Corporate Board Practices in the Russell 3000, S&P 500, and S&P MidCap 400

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min Article
January 14, 2022
5 min
Family BusinessLeadershipBoard and CEO AdvisoryBoard Effectiveness
Executive Summary
A look at corporate governance trends and developments, including information on board composition and diversity.


Corporate Board Practices in the Russell 3000, S&P 500, and S&P MidCap 400: 2021 Edition documents corporate governance trends and developments at US publicly traded companies—including information on board composition and diversity, the profile and skillsets of directors, and policies on their election, removal, and retirement. The analysis is based on recently filed proxy statements and complemented by the review of organizational documents (including articles of incorporation, bylaws, corporate governance principles, board committee charters, and other corporate policies made available in the Investor Relations section of companies’ websites). When relevant, the report highlights practices across business sectors and company size groups.

The project is a collaboration among The Conference Board, Debevoise & Plimpton, the KPMG Board Leadership Center, Russell Reynolds Associates, the John L. Weinberg Center for Corporate Governance at the University of Delaware, and ESG data analytics firm ESGAUGE. See page 31 for more information on the study methodology, and visit the online dashboard to access and manipulate our data online.

Insights for What’s Ahead

The key findings in this year’s analysis highlight the efforts undertaken by many companies to accelerate board refreshment and promote diversity of gender, race, and skills among their directors.

  • Ensuring the racial (ethnic) diversity of board members will be an imperative for US public companies in the next few years, as pressure from multiple stakeholders will only rise from here. For the first time in our annual analysis of proxy statements, in 2021 the majority of S&P 500 companies have disclosed the racial (ethnic) makeup of their boards. According to the disclosure available, boards remain overwhelmingly white, with some business sectors disclosing far more racial diversity than others. This is also true for newly elected directors for which demographic information is made public—less than one-fourth of them are nonwhite. Companies should consider committing to a multi-year board succession plan where the search for strategic skills and expertise is accompanied by a sustained focus on diversity. They should also investigate best practices on the integration of diversity, equity, and inclusion (DEI) metrics into senior executives’ incentive plans, and continue to improve disclosure of board racial and ethnic diversity.

  • Much progress has been made already, but companies should continue to show their commitment to leadership diversity. This is particularly true for those smaller organizations that still lag behind on gender diversity in the boardroom. The corporate boardroom, which has long been a predominantly male preserve, continues to make progress on gender diversity. Both in small and mid-size companies, the number of female directors is showing marked increases and, among new directors, more than one-third are women. By now, the largest companies have more boards with three, four or more than four females than boards with one or two. Those smaller entities that do not yet have any female board members should make a clear, public commitment to change. While a sound succession planning process is the most effective way to promote refreshment and the election of diverse candidates, boards may also wish to consider other practices. These include endorsing the model proposed by the Committee for Economic Development of The Conference Board (CED), where every other board seat vacated by a retiring board member is filled by a woman. In addition, directors could temporarily increase the size of the board, introduce (and adhere to) overboarding restrictions, and adopt guidelines on expected board tenure.

  • As with most other governance matters, there is no single answer to the question of what committees the board of directors should institute to perform its duties. In general, while some tasks related to ESG oversight should be kept at the full-board level (or assigned to a dedicated ESG committee), the breadth and interdisciplinary nature of ESG warrants the delegation of specific responsibilities to the audit, compensation, and nominating/governance committees. The scope of directors’ oversight responsibilities has been expanding in the last decade, including in the ESG area. But an analysis of board committee structures shows that companies still opt for the delegation of new duties to existing committees rather than the creation of new standing committees. Some exceptions may be found in certain sectors—notably, the energy, materials, and utilities sectors, where more boards are forming specialized environment, health & safety committees. Smaller companies, which tend to have smaller boards and committees, may find it more practical to keep the oversight of new ESG issues at the full board level and frequently add those issues to the board meeting agenda—just as a board committee would do for any of its own core responsibilities.

  • Corporations should carefully weigh their own governance needs when choosing a board leadership model, as no single structure works for every business. When making this decision, the organization should consider existing board-management dynamics and regard director independence as its paramount interest. The trend toward CEO-board chair separation, previously more pronounced among smaller businesses in the Russell 3000, is extending to the S&P MidCap 400. Amid these governance changes, some companies are tapping leaders with different backgrounds, including in the military or the government. Regardless of the chosen leadership model, boards should safeguard their oversight authority and assure investors of their independence. In their periodic performance assessment, directors should conduct a candid review of the effectiveness of the leadership structure in place. Disclosure on the rationale for the chosen board leadership model should avoid generic, boilerplate language and discuss the specific circumstances that drove the decision at the company.

  • Companies that retain plurality voting and/or staggered board structures should be aware that they may be targeted by activists if it becomes apparent that their election process shuns shareholder rights or impairs board refreshment and diversity. Director election practices that are well established among larger US companies—including board declassification and majority voting—continue to elude much of the broader Russell 3000 index. But the demand for director diversity is not going to subside, and smaller businesses caught unprepared to execute a solid board succession plan may ultimately find themselves not only facing shareholder activism but also at a disadvantage in the competition for leadership talent.




Corporate Board Practices in the Russell 3000, S&P 500, and S&P MidCap 400