Corporate Governance and Practices and Trends

A Comparison of Large Public Companies and Silicon Valley Companies

As outside legal counsel to a wide range of public companies in the technology and life sciences industries, many of which are based in Silicon Valley, Fenwick has collected information on corporate governance in order to counsel our clients on best practices and industry norms. We have collected this data since 2003 and believe this unique body of information is useful for all Silicon Valley companies as well as other public companies in the United States and their advisors. Download the complete report.

Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100), which are often presented as a desired norm, compared to the technology and life sciences companies included in the Silicon Valley 150 Index (SV 150), where the needs and circumstances of public companies can be quite different.

Comparative data is presented for the S&P 100 companies and the SV 150, as well as trend information over the history of the survey. In a number of instances the report also presents data showing comparison of the top 15 (which are of a scale similar to the S&P 100), top 50, middle 50 and bottom 50 companies of the SV 150 (in terms of revenue), illustrating the impact of scale on the relevant governance practices.

This in-depth survey was developed as a resource for board members, senior executives, in house legal counsel and their advisors, based in Silicon Valley and throughout the United States.

Key Findings Include:

  • Dual-class Stock. The use of dual-class stock structures among SV 150 companies more than doubled since 2011 to 7.3%, up from ~2-4% in prior years and allows founders or other major long-term holders to retain control of a company through special shares with outsized voting rights.
  • Classified Boards. Companies in the S&P 100 have inherent protection from hostile takeovers in part due to their much larger size, so we’ve seen them declassify in recent years from ~47% a little more than a decade ago down to only 10% in the 2014 proxy season. During that same 10 year period the number of SV 150 companies with classified boards has held strong at ~47%.
  • Insiders. SV 150 companies continue to have more insiders as a percentage of the full board (largely a result of having smaller boards), while S&P 100 companies continue to have more insiders in absolute numbers. While there has been a longer term downward trend in insiders, both groups have held essentially steady over the past six proxy seasons.
  • Board Leadership. Where there is a board chair separate from the CEO, they are also substantially more likely to be a non-insider at SV 150 companies (in the 2014 proxy season, 71% compared to 52%)—though the S&P 100 increased markedly in the 2014 proxy season. Silicon Valley companies are also substantially less likely to have a combined chair/CEO (36% compared to 69% in the S&P 100).
  • Gender Diversity. Women directors are twice as common among S&P 100 companies (in the 2014 proxy season, 21% compared to 10% in terms of average percentage of each board that are women).  While board membership for women peaked in the SV 150 in the 2008 proxy season, the overall trend is still upward in both groups.