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New Challenges Inspire Changes to Board Committee Structures


December 17, 2015

As public concerns and needs change, so do board structures. Boards establish and dissolve committees based on their needs to deal with a specific matter or general issue to help the board for diligent decision-making. In the past five years, the rise of technology and the increasing concerns for health, environment, and safety issues, has corresponded to a rise in committees dedicated to these matters, while the number of general public policy committees has fallen due to overlapping roles with other rising committees.

Technology

As the corporate world becomes more digitalized, technology committees may soon become a standard for boards. Even though the number of technology committees remains relatively low, it has increased over the past five years.

In 2014, just over 10% of S&P 500 companies had technology committees, up from 6.9% in 2010. As reliance on technology increases, companies may create separate committees to specialize in tackling the broad range of subsequent challenges.

The low percentages may not tell the whole story, since a technology committee is not one-size-fits-all. Unlike audit or compensation committees, both of which have clear functions and obligations, the responsibilities for technology committees differ. Depending on the industry, tech committees can range from cybersecurity to more specialized areas like genetically modified organisms and their impact on biotechnology.

Furthermore, some boards choose to dissipate technology-related responsibilities to other committees. For example, a recent Equilar study found that cybersecurity responsibilities have fallen to the audit committee in particular cases.

Despite the difference in responsibilities, boards need more access and experience with respect to information and data, and nowadays it is incredibly important for companies to be able to use technology in order to keep up with the curve, so it’s likely we see this trend continue to rise.

Health and Environment

As we learn exponentially more about our health, environment and safety, public concerns for these issues are also booming. Consumers are increasingly showing concern about climate change, and likewise, the growing concern for human and environmental health encourages companies to meet the standards regarding health and safety regulations. Concurrent with these trends, we’ve seen an increasing number of S&P 500 Boards establish Environmental, Health and Safety (EH&S) committees over the past five years, with the prevalence of such committees increasing from 5.6% to 6.7%.

Boards establish EH&S committees to fulfill a variety of functions such as monitoring the overall adequacy of the company’s policies and management systems for addressing environmental, health and safety matters consistent with industry practices, or recommending any changes to the company’s EH&S policies and programs. Although a 1.1 percentage points may seem like a minor increase, it has been consistently on the uptick, and more and more boards are delegating responsibilities to members to make sure that the company is complying with EH&S laws and regulations.

Public Policy

While we see an increasing prevalence of technology EH&S committees, the number of public policy committees actually saw the biggest decline among all other S&P 500 board committees. According to Equilar’s study, public policy committees decreased in prevalence from 13.2% to 9.9% between 2010 and 2014.

Overlapping roles of committees are factoring into the reason why boards dissolving or merging public policy committees, and leading to the slow decline. As public policy committees are in charge of evaluating compliance matters, including the company’s corporate governance structure, officer succession planning, technology issues, and environmental, health and safety activities, they may share responsibilities with other committees such as the EH&S, nominating and corporate governance, and technology committees.

For more information on the changing face of America’s boardrooms, check out Equilar’s report Board Composition and Recruiting Trends 2015: Gender Diversity in the S&P 500.


The data in this report is powered by Equilar’s BoardEdge, which not only includes information on 135,000 directors and executives qualified for board service, but also more than a dozen categories about each board member’s background and leadership experience, but also features a network tool clearly displaying how board members are connected to each other.

For more information on BoardEdge, or to request a demo, click here.

For more information on Equilar’s research and data analysis, please contact Dan Marcec, Director of Content & Marketing Communications at dmarcec@equilar.com. Jasmin Tran and Billy Zou, research analysts, contributed to this post.

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