How do your board practices compare with other private and public companies regarding board selection, recruitment, and composition?
This is the first of eight postings of the results of the Society of Corporate Secretaries and Governance Professionals “2011 Board Practices Report” to use as a benchmark to compare your board’s governance practices. The Society’s 2011 Report is useful because it reflects the survey results separately for public companies and private companies that can be used for evaluating the current governance practices of any organization. The Society’s 2011 Report is available at the Deloitte Center for Corporate Governance at http://www.corpgov.deloitte.com/site/us/ as the “2011 Board Practices Report” under the page “Board Governance.”
The postings will focus on each of the following:
- Board Selection, Recruitment, and Composition
- Independence of the Board and its Chair and Committee Chairs
- Audit Committees
- Board Orientation and Training
- Board Evaluations
- Strategy and Risk Oversight
- Succession Planning
- Board Meetings
Board Selection, Recruitment and Composition
Below are the results of the Society’s survey as to the following questions regarding board selection, recruitment, and composition:
Click here to view the table.
Use of written criteria in selection of directors has increased from 35 percent of all companies in 1999 to 78 percent of public companies and 57 percent of private companies in 2011. Likewise, but not quite as dramatically, use of a skills matrix has increased from 21 percent of all companies in 1999 to 62 percent of public companies and 33 percent of private companies in 2011. In 2011, the gap between public companies and private companies in the use of a skills matrix may be the result of increased SEC proxy requirements for discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that the person should serve as a director in light of the registrant's business and structure.
Perhaps because of their increased use of a skills matrix and written criteria in selecting directors, public companies use search firms more than private companies. Public companies also rely more on a mandatory retirement age for directors than private companies to change board composition.
Our next posting will focus on the independence of the board, its chair, and committee chairs.