Mountain View, CA (December 5, 2012)– Fenwick & West, one of the nation’s premier law firms providing comprehensive legal services to high technology, venture capital and life science companies, today announced the 2012 proxy season results of its Corporate Governance Practices and Trends Survey.
The survey collects and analyzes information on the corporate governance practices of the very large publicly-traded companies included in the Standard & Poor’s 100 index (S&P 100) and the high technology and life sciences companies included in the Silicon Valley 150 index (SV 150) for the 2012 proxy season.
“This survey holds several surprises, with findings that may seem counterintuitive to our preconceptions of governance practices in the SV 150 vs. the S&P 100,” said survey author David Bell, partner in the corporate practice at Fenwick & West.
“Governance practices and trends (or perceived trends) among the largest companies are generally held out as the desired norm for all public companies, often with little regard to the particular needs and circumstances of each company,” said Mr. Bell. “Fenwick & West collects this information regarding public company governance practices to enable boards and executives at high technology and life science companies to understand the actual corporate governance practices among their peers, understand how those practices contrast with actual practices among large companies nationally (not just the latest perceived trends) and better determine whether or not diverging practices are an aberration for the company or whether such corporate governance decisions might actually be a best practice, particularly for smaller technology companies.
Key take-aways from the survey include:
Combined Chair/CEO: The SV 150 companies are substantially less likely to have the same person serving as board chair and CEO (34% compared to 71% of the S&P 100).
Insiders versus non-insiders: Where separate chairs exist, SV 150 companies are significantly more likely to appoint non-insiders (68% compared to 41% of the S&P 100). SV 150 companies continue to have more insiders as a percentage of the full board, while S&P 100 companies continue to have more insider directors measured in absolute numbers.
Women on boards: Female directors are substantially more common among S&P 100 companies, whether measured in terms of average number of female directors (2.4 compared to 0.7) or in terms of average percentage of each board that are women (19.8% compared to 8.1%). While female board membership peaked among SV 150 companies in 2008 (average of 12.3% compared to 17.2% for the S&P 100), the overall trend is clearly upward in both groups (compared to averages of 16.5% in the S&P 100 and 5.4% in the SV 150 in 2004). From 2004 through 2012, the percentage of companies with no women directors declined from 4% to 1% in the S&P 100 and 61% to 48% in the SV 150.
Majority voting: While there is a clear trend toward adoption of some form of majority voting in both groups, the rate of adoption is substantially higher among S&P 100 companies (90% compared to 41% of the SV 150) , although this rate declined 7% from the prior year (compared to a 4% increase for the SV 150).
Stock ownership: Stock ownership guidelines for executive officers were found to be substantially more common among S&P 100 companies than among SV 150 companies (93% compared to 44%), although that is a substantial increase for both groups over the course of the survey (compared to 58% for the S&P 100 and 8% for the SV 150 in 2004). Similar trends hold for stock ownership guidelines covering board members. However, actual equity ownership by executive officers and directors, as a group, tends to be substantially higher among SV 150 companies (median of 6% for the SV 150 compared to a median of less than 1% for the S&P 100 in 2012).
Stockholder activism: Stockholder activism (measured in the form of proposals included in the proxy statements of companies) continues to be substantially lower among the high tech and life science companies in the SV 150 than among S&P 100 companies (whether measured in terms of frequency inclusion of any such proposals or in terms of number of proposals).
Board size: S&P 100 companies tend to have larger boards than SV 150 companies (median of 12 compared to median of 8 in 2012), and tend toward larger primary committees. S&P 100 companies also are substantially more likely to have other standing committees beyond the three primary committees for audit, compensation and nominations (86% of S&P 100 companies do, compared to 21% of SV 15 companies in 2012).
Complete results of the survey with related discussion are posted on Fenwick & West’s website at Fenwick.com/CorporateGovernanceSurvey.
About the Survey
The Fenwick & West Corporate Governance Survey, authored by law firm partner David Bell, provides insight into corporate governance practices of the companies included in the Standard & Poor’s 100 Index (S&P 100) and the high technology and life science companies included in the Silicon Valley 150Index (SV 150) each year. This unique body of information, covering corporate governance trends for the period following the passage and implementation of the Sarbanes-Oxley Act of 2002, is valuable for publicly-traded technology and life science companies across the U.S. as well as public companies of all sizes and across industries generally.
About Fenwick & West
Established in 1972, Fenwick is one of the nation’s premier law firms, with extensive expertise in venture capital, public offerings and other corporate finance, joint ventures, M&A and strategic relationships, intellectual property, litigation and dispute resolution, taxation, antitrust, and employment and labor law.
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