There’s been some interesting chatter this week in board governance. As the proxy season comes to a close, voting data has revealed some interesting trends in shareholder proposals. In addition, we’re seeing a media focus on age diversity in the boardroom, plus the revenue recognition standard continues to loom large overhead. We’ve pulled excerpts from this week’s reports, articles, and videos to pique your interest. Let’s have a look:
Say on Pay Trends
Shareholder support for company say on pay proposals is reaching new heights, as the failure rate for these proposals have dropped to new lows: ½% for S&P 500 companies and 1% for Russell 3000 companies.
According to a report from Meridian Compensation Partners, the 2017 proxy season has seen a significant decline in failure rates for Say on Pay (SOP) proposals, which is true for both the S&P 500 and the Russell 3000 (with 99.5% and 99% receiving majority shareholder support, respectively). Only two S&P 500 companies’ SOP proposals and 18 Russell 3000 companies’ SOP proposals have failed to receive majority shareholder support. Furthermore, the percentage of companies receiving 90% or more shareholder support has also reached an all-time high (numbers below reflect 6/15/17 data).
As detailed in the report, these multi-year trends of high passing rates strongly suggest that these companies have been effectively addressing compensation and corporate governance concerns raised by shareholders and proxy advisors.
Age Diversity in the Boardroom
According to Equilar BoardEdge data, there are more than 3,500 executives at public companies under the age of 40. Of those, 1,048—or 29.7%—have served on a public company board of directors at some point, and 615 are currently sitting directors—about one-sixth of the total.
In the past week, both Equilar and the Chicago Tribune sparked discussion around board member age. In Equilar’s BoardEdge database of 160,000 public company executives and board members, the overall number of individuals under 40 represents only a fraction (3,523 people). However, of those 3,523 people, nearly 30% had public company board experience, which suggests that under-40 executives are highly sought-after for board positions.
Equilar’s Dan Marcec also pointed out that marketing and technology experience were among the most sought-after board skills disclosed by large-cap companies, according to an Equilar study from late 2016.
For boards seeking diversity of skills and perspectives, age diversity becomes another output of the process, explains 36-year-old board member Caroline Tsay in the Chicago Tribune: “Excluding a younger generation of members affects the ability as a board to create value for the company long-term.”
The Looming Revenue Recognition Standard
Even if there isn’t a significant change in revenue recognition practices, all companies are going to see a significant change in the disclosures that are required around revenue.
Despite the four-year lead time, a handful of companies still seem largely unprepared for the implementation of the new revenue recognition standard (set to take effect for many public companies on January 1, 2018). In this week’s Profession in Focus, the Center for Audit Quality (CAQ) interviewed Christine Ann Botosan, board member with the Financial Accounting Standards Board (FASB). According to a FASB webinar conducted last fall, one-third of the companies polled had yet to begin the implementation phase.
In a recent episode of Inside America’s Boardrooms, the CAQ’s Executive Director Cindy Fornelli explained that the new standard could affect various functional areas within an organization including accounting, tax, financial reporting, financial planning, investor relations, treasury, sales, and so on. “It’s really quite huge,” emphasized Fornelli. “Boards need to make sure that the company has a plan for assessing its impact and implementing the change.”
For more information on the impending revenue recognition standard (including disclosure considerations and resources for boards), catch this week’s episode of the CAQ’s Profession in Focus.