Study Says Boards Are Adjusting Ahead of Expected Rule Changes

Lora Bentley

It's a given that boards of directors often change in structure and/or function after the latest corporate crisis prompts Congress to pass legislation or regulators to add new rules to the mix. But how often do they change in anticipation of expected legislation and regulations? A new study from executive search and consulting firm Spencer Stuart indicates that many boards may be doing just that now.


Monday, the firm announced the 24th annual Spencer Stuart Board Index, a survey of Standard and Poor's 500 companies. In the annoucement, Julie Hembrock Daum, North American Board and CEO Succession Practice Leader for Spencer Stuart, said:

Boards have been listening and responding to criticism about their effectiveness and have moved to better practices. While there are still calls for greater transparency and governance, boards have shown they are well aware of what they need to do to serve shareholders.

Some of those better practices include term limits for directors, requiring those who did not garner a majority vote from shareholders to resign, fewer active CEOs serving as directors for other companies, and including succession planning as a regular part of the agenda. Specifically, 67 percent restrict the number of boards on which their directors can serve, only 26 percent have active CEOs as new directors and 65 percent require directors who did not gain a majority shareholder vote to resign.


Given the proposed SEC rules on increased shareholder involvement, the boards who are taking such actions now are clearly headed in the right direction, and they will be ahead of the game when the rules go into force.

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