“Board Refreshment and Evaluations” from The Conference Board, in collaboration with ESGAUGE, Debevoise & Plimpton, the KPMG Board Leadership Center, Russell Reynolds Associates, and the John L. Weinberg Center for Corporate Governance at the University of Delaware, provides benchmarking data and trends, and associated insights, on various board refreshment tools and evaluation practices across S&P 500 and Russell 3000 companies based on public disclosures made as of July 7, 2022.
Mandatory retirement age policies
- The prevalence of mandatory retirement age policies has declined to 67% of S&P 500 companies (36% of Russell 3000 companies) in 2022 from 70% of S&P 500 companies (40% of Russell 3000 companies) in 2018.
- For those companies with such policies, mandatory retirement ages have generally increased. Nearly half of S&P 500 policies (52% of Russell 3000 policies) have a retirement age of 75 in 2022 compared to 39% of S&P 500 policies (42% of Russell 3000 policies) in 2018.
- Use of “no exceptions” retirement age policies for those companies that have a policy has declined to 34% of S&P 500 companies (18% of Russell 300 companies) in 2022 from 41% of S&P 500 companies (24% of Russell 3000 companies) in 2018.
Tenure / term limit policies
- The prevalence of tenure-based retirement policies remains low. In 2022, 6% of S&P 500 companies and 4% of Russell 3000 companies disclosed such a policy, compared to 5% of S&P 500 companies and 3% of Russell 3000 companies disclosing such a policy in 2018.
- The most common term limit for those companies with mandatory retirement policies based on tenure is 15 years (generally unchanged over the past five years).
Overboarding policies
- Director overboarding policies have increased in prevalence to 72% of S&P 500 companies (50% of Russell 3000 companies) in 2022 from 64% of S&P 500 companies (45% of Russell 3000 companies) in 2018.
- Most commonly, companies that have such policies limit their directors to three additional board seats (59% of S&P 500 companies and 46% of Russell 3000 companies, respectively).
Board evaluations
- Companies increasingly are conducting individual director evaluations along with full board and committee evaluations, with 52% of S&P 500 companies (34% of Russell 3000 companies) having conducted all three in 2022, compared to just 37% of S&P 500 companies (18% of Russell 3000 companies) having done so in 2018.
- The use of independent facilitators for board evaluations (or disclosure of the use) is also on the rise, with 29% of S&P 500 companies (15% of Russell 3000 companies) having disclosed use of a facilitator in 2022, compared to 14% of S&P 500 companies (6% of Russell 3000 companies) in 2018.
See “Companies shift tactics on keeping boards fresh” (Investment Executive), “Board refreshment: are evaluations preferable to retirement policies?” (Cooley), and “On the Board but Aging Out” (Korn Ferry), and additional resources on our Board Recruitment & Succession/Refreshment and Board/Director Evaluations pages.
This post first appeared in the weekly Society Alert!