New Research Age Diversity within S&P 500 Boards

Transcription

1 New Research Age Diversity within S&P 500 Boards Webinar Tuesday, March 28, 2017 Investor Responsibility Research Center Institute and Board Governance Research 1

2 Agenda Introductions Research Review IRRCi Perspective Q&A 2

3 Webinar Logistics Attendees in listen only mode. Questions encouraged. Type using the Question function, answers following report overview. You will receive with replay link. Report at Share info on social media Audio issues, contact

4 Speakers Annalisa Barrett Report Author Founder & CEO, Board Governance Research Clinical Professor of Finance, University of San Diego Jon Lukomnik Executive Director Investor Responsibility Research Center Institute 4

5 Investor Responsibility Research Center Institute Not-for-profit established in Funds, disseminates objective, unbiased research on range of issues at intersection of corporate responsibility, investors informational needs. Academic & practitioner research examining capital market context that impacts how investors, companies make decisions. Annual research award with two $10K awards. More than 60 research reports available at no charge. 5

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7 The Diversity Conversation Calls for board diversity are continuing to grow as more and more studies show the benefits ü Most board diversity studies focus on director gender Most studies of director demographics find that the vast majority of directors are in their fifties and sixties ü The recent IRRCi study by ISS found that nearly three-quarters (73.6%) of S&P 1500 are in their fifties and sixties* This study uniquely focuses on age diversity WITHIN each board * Institutional Shareholder Services, Board Refreshment trends at S&P1500 Firms: 2008 to 2016, January 2017, available at. 7

8 Average Board Age An examination of the average age of the directors serving on each S&P 500 board reflects this age range. ü 80% had an average age in the sixties ü Fewer than 2% had average ages of more than 70 or less than 55 8

9 Average Board Age Youngest average board age ü Two S&P 500 companies had an average board age younger than 50 years: TripAdvisor Inc. s average board age was 48.6 years Facebook Inc. s average board age was 49.0 years Oldest average board age ü One S&P 500 company had an average age over 75 years: CBS Corp. s average board age was 75.5 years Even without 92-year old Sumner Redstone, the average age of the other CBS directors was 74.2 years But average board age doesn t tell whole story 9

10 Standard Deviation of Ages within Each Board The dispersion of the ages for each board was determined by calculating the standard deviation of the ages of the directors within each board ü The median standard deviation of the director ages on the boards studied was 6.9 and the average standard deviation was 7.2 ü Most (62%) S&P 500 boards include directors with a standard deviation of ages between 5 and 8 10

11 Number of Decades Represented on Each Board Examination of how many people of different age groups are represented in each board room ü The age groups used were defined by decades Most (55%) boards have 3 decades represented ü For 80% of these boards, three decades were 50s, 60s and 70s 11

12 Number of Decades Represented on Each Board 65 S&P 500 boards had directors from only two decades ü Notable examples include: Apple Inc. (50 s & 60 s) Proctor & Gamble (50 s & 60 s) Target Corp. (50 s & 60 s) Urban Outfitters (50 s & 60 s) TripAdvisor, Inc. (40 s & 50 s) Three S&P 500 boards had directors from six decades Kraft Heinz Co News Corp. Viacom Inc. 12

13 Comparison by Industry Although it would be expected that boards in certain industries would benefit from boards in different age groups, there are very few differences by industry. The Telecommunications industry has too few companies for analysis 13

14 Comparison by Industry 14

15 Comparison by Company Size There is very little difference in the board age diversity when compared by company size (market capitalization) ü The median average board age is between 62 and 63 for all three of the company size groups analyzed ü Smaller S&P 500 companies are slightly more likely to have directors with ages in 3 decades 15

16 Comparison by Company Age When categorized by company age (as measured by the number of years since the company s IPO), slightly more difference by category ü Boards that went public 50+ years ago have lowest standard deviation of three categories ü Companies that went public less than 25 years ago more likely to have four or more decades represented among directors 16

17 Does turnover increase board age diversity? The impact on board age diversity of director changes between was examined for 55 companies* ü Ideally, board turnover would improve board age diversity ü However, standard deviation of ages of directors within each board was more likely to decrease for boards with more director changes between * Comprised of the 5 largest companies (measured by market capitalization) in each of the 11 GICS Sectors 17

18 From the IRRC Institute Viewpoint The dog did nothing in the night time. -- Inspector Gregory That was the curious incident. - Sherlock Holmes (Silver Blaze, 1892) 18

19 From the IRRC Institute Viewpoint Sometimes the news is what you don t find: ü Little variety in average age across boards ü Small dispersion in age within boards ü Little difference in average age of boards by industry or market capitalization ü 80% of boards average age in 60s ü Less than 2% average age below 55 or above 70 ü Refreshment doesn t seem to affect age dispersion 19

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21 Contacts Jon Lukomnik Executive Director IRRC Institute Annalisa Barrett Founder & CEO Board Governance Research LLC 21