The 2019 U.S. Technology Spencer Stuart Board Index (Tech Index) reflects the board practices and trends of 200 public tech companies with the highest revenues based on proxy statements released between July 1, 2018 and July 1, 2019.
I. Selected Spencer Stuart Perspectives
The 2019 U.S. Spencer Stuart Board Index (Index) reflects the board practices and trends of S&P 500 companies. According to the Index, boards are responding to investors’ increasing calls for greater diversity of “gender, age, race/ethnicity and professional backgrounds.” Spencer Stuart found that “boards are accelerating the addition of women and minority directors,” which in turn is driving notable changes in board composition.
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On October 1, 2019, in In re Clovis Oncology Inc. Derivative Litig., a Delaware Chancery Court denied a motion to dismiss the plaintiffs’ Caremark claim alleging that individual directors should be held financially liable for failing to monitor the development of the biotech firm’s only promising experimental drug and for allowing the firm to publish inflated performance results.
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Key Holding and Facts. In Marchand vs. Barnhill, Chief Justice Leo E. Strine, Jr. writing on behalf of the Delaware Supreme Court earlier this month reversed the Court of Chancery’s 2018 dismissal of a stockholder derivative suit alleging Caremark claims. Caremark claims are essentially claims asserting bad faith by board members such that the directors breached their duty of loyalty.
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As public company governance remains in the spotlight, we examined the governance structures of the 50 largest U.S. newly public companies at the time of their initial offerings. Our survey of both controlled and non-controlled companies found that those companies continue to adopt various takeover defenses at the time they enter the public market, a stark contrast to the current practices of the S&P 500.
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With a focus on longer-term policy changes that extend beyond 2014, ISS has opened a new consultation period on several important topics, including key aspects of how they review director elections. Responses are due by February 2014.
Director tenure. Recognizing that while viewpoints are mixed, investors appear to be concerned with lengthy director tenure though are reluctant to impose strict limits.
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We spoke with Agenda for its recent article, “Large Companies Have Strictest Director Independence Standards” (subscription required), which explored the Conference Board’s 2013 Director Compensation and Board Practices report. The report showed that one-fifth of companies in the financial services sector and one-fifth to one-quarter of companies in other industries have director independence policies that go beyond what the applicable securities exchanges require.
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Considering that there continues to be growing pressure on larger companies to update their corporate governance provisions in response to both government regulations and pressure from shareholders and advisory groups, we thought this would be a good time to review the corporate governance practices at the time of the IPO to see which of these practices were being adopted by IPO companies.
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