Trends in Board Governance: -Leadership Structures -Succession Planning -Board Composition/Diversity -Director Development -Service Restrictions

1. ©Copyright 2007. CBIZ, Inc. NYSE Listed: CBZ. All rights reserve
d.
Building Better Boards
Angie Salmon, EFL Associates
CBIZ Human Capital Services, Inc.

2. Trends in Board Governance
• Leadership Structures
• Succession Planning
• Board Composition/Diversity
• Director Development
• Service Restrictions
www.eflassociates.com

3. Board Leadership
• Define board/committee chair qualifications to utilize
for evaluation and recruitment
• Independent chairs are a hot topic for shareholders
– Ranked third for proposals put forth in the 2012 proxy
season
• Boards are trending toward splitting chair and CEO
roles
– 45% in 2013 versus 23% ten years ago
Deloitte. “The Split CEO/Chairman Structure Debate.” The Wall Street Journal, CFO Journal 2012
Spencer Stuart US Board Index 2013
www.eflassociates.com

4. Board Succession Planning
• Responsibility of nominating/governance committees
• Lack of planning can lead to:
– Entrenchment
– Challenges to re-election of directors
– Shareholder proposals
• Institutional investors are increasingly expecting
boards to have and disclose director succession plans
Respelier, Patrick and Scott Gootee “Nominating & Corporate Governance Committee Update”
Stinson Morrison Hecker Director’s Institute & 2014 Proxy Season Workshop. 4 December 2014
www.eflassociates.com

5. Board Succession Planning
• Plan ahead
• Determine preferences rather than replicating
background of departing directors
• Consider long term company strategy and
emerging trends against the current and future board
composition
Hanson, Lee & Les Csorba. Heidrick & Struggles Governance Letter “Be Strategic…” 2013
www.cbiz.com

6. Board Composition Matrix
Critical Requirements
Director/Candidate
Cultural/Gender
Diversity
Financial Expert
(Audit Chair)
Industry
Operations
1
Illbe There
1
Justin Case
Helen Back
1
Ima Example
1
1
Social Media
Totals
Preferred Attributes
Entrepreneurial
Customer
Knowledge
IPO Experience
1
1
M&A
Sales/Business
Development
Total Critical Overall Total
1
1
3
1
1
2
3
4
3
4
2
3
1
1
1
John Doe
1
1
1
Brian Melby
1
1
1
1
2
Jack Nimble
1
1
Industry, financial, and operational expertise cited most often
www.eflassociates.com

7. Board Composition - Diversity
• Boardroom diversity is progressing slowly
• Customer demographics ≠ director diversity
– 73% of Fortune 500 directors are white men and four
of five new board appointments are filled by men
• Lack of diverse perspectives can pose a governance
risk…and PR problems (Apple, Twitter, Facebook)
• Forward-thinking boards consider skills/experience not just titles
Alliance for Board Diversity. “Missing Pieces: Women & Minorities on Fortune 500 Boards” August 2013
Catalyst, “Setting the Record Straight.” 2012
www.cbiz.com

8. Director Development
• Orientation needs to prepare new directors for more
immediate impact
• Continued director education is critical in dynamic
business environments
• Board Assessments & Evaluations
– Most significant listed companies in the US have an
annual assessment process – not all are robust
– 35% of directors believe that someone on their board
should be replaced
Rogers, Mark. Forbes “Sarbanes-Oxley Ten Years Later” July 2012
Spencer Stuart US Board Index 2012
www.eflassociates.com

9. Service Restrictions
• Limitations on executive outside board service are
becoming more prevalent
• US companies are trending away from mandatory
retirement and term limits
– Companies with a mandatory retirement age dropped from
79% to 73% in the past five years
– Only 16 companies on the S&P 500 had director term limits in
2013, none shorter than 10 years (down from 25 companies
in 2009)
– 64% of directors have served 10-15 years and another 5%
have served 15+ years
Hymowitz, Carol & Jeff Green. Businessnweek “Corporate Directors Get Older, Hold Their Seats Longer” May 2013
www.eflassociates.com

10. Panel
• Tim Barton
– Executive Chairman & Founder, Freightquote.com
• Robert Druten
– Audit, Finance, and Nominating/Corporate Governance
Committee Member, Kansas City Southern
– Board Chair & Nominating/Corporate Governance Committee
Member, EPR Properties
• William Lyons
– Nominating/Governance Committee Chair, NIC, Inc.
– Nominating/Governance and Compensation Committee
Member, Morningstar, Inc.

11. Questions?
Angie Salmon
Senior Vice President
EFL Associates
11440 Tomahawk Creek Parkway | Leawood, KS
66211
Direct: 913. 234.1576
www.eflassociates.com
www.cbiz.com