with the company’s business, operations, industry, and strategy:
Depth of Qualifications (n=81) – For 63% of companies, the roles directors have held and hold are a key factor in evaluating the depth of their skills and experiences. Furthermore, formal qualifications and certifications are considered by 48% of companies, while 47% assess the duration of experience, 46% consider other directorships, and 35% lack specific criteria.
Recency of Qualifications (n=80) – A slim majority of companies (51%) do not consider the recency of a director’s skills or experience when assessing their qualifications for disclosure purposes. Meanwhile, 49% acknowledge both recent and past qualifications in their assessments. Notably, no companies prioritize recent experience over prior experience.
Disclosure of Skills and Experiences (n=73) – Financial experience tops the list of disclosed qualifications, while just 7% disclose soft skills such as collaboration and communication:
Moreover, 77% of companies use tabular formats (lists or tables, such as a skills matrix) to disclose director qualifications in their proxy statements, followed in prevalence by narrative formats (40%) and director-specific disclosures in addition to the director biographies (39%). Less common are visual formats and aggregated skill and experiences disclosures alongside director biographies.
Evaluation of Approach (n=74) – Benchmarking against peer disclosures is the primary method companies use to gauge the effectiveness of their director skills and experiences disclosures (57%), followed by soliciting board feedback (50%), conducting periodic reviews of the compilation and reporting process (47%), and gathering feedback from investors, proxy advisors, and other stakeholders (43%). Relatively few companies report having no process in place to evaluate the effectiveness of their disclosure methods.
Responses tended to vary by company size. Access the survey results by company size here and here.
This post first appeared in the weekly Society Alert!