Tech companies ahead of S&P 500 in splitting the chair and CEO roles, trail in female representation on boards

Inaugural Spencer Stuart U.S. Technology Board Index highlights latest trends in board composition, governance and compensation

New York — December 4, 2012 — The boards of U.S. technology companies are more likely to have a separate chairman and CEO than their S&P 500 counterparts, but have a much lower representation of female directors. These are among the findings revealed in the first Spencer Stuart U.S. Technology Board Index, a study of the board composition and governance practices of 200 leading U.S. technology companies.

The U.S. Technology Board Index expands upon the annual Spencer Stuart Silicon Valley Board Index to include top U.S. technology companies outside of Silicon Valley. Companies in the index range in size from about $400 million in 2011 revenues to more than $125 billion and represent a broad swath of technology companies, including computer manufacturers, software developers, semiconductor and component makers, telecommunications equipment manufacturers, managed applications and network services, IT services, Internet publishing, search and Internet retail companies. Throughout the index, data from technology companies is compared to the broader S&P 500 as well as a subset of Silicon Valley-based technology companies.

“As technology exerts greater influence across industries and in the economy as a whole, it is fitting to expand our view of governance in technology companies to businesses outside of Silicon Valley,” said Nayla Rizk, Spencer Stuart consultant and study co-author.

Technology companies, and particularly those based in Silicon Valley, are much more likely to have a separate chairman and CEO than the S&P 500. Sixty-five percent of technology boards overall and 74 percent of Silicon Valley boards split the roles, compared with 43 percent of S&P 500 boards.

The majority of technology boards, 60 percent, have at least one woman serving on the board, trailing both Silicon Valley boards (63 percent) and the S&P 500 (91 percent). Women represent 11 percent of the total number of directors on technology boards, compared with 17 percent of S&P 500 directors.

“Technology companies are making steady but slow progress in female representation,” said Jason Hancock, Spencer Stuart consultant and study co-author. “As companies increasingly recognize the value of diverse perspectives in the boardroom, we expect to see technology boards become more diverse, adding female directors as well as non-U.S. executives and those with international experience.”

A 10-year look at board governance in Silicon Valley
The Spencer Stuart U.S. Technology Board Index also includes a special section highlighting 10-year governance trends for Silicon Valley companies. The corporate boards of Silicon Valley’s top technology companies are more independent from management, have more financially savvy directors, and are larger, older and more diverse than they were 10 years ago, the study found.

“In many ways, Silicon Valley boards look different today than they did 10 years ago when we began studying governance trends among technology companies in the region,” said Fran Helms, Spencer Stuart consultant and study co-author. “In the decade since the Sarbanes-Oxley Act was passed, boards have increased the number of independent and financially savvy directors and recruited more female directors. They also are more likely to separate the chair and CEO roles.”

Among other notable findings in the 2012 U.S. Technology Board Index:

Technology company boards are smaller and slightly younger than S&P 500 boards. The 200 technology boards in the index have 8.4 members on average, about the same as Silicon Valley boards, but more than two members fewer than S&P 500 boards on average. The average age of technology boards is 62, a year older than the Silicon Valley average and slightly younger than the S&P 500 average of 62.6.

Mandatory retirement is less common among technology boards. Forty-five percent of technology companies and 40 percent of Silicon Valley technology companies disclose a mandatory retirement age for directors. The practice is more common among S&P 500 boards, where 73 percent report having a mandatory retirement age. Among the companies that set one, the average mandatory retirement age is about 73 across the board.

Technology boards are less likely than the S&P 500 to elect directors annually. In response to investor pressure, more companies are moving to a declassified board structure and electing directors annually, although technology companies generally are making this change at a slower pace than S&P 500 companies and Silicon Valley technology companies. More than two-thirds of technology companies (67 percent) elect directors annually; by comparison, 72 percent of Silicon Valley companies and 83 percent of S&P 500 companies have annual director elections.

Cash compensation for technology company directors trails the S&P 500. Nearly all technology companies, including those in Silicon Valley, pay an annual cash retainer to directors. The average cash retainer among those that provide them is $51,802 for technology boards generally and $50,720 for boards in Silicon Valley. The S&P 500 average is significantly higher at $96,649.

Compensation for directors of Silicon Valley companies exceeds the technology company average. Total director compensation among Silicon Valley boards averages $276,377, 18 percent more than the $233,527 average for technology companies overall.

The U.S. Technology Board Index is available in its entirety on the Spencer Stuart website.

About Spencer Stuart
Spencer Stuart is one of the world’s leading executive search consulting firms. Privately held since 1956, Spencer Stuart applies its extensive knowledge of industries, functions and talent to advise select clients — ranging from major multinationals to emerging companies to nonprofit organizations — and address their leadership requirements. Through 54 offices in 29 countries and a broad range of practice groups, Spencer Stuart consultants focus on senior-level executive search, board director appointments, succession planning and in-depth senior executive management assessments. For more information on Spencer Stuart, please visit www.spencerstuart.com.