Oversight and discussions
The nominating and governance committee is far and away the most commonly cited body that has primary oversight of board refreshment, being named by more than seven in 10 respondents (71 percent). Second in line is the main board, mentioned by 19 percent of respondents. No other committee is mentioned by more than 2 percent of respondents.
There are variations according to the size of the company, however. At large-cap companies, 82 percent of respondents say the nominating and governance committee has primary oversight. This compares with 73 percent of those at mid-caps, 71 percent of those at mega-caps and 64 percent of those at small-cap companies.
Conversely, just 10 percent of respondents at large caps say the main board is in charge, compared with 19 percent of those at mid-caps and almost a quarter (23 percent) of those at both small caps and mega-caps.
A greater proportion of respondents in North America (77 percent) say the nominating and governance committee is in charge than do those in Europe (70 percent).
Although it doesn’t usually take charge of board refreshment oversight, the main board is almost always involved to some degree, being cited by 86 percent of respondents as having some oversight. Aside from the nominating and governance committee, only the compensation committee has much significance in this area, with 13 percent of respondents saying it has some oversight.
The partial oversight of the main board is particularly widespread at larger firms. Ninety-five percent of respondents at mid-caps say it has some oversight, along with 92 percent of those at mega-caps, 91 percent of those at large-cap companies and 83 percent of those at small-cap firms. Almost a quarter (23 percent) of those at mega-caps say the compensation committee plays a role.
Respondents in Europe are more likely (93 percent) to say the main board has some oversight of board refreshment than are those in North America (87 percent).
Most respondents (a combined 67 percent) whose nominating and governance committee has board refreshment oversight say the panel reports to the main board either on an ad hoc basis (35 percent) or once a year (32 percent). Fifteen percent say the committee reports to the board at every meeting.
Almost a quarter (24 percent) of those respondents whose nominating and governance committee has board refreshment oversight at large-cap companies and 19 percent of those at mega-caps say the committee reports to the main board at every meeting. The comparable figures are 9 percent and 10 percent for those at small-cap and mid-cap firms, respectively. More than four in 10 (43 percent) of respondents at small-cap companies say the committee reports to the board on an ad hoc basis.
Only 8 percent of respondents in Europe say their nominating and governance committee reports to the main board on refreshment oversight once a year, compared with a third of those in North America.
More than two fifths (44 percent) of all respondents say their main board discusses refreshment on an ad hoc basis. Just under three in 10 (29 percent) say those discussions happen once a year, while just 6 percent say they take place at every meeting.
According to the research, the boards of smaller companies are more likely than those of larger companies to discuss refreshment on an hoc basis. While 57 percent of respondents at small caps say their main board talks about the issue on an ad hoc basis, that figure falls to 51 percent, 41 percent and 23 percent among those at mid-caps, large caps and mega-caps, respectively. No respondents at small-cap companies say their board talks about refreshment every time it meets.
The figures are broadly similar between respondents in Europe and North America.
Overall, discussions on board refreshment are taking place more often than in the past. Among all respondents, a combined 49 percent say the frequency with which the board discusses refreshment issues has seen a slight or large increase over the past 12 months. That figure rises to 60 percent over the past three years, with a quarter of respondents saying there has been a large increase in frequency over that time.
By comparison, less than half (46 percent) of respondents report no change in frequency and just 2 percent report a slight decrease in frequency over the past year.
Among respondents at small, mid and mega-cap companies, 20 percent, 18 percent and 25 percent, respectively, say there has been a large increase in frequency of refreshment discussions over the last 12 months. This compares with just 9 percent of those at large caps.
A combined 57 percent of those in Europe report a slight or large increase in frequency over the past year, compared with 45 percent of those in North America. Looking back over the past three years, the figures are more aligned, with 61 percent of both European and North American respondents reporting a slight or large increase in frequency.
More than three quarters (79 percent) of respondents say that when boards look for assistance on refreshment, they turn to the corporate secretary or general counsel. Almost two thirds (63 percent) look to outside advisers, 21 percent ask human resources and 6 percent seek help from the finance team.
While 90 percent of those at large-cap companies say the board gets assistance from the corporate secretary/general counsel, 83 percent of those at mid-cap companies say likewise, as do 77 percent of those at mega-caps and 71 percent of small-cap company respondents.
Four fifths (80 percent) of respondents at large caps say the board seeks outside assistance, compared with 68 percent of those at mega-caps, 63 percent of those at mid-caps and just over half (51 percent) of those at small-cap firms.
