Greater independence in evidence in US boards

Boards of directors of US corporations have generally been very independent of management, if you judge independence purely on the basis of their formal ties to the company. But that's not always how it works out in practice. According to the latest version of the Spencer Stuart Board Index, however, there are increasing signs that boards are gaining structural power at the expense of the CEO. The headhunter's annual study of the S&P 500, now in its 26th year, shows a number of pointers in that direction:

• Declining board turnover: While transitions for the CEO may be on the rise, the same is not the case for the board of directors. Last year saw the smallest number of newly elected directors in a decade.
• More independent board leadership: Some 41 per cent of boards have now split the roles of chairman and CEO. Over half of boards feature the CEO as the only non-independent director, a figure that has doubled in only ten years.
• Fewer active CEOs as directors: Fewer than half of CEOs serve on the board of another company. That means nominations committees are casting their net more widely.
• Older boards: It follows from the decline in turnover and the selection of fewer sitting CEOs: The average age of all independent directors is now 62.4 years, up from 60.2 years in 2001. Five of every six boards that have a fixed retirement age have set the mark at 72 years of age or older.
• Mixed results in diversity: Nine per cent of S&P500 boards have no women members. Minorities have failed to land a seat on 12 per cent of boards. The number of African-Americans serving on boards has even fallen slightly, though more boards have added directors of Hispanic or Asian origin. Some 10 per cent of the new directors named in 2011 were born outside the United States.

No surprise, though, on pay. The average annual pay for board directors rose eight per cent over last year, exceeding $232,000. The nature of that compensation is changing, too, as cash retainers rose 11 per cent.

Source document: The Spencer Stuart US Board Index 2011 is a 68-page pdf file.