March 23, 2016
Board succession and refreshment have become consistent topics of conversation in corporate governance, with shareholders directly sending a message to companies that they expect regular evaluation of a board’s composition and performance. Constituents have competing interests in terms of what they’d like to see change, and most discussions about an urgent need for board assessment has centered on greater diversity and skills in a changing corporate environment.
In the past several weeks, high-profile public companies have been in the news as months of back and forth with shareholders culminated in turnover on their boards of directors. Each of the scenarios highlighted below spotlights a different hot-button issue at the forefront of today’s corporate governance discourse. According to Equilar Atlas, an executive data platform, 32 new board members were added at NYSE and Nasdaq-listed companies in the week ending March 11. Of those, seven (or 22%) were females. Seventeen board members left their positions as directors during that timeframe, and even more turnover has occurred since then, as reflected below.
In the second week of March, both United Continental Holdings and Yahoo added two new members to their boards. In the case of United, the company immediately came under fire from activists who threatened a proxy fight with the presumption that the company’s directors as a whole do not have enough industry experience. Yahoo, who has been under widely publicized scrutiny from investors Starboard Value, added two new board members recently as well, which The Wall Street Journal said “may indicate that Yahoo intends to fend off any outside attempt to seize the board.” In the coming weeks when these companies file their proxy statements and get ready for their shareholder meetings, more news is sure to come.
Boards Reflecting Company Performance
Valeant Pharmaceuticals has added several new board members in 2016, most recently in the opening weeks of March. These appointments occurred in concert with Valeant’s consistent position in the spotlight for a variety of reasons, from CEO J. Michael Pearson’s medical leave, scrutiny of its acquisitions strategies, an SEC investigation and a stock price that has fallen well over $200 from its peak last year. After announcing its earnings on Tuesday, March 15, Valeant’s stock fell another 50%, prompting activist investor Bill Ackman, who leads Pershing Square Capital Management and just secured a spot on the company’s board, to move into defensive mode. Indeed, with the company’s stock now a shell of its high last summer, its new directors have their work cut out for them to assuage the concerns of its stockholders.
Over the weekend, Pearson was let go at the request of the board, prompting more changes at the company as the company’s CFO refused to step down as a director to make room for Ackman himself.
Viacom has had no shortage of attention on its board composition this year, and the plot thickened after its annual shareholder meeting on March 14 when the company added a new lead independent director. This is in line with greater trends among S&P 500 companies, which have seen an increase in boards adding a lead independent director to serve alongside a combined CEO and Chairman of the Board—which Viacom now has in Philippe Dauman.
According to Equilar, the percentage of S&P 500 companies that have a lead independent director alongside a combined CEO/Chair role has increased from 55.5% in 2012 to 61.2% in 2014. The movement toward board independence is typically a popular move among investors and proxy advisors. And though Viacom’s shareholders technically overwhelmingly supported the company’s decisions, some have raised questions about the move in light of considerable controversy over the way its voting shares are distributed.
The data in this post is powered by Equilar BoardEdge, which not only includes information on 150,000 directors and executives qualified for board service, but also more than a dozen categories about each board member’s background and leadership experience. The platform’s defining feature is a networking tool that clearly displays how board members are connected to each other.
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