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© 2016 The Investor Responsibility Research Center Institute1 www.irrcinstitute.org
New Research | Age Diversity within S&P 500 Boards
Webinar | Tuesday, March 28, 2017
Investor Responsibility Research Center Institute and
Board Governance Research
© 2016 The Investor Responsibility Research Center Institute2 www.irrcinstitute.org
§ Introductions
§Research Review
§ IRRCi Perspective
§Q&A
Agenda
© 2016 The Investor Responsibility Research Center Institute3 www.irrcinstitute.org
Webinar Logistics
§ Attendees in listen only mode.§ Questions encouraged. Type using the “Question” function, answers following report overview.
§ You will receive email with replay link.§ Report at www.irrcinstitute.org§ Share info on social media -@irrcresearch and @Annalisa_BGR
§ Audio issues, contact GoToWebinar @ 1-800-263-6317.
© 2016 The Investor Responsibility Research Center Institute4 www.irrcinstitute.org
Annalisa BarrettReport AuthorFounder & CEO, Board Governance ResearchClinical Professor of Finance, University of San Diego
Jon LukomnikExecutive Director Investor Responsibility Research Center Institute
Speakers
© 2016 The Investor Responsibility Research Center Institute5 www.irrcinstitute.org
• Not-for-profit established in 2005.
• Funds, disseminates objective, unbiased research on range of issues at intersection of corporate responsibility, investors informational needs.
• Academic & practitioner research examining capital market context that impacts how investors, companies make decisions.
• Annual research award with two $10K awards.
• More than 60 research reports available at no charge.
Investor Responsibility Research Center Institute
© 2016 The Investor Responsibility Research Center Institute7 www.irrcinstitute.org
The Diversity Conversation
§ Calls for board diversity are continuing to grow as more and more studies show the benefits ü Most board diversity studies focus on director gender
§ Most studies of director demographics find that the vast majority of directors are in their fifties and sixtiesü The recent IRRCi study by ISS found that nearly three-quarters (73.6%) of S&P 1500 are in their fifties and sixties*
* Institutional Shareholder Services, “Board Refreshment trends at S&P1500 Firms: 2008 to 2016”, January 2017, available at www.irrcinstitute.org.
This study uniquely focuses on age diversity WITHIN each board
© 2016 The Investor Responsibility Research Center Institute8 www.irrcinstitute.org
Average Board Age
§ An examination of the average age of the directors serving on each S&P 500 board reflects this age range.
ü 80% had an average age in the sixties
ü Fewer than 2% had average ages of more than 70 or less than 55
© 2016 The Investor Responsibility Research Center Institute9 www.irrcinstitute.org
Average Board Age
§ Youngest average board ageü Two S&P 500 companies had an average board age younger than 50 years:– TripAdvisor Inc.’s average board age was 48.6 years– Facebook Inc.’s average board age was 49.0 years
§ Oldest average board ageü One S&P 500 company had an average age over 75 years:– CBS Corp.’s average board age was 75.5 years– Even without 92-year old Sumner Redstone, the average age of the other CBS directors was 74.2 years
But average board age doesn’t tell whole story
© 2016 The Investor Responsibility Research Center Institute10 www.irrcinstitute.org
Standard Deviation of Ages within Each Board§ The dispersion of the ages for each board was determined by calculating the standard deviation of the ages of the directors within each board
ü The median standard deviation of the director ages on the boards studied was 6.9 and the average standard deviation was 7.2
ü Most (62%) S&P 500 boards include directors with a standard deviation of ages between 5 and 8
© 2016 The Investor Responsibility Research Center Institute11 www.irrcinstitute.org
Number of Decades Represented on Each Board
§ Examination of how many people of different age groups are represented in each board room
ü The age groups used were defined by decades
§ Most (55%) boards have 3 decades represented
ü For 80% of these boards, three decades were 50s, 60s and 70s
© 2016 The Investor Responsibility Research Center Institute12 www.irrcinstitute.org
Number of Decades Represented on Each Board§ 65 S&P 500 boards had directors from only two decades
ü Notable examples include: – Apple Inc. (50’s & 60’s)– Proctor & Gamble (50’s & 60’s)– Target Corp. (50’s & 60’s)– Urban Outfitters (50’s & 60’s)– TripAdvisor, Inc. (40’s & 50’s)
§ Three S&P 500 boards had directors from six decades– Kraft Heinz Co– News Corp.– Viacom Inc.
© 2016 The Investor Responsibility Research Center Institute13 www.irrcinstitute.org
Comparison by Industry
§ Although it would be expected that boards in certain industries would benefit from boards in different age groups, there are very few differences by industry.
The Telecommunications industry has too few companies for analysis
© 2016 The Investor Responsibility Research Center Institute14 www.irrcinstitute.org
Comparison by Industry
© 2016 The Investor Responsibility Research Center Institute15 www.irrcinstitute.org
Comparison by Company Size
§ There is very little difference in the board age diversity when compared by company size (market capitalization)
ü The median average board age is between 62 and 63 for all three of the company size groups analyzed
ü Smaller S&P 500 companies are slightly more likely to have directors with ages in 3 decades
© 2016 The Investor Responsibility Research Center Institute16 www.irrcinstitute.org
Comparison by Company Age
§ When categorized by company age (as measured by the number of years since the company’s IPO), slightly more difference by category
ü Boards that went public 50+ years ago have lowest standard deviation of three categories
ü Companies that went public less than 25 years ago more likely to have four or more decades represented among directors
© 2016 The Investor Responsibility Research Center Institute17 www.irrcinstitute.org
Does turnover increase board age diversity?
§ The impact on board age diversity of director changes between 2014-2016 was examined for 55 companies*
ü Ideally, board turnover would improve board age diversity
ü However, standard deviation of ages of directors within each board was more likely to decrease for boards with more director changes between 2014-2016
* Comprised of the 5 largest companies (measured by market capitalization) in each of the 11 GICS Sectors
© 2016 The Investor Responsibility Research Center Institute18 www.irrcinstitute.org
From the IRRC Institute Viewpoint
“The dog did nothing in the night time.”-- Inspector Gregory
“That was the curious incident.”- Sherlock Holmes (Silver Blaze, 1892)
© 2016 The Investor Responsibility Research Center Institute19 www.irrcinstitute.org
From the IRRC Institute Viewpoint
§ Sometimes the news is what you don’t find:
ü Little variety in average age across boardsü Small dispersion in age within boardsü Little difference in average age of boards by industry or market capitalization
ü 80% of boards’ average age in 60sü Less than 2% average age below 55 or above 70ü Refreshment doesn’t seem to affect age dispersion
© 2016 The Investor Responsibility Research Center Institute21 www.irrcinstitute.org
Jon LukomnikExecutive DirectorIRRC Institute+1.646.512.5807jon@irrcinstitute.org@irrcresearchwww.irrcinstitute.org
Contacts
Annalisa BarrettFounder & CEOBoard Governance Research LLC+1.858.774.1212annalisa@boardgovernanceresearch.com@Annalisa_BGRwww.boardgovernanceresearch.com
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