This week we highlight a publication by Equilar titled, Declassified Boards Are Much More Likely to Be Diverse. The Equilar Gender Diversity Index (GDI) has reported that, at the current pace of growth in female representation on public company boards of directors, gender parity would not be reached until Q4 2055 for the Russell 3000. However, annually elected boards may already have an edge against their classified counterparts.
This week we highlight two analyses, one by J.P. Morgan and the other by Ernst & Young, reviewing the 2017 proxy season. The reports address board diversity; gender equality; environmental, social and governance (ESG) issues; and the normalization of shareholder activism as high priorities and key trends for many investors and boards.
This week we highlight a report by Ernst & Young based on three years of research on the linkages between nonfinancial performance and investor decision-making. The data concludes that with regards to environmental, social and governance (ESG) reporting, there is a global trend toward increased interest in nonfinancial information on the part of investment professionals.
This week we highlight a report on Board Refreshment Trends at S&P 1500 Firms based on a survey conducted by Institutional Shareholder Services and the Investor Responsibility Research Center Institute. The analysis examines demographic trends in the boardroom, including tenure, age, gender and ethnicity/race and offers evidence of the impact of the three most common refreshment tools (retirement ages, term limits and boardroom evaluations) on refreshment.
When Snap, Inc., parent company to the popular social media app, Snapchat, completed its much-anticipated IPO last week, investors were quick to question whether the company was overvalued. Despite half a billion dollars in losses last year, the stock closed its first day of trading at an eye-watering $28 billion valuation. By close of trading the following Monday, the stock had fallen to below its opening price. But other market watchers were distracted by a sense of déjà vu as yet another lauded tech company went public with overwhelmingly white and male corporate leadership.
This week we highlight Ernst & Young’s “Top Priorities for US Boards in 2017.” The report addresses the importance of focusing on strategy, risk management, shareholder communications and the company’s talent pool, including the board’s own composition, as well as how geopolitical developments, innovation and technology are some of the main drivers of creating a competitive advantage.
Board composition: Evaluate and refresh board composition to help achieve the company’s goals, increase diversity and manage turnover
The role of the board of directors and the scrutiny it receives seemingly increase every day. While the primary purpose of the board is to enhance shareholder value through the establishment of strategic priorities, select key members of management and oversee emerging risks and opportunities, the board, as a functioning body, comprises individuals who must function cohesively and productively. Each member’s ability to trust and be comfortable with her or his fellow board members is paramount to the ultimate success of the board as a whole. However, as is often the case, comfort zones, when they become too comfortable, can lead to stagnation. The threat of stagnation— particularly in a fast-moving world with a sluggish economy—must be regularly assessed and carefully avoided if a board is to successfully lead the enterprise to sustainable growth and shareholder satisfaction.
Here is our annual list of hot topics for the boardroom in the coming year:
1. Corporate strategy: Oversee the development of the corporate strategy in an increasingly uncertain and volatile world economy with new and more complex risks
Directors will need to continue to focus on strategic planning, especially in light of significant anticipated changes in U.S. government policies, continued international upheaval, the need for productive shareholder relations, potential changes in interest rates, uncertainty in commodity prices and cybersecurity risks.