Board Composition and Structure: Are directors willing to consider investor input on candidates?

Finding new directors

• Ninety-one percent of directors find new members through director recommendations, suggesting a preference for referrals by someone they know and trust. However, 67% use search firms.
• Directors say their corporate governance communications with shareholders has increased, but only about 11% look to investor recommendations for potential director candidates.
• Willingness to consider investor input on board candidates is even lower at companies with over $10 billion in revenue, at 6%.

What sources do you use to recruit new board members?

Performance concerns:

• Nearly one-third of directors (31%) are dissatisfied with a fellow director and feel the individual should be replaced.
• About half say their reasons for dissatisfaction include aging, which they say has diminished a person’s performance.
• About 40% believe the director does not have the necessary expertise, and many others cite a lack of preparation for meetings.
• Directors who have been at the company only one to two years are most likely to believe a fellow board member should be replaced because of aging.
• Other studies show that both the average age of S&P 500 directors and average board tenure keeps growing. In our study, 35% of directors have been on their current board for over 10 years.

Do you believe that any of your board members should be replaced for the following reasons?