NEW YORK, USA: In 2014, Boards will have a critical role to play in business transformation and strategy, particularly in light of the pace of market and competitive change today.
Spencer Stuart explored the board's evolving role in this area as well as the implications for board composition and practices in its latest U.S. Technology Board Index. Drawing on the expertise of experienced board directors and an extensive review of proxy data, the second annual index considers how boards can work most effectively with the CEO and management team to future-proof the business and looks at trends around board composition and renewal.
Annual director elections have become the norm among top U.S. technology companies, with 70 percent of technology companies now electing directors annually, an increase from 67 percent in 2012. An additional 19 companies indicated in their proxies that they will adopt annual director elections in the next several years, pending shareholder approval.
Following national governance trends, the average mandatory retirement age among technology boards has now reached 73. However, technology companies are less likely than S&P 500 companies to report a mandatory retirement age - 45 percent versus 72 percent.
While some boards are asking experienced directors to remain on the board longer, a review of technology company proxies also reveals an increase in the number of new independent directors, including a higher percentage of new female directors, suggesting that boards are interested in refreshing their skills and increasing the diversity of perspectives around the boardroom.
Technology companies, and especially those in Silicon Valley, have moved much more aggressively than the S&P 500 to adopt a board leadership model that separates the duties of the CEO and board chair, and it is a topic that boards continue to review and discuss.
Sixty-five percent of technology boards and 71 percent of Silicon Valley boards separate the chairman and CEO roles, versus 45 percent of S&P 500 boards. As more technology companies separate the roles, they are less likely than the S&P 500 to have a lead or presiding director; 49 percent of technology company boards have a lead or presiding director, compared with 90 percent of S&P 500 boards.
Among other findings of the report are:
* Technology boards have 8.6 members on average, about the same as Silicon Valley boards with 8.4 members.
* 66 percent of technology boards have at least one woman serving on the board.
* Eighty-one technology companies included in the index added at least one new director; in all, 129 new independent directors joined technology boards.
* Total annual director compensation among technology companies averages $215,666, 13 percent less than the Silicon Valley average of $242,632.
* Stock compensation represents about half of director compensation for both Silicon Valley and technology companies overall.