New Voices in the Boardroom: The Gradual Evolution of Board Composition

The stakes for having the right people around the boardroom table have never been higher. Directors need to have the skills and experiences that not only align with their company’s long-term strategic direction but also enable their boards to effectively advise management amid unprecedented change and business disruption. Board succession has emerged as a key priority for shareholders, who increasingly expect boards to have a rigorous process in place for assessing board composition and refreshment. Of particular concern are whether there is enough diversity in the boardroom, whether the board has the right combination of skills, and how the board views director tenure.

Notably, directors with diverse profiles are increasingly joining US boardrooms. However, a chronically low rate of director turnover is bringing about only gradual shifts in the overall makeup of US boards. The modest pace of change is likely to persist, meaning that corporate boards are likely to evolve only incrementally.

Looking to the year ahead, the following represent the board trends Spencer Stuart believes will continue or accelerate in 2019, and how they are likely to shape board composition in 2019 and beyond.

Turnover will continue to be driven by director departures and mandatory retirement in the near term.

In 2018, S&P 500 companies added the highest number of new directors since 2004—roughly 0.88 new independent directors per board. That said, overall turnover in US boardrooms is modest, and is likely to remain so for the foreseeable future, impeding meaningful year-over- year change in the overall composition of S&P 500 boards. During the 2018 proxy season, a little more than half of S&P 500 boards (57%) added one or more new directors.