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Corporate Governance, CEO’s Roles Change over 25 Years

The annual Spencer Stuart Board Index (SSBI) has tracked board composition, structure, and compensation for 25 years. In its 25th edition, the firm looks at the evolution in board composition and the growth of board independence.

The annual Spencer Stuart Board Index (SSBI) has tracked board composition, structure, and compensation for 25 years. In its 25th edition, the firm looks at the evolution in board composition and the growth of board independence. A substantial number of directors considered “outsiders” 25 years ago, would not qualify today as independent. The average board size was then 15, with a three-to-one ratio of outsiders to insiders; the average board now has 11 members, with a five-to-one ratio of independents to non-independents. In 1986, the CEO was the sole insider on less than a handful of boards. Today, the CEO is the only insider on more than half of all S&P 500 boards. The 1986 index did not address the separation of the chair and CEO roles. The issue had not yet surfaced. Today, 40 percent of boards split the chair and CEO roles. Outgoing CEOs who have made the transition to board chair account for just over half of these situations, but 19 percent of all S&P 500 boards now have truly independent chairs. As recently as five years ago, only 9 percent of S&P 500 chairs were truly independent. Nearly all boards (99 percent) responding to the survey say they discuss CEO succession at least once a year.

One thing that hasn’t changed: Boards still prefer active CEOs as directors. The difference now is that boards are finding it difficult to recruit active CEOs for director spots.

For more from BusinessWeek about the changing roles of boards and CEOs, please click here.

About ceo briefing - nov. 23 2010