Annual Elections by Market Cap

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An article featured in Tuesday’s edition of NACD Directors Daily focused on a proposal submitted to Smithfield Foods, Inc. for a switch from a “staggered three-year term to annual elections for board members.” Annual elections for directors are commonplace among companies ofSmithfield’s size and industry. For mid-cap companies ($2 billion to $10 billion) in the food, beverage, and tobacco industry group, such asSmithfield, the majority (58.3%) have annual elections. For mid-cap companies in general, regardless of industry, the statistics are nearly evenly split between classified boards (51.1%) and annually elected boards (48.9%).

Director election methods are closely related to company size. Those organizations with smaller market capitalization tend to have classified boards (also known as “staggered”—the practice in which a portion of directors serve for different term lengths), while those with larger market caps are increasingly more likely to have annual elections. Two-thirds of nano-cap companies (less than $50 million) have classified boards while a slight majority of micro-cap, small-cap, and mid-cap companies also stagger their elections (55.2%, 53.4%, and 51.1%, respectively).

The statistics change rather dramatically for large- and mega-cap companies. Over two-thirds of companies with a market cap of between $10 billion and $200 billion have annual elections. Almost all of the very largest of companies, those with a market cap over $200 billion, have annual elections.

NACD is able to provide custom information on election methods and dozens of other governance issues through our Custom Benchmarking Report. Click here to learn more.

NACD Survey Reveals Most Up-To-Date Trends on Corporate Governance

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Exemplary boardroom leadership means advancing a company’s best interests while also maintaining a responsible and accountable corporate culture. Whether shareholders are seeking to remove directors or third parties are questioning corporate responsibilities, obtaining a consensus on best governance practices is a key asset for corporate leaders. Knowing what their peers are doing can help boards assess their decisions instead of working in a vacuum.

As companies prepare for and react to the unique external events that will shape their corporate climate in the months and years to come, they can benefit from external benchmarks for their corporate governance practices.  However, in a year marked by a troubled economy and sweeping legislative reforms, standards for best practices in governance often become increasingly murky.

NACD helps boards tap into the latest trends and issues for boards with our 2011 Public Company Governance Survey. The survey offers a comprehensive review of the most up-to-date governance trends, incorporating input from almost 1,300 individuals from public company boardrooms. In addition, the information gleaned from respondents is enhanced by the inclusion of data from 2,400 proxy statements compiled by Institutional Shareholder Services.

The survey provides insights on a wide range of issues, including shareholder communications, CEO succession planning, director competence, and directors’ response to new proxy disclosure requirements. In addition, it features a special section on executive compensation, which is broken down into 24 industry sectors. Among the key survey findings this year:

  • The board’s role in overseeing strategic planning, corporate performance and valuation are top priorities for the majority of respondents.
  • Nearly 70 percent of respondents characterize their company’s long-term strategy as “balanced,” with moderate risk and moderate expected reward.
  • Directors believe that their current governance structures and practices enhance their ability to effectively and efficiently fulfill their duties.
  • Most boards have not formalized their CEO succession plans.
  • Nearly one-third of respondents feel the current disclosure requirements for corporate governance are “excessive and should be reduced.”

Data gleaned from this latest survey is also used to create the comprehensive NACD Custom Board Benchmarking Report, which provides boards with the opportunity to conduct an in-depth analysis of their current structures, practices, strategies and policies in comparison to their industry and peer group companies.

To purchase a copy of the latest Public Company Governance Survey, visit

Gender Diversity in the Boardroom

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A Wall Street Journal article highlighted in Tuesday’s edition of NACD Directors Daily, reported that the European Commission introduced quotas for female employees into new securities trading rules. The Commission’s approach has been criticized as a “back-door route” that avoids a “proper debate.” Meanwhile, on a parallel track, several European nations have successfully encouraged gender diversity through legislation aimed at corporations. (See “Keeping Count” in the April/May 2011 issue of NACD Directorship.)

While the United States has not required gender or diversity quotas for corporations, the Securities and Exchange Commission has highlighted the topic as it relates to the boardroom. In 2009, the SEC finalized a rule requiring proxy statements to disclose the board’s consideration of diversity in the nomination of director candidates. According to the SEC and public comments on the rule, there is “a meaningful relationship between diverse boards and improved corporate financial performance.” In this assertion, the SEC cites Catalyst, a nonprofit organization focused on the advancement of women in business, which found higher measures of financial performance for boards with women directors.

Despite the attention to this topic, gender diversity is still weak among public company boards. According to the 2011 NACD Public Company Governance Survey, one-third of public boards have no female members, another third has one female director, and the final third has two or more directors. Considering that the average public board contains eight or nine members, most companies have very few women represented on their boards, if at all.  

NACD has long believed that diverse insights are essential components of exemplary board performance. To this end, NACD, along with PwC’s Center for Board Governance, hosted “Diversity: Opportunities for Women in the Boardroom” yesterday in New York.  The event gathered female directors from American corporations to discuss the challenging business environment and the prospect of improving female representation in the boardroom.