Spencer Stuart: U.S. Technology Board Index 2015

Has the governance committee emerged as the new “center stage” committee for corporate boards?

In light of the growing investor attention to governance issues — from board composition, succession and refreshment, executive compensation, risk oversight and strategic concerns — it may seem that way. Traditional institutional and activist investors increasingly are calling on boards to demonstrate that they are being thoughtful about the skills they need around the board table and how directors’ capabilities align with those needs. They expect boards to plan for CEO succession and evaluate their own performance. The responsibility for driving many of these areas falls to the board’s governance committee.

As part of this year’s U.S. Technology Board Index, Spencer Stuart set out to identify the best governance practices for boards. They developed a list of priorities based on their work with boards and asked six technology company directors to weigh in on the list and the issues that their boards are prioritizing:

• Tom A. Alberg, director, Amazon.com
• John G. Connors, director, Splunk and Nike
• Mercedes Johnson, director, Intersil Corporation, Juniper Networks, Micron Technology and Teradyne
• Edward A. Kangas, non-executive chairman, United Technologies Corporation and Tenet Healthcare Corporation
• Catherine Kinney, director, NetSuite, MetLife, MSCI and Quality Technology Services
• Abhijit Y. Talwalkar, director, Lam Research Corporation

To explore what boards are doing in practice, Spencer Stuart’s fourth annual U.S. Technology Board Index examines trends in board composition, governance practices and director compensation for 200 top technology companies in the United States. The companies in this index range in size from $415 million in 2014 revenues to more than $180 billion and represent a broad swath of technology companies, including computer manufacturers, software developers, semiconductor and component makers, telecommunications equipment manufacturers, managed applications and network services, IT services, Internet publishing, search and Internet retail companies.

• Technology company boards range in size from five to 15 members. The average size is 8.6 members.
• Eighty-one percent of technology board directors are independent versus 84% of S&P 500 directors.
• The percentage of technology company boards with at least one female director increased from 72% in 2014 to 75% this year. Nevertheless, technology boards significantly trail the S&P 500 in female representation; 97% of S&P 500 boards have at least one female director. Women represent 14% of the total number of directors on technology boards versus 19.8% of S&P 500 directors.
• Forty-seven percent of technology companies in Spencer Stuart's index added a new director in the 2015 proxy year, up from 42% in 2014. In total, 93 companies added 142 directors, compared with 2014, when 84 companies added 127 new directors.Thirty-three of the new directors, 23%, are women.
• Of the 200 technology boards in the index, 66% separate the chairman and CEO roles, compared with 48% of S&P 500 boards.
• The average tenure for technology company board members is slightly longer than the S&P 500 average, 8.8 years versus 8.5 years.
• The majority of technology company boards (54%) held three to seven meetings.
• Directors are elected annually on 70 percent of technology company boards, down from 72% in 2014. By comparison, 92% of S&P 500 companies have annual director elections.
• The number of technology company boards that have a mandatory retirement age fell to 39% from 43% in 2014. By comparison, 73% of S&P 500 boards report a mandatory retirement age for directors. Among the technology companies that have one, the average retirement age is 73.
• Technology company directors received total compensation of $277,578 on average, 9% more than in 2014. Stock awards represented 58% of total per-director compensation for technology company directors, and another 11% of compensation is in the form of stock options. Cash fees represent 28% of compensation for technology company directors.

To read the full report, visit https://www.spencerstuart.com/research-and-insight/us-technology-board-index-2015