Update on Board Diversity Developments
August 1, 2018
Over the last few years, boards have come under mounting pressure to focus on board composition and refreshment, including length of tenure, individual and aggregate skills mix and diversity.
A few years ago, CalPERS’ revised its Global Governance Principles to call for companies to conduct rigorous evaluations of director independence after twelve years’ service, and ISS’ QualityScore metric rewards companies where the proportion of non-executive directors with fewer than six years tenure makes up more than one-third of the board, in addition to scrutinizing boards where average tenure exceeds 15 years. Companies also face demands to justify the contributions of individual directors and to conduct rigorous evaluations to ensure that the board functions effectively and with the right mix of skills. Correspondingly, refreshment is one of the top areas of continued governance focus from other investors and advocates. This update is intended to provide boards with data that brings them up to date on developments in this area, since it is certain to be an area of continuing focus for various constituencies in the near future.
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This blog post was republished by Law360 as “Companies Could Face Pressure Over Board Composition” on August 13, 2018.