Corporate Governance Trends
A Comparison of Large Public Companies and Silicon Valley Companies
As outside legal counsel to a wide range of public companies in the technology and life sciences industries, many of which are based in Silicon Valley, Fenwick has collected information on corporate governance in order to counsel our clients on best practices and industry norms. We have collected this data since 2003 and believe this unique body of information is useful for all Silicon Valley companies as well as other public companies in the United States and their advisors. Download the complete report.
Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100), which are often presented as a desired norm, compared to the technology and life sciences companies included in the Silicon Valley 150 Index (SV 150), where the needs and circumstances of public companies can be quite different.
Comparative data is presented for the S&P 100 companies and the SV 150, as well as trend information over the history of the survey. In a number of instances the report also presents data showing comparison of the top 15 (which are of a scale similar to the S&P 100), top 50, middle 50 and bottom 50 companies of the SV 150 (in terms of revenue), illustrating the impact of scale on the relevant governance practices.
This in-depth survey was developed as a resource for board members, senior executives, in house legal counsel and their advisors, based in Silicon Valley and throughout the United States.
Key Findings Include:
- Dual-Class Voting Stock Structure. Adoption of dual-class voting stock structures has emerged as a recent clear trend among Silicon Valley technology companies, though it is still a small percentage of companies. Historically, dual-class voting stock structures have been significantly more common among S&P 100 companies than among SV 150 companies, though the frequency in the SV 150 (9.4% in 2015 to 11.3% in 2016) has surpassed the S&P 100 (9.0% in both 2015 and 2016) in recent years.
- Classified Boards. Classified boards are now significantly more common among SV 150 companies than among S&P 100 companies. Compared to the prior year, classified boards remained fairly consistent for the SV 150 at about half of companies, but decreased for the S&P 100 from 10% in 2015 to 4% in 2016 (in each case consistent with the long-term trend for the group).
- Majority Voting. The rate of implementation of some form of majority voting has risen substantially over the period of this survey. The increase has been particularly dramatic among S&P 100 companies, rising from 10% to 95% between the 2004 and 2016 proxy seasons. Among SV 150 companies, the rate has risen from none in the 2005 proxy season to 55% in the 2016 proxy season.
- Stock Ownership Guidelines. The prevalence of stock ownership guidelines has generally increased over time in both groups but the SV 150 only recently surpassed the level of the S&P 100. This year’s edition of the survey includes additional detail regarding the terms of those guidelines.
- Board Diversity. Overall, 2016 continued the long term trend in the SV 150 of gradually increasing numbers of women directors (both in absolute numbers and as a percentage of board members), as well as the trend of declining numbers of boards without women members. The rate of increase for the SV 150 overall continues to be higher than among S&P 100 companies. The peers of the S&P 100 that are in the SV 150 (the top 15) now have about the same average percentage of women directors as their S&P 100 peers. Companies with at least 1 woman serving on the board increased from 67.8% to 74% for the SV 150.
- Board Meeting Frequency. SV 150 companies held board meetings more often in 2016, while S&P 100 companies decreased meeting frequency. SV 150 companies, though, continued to skew noticeably toward fewer meetings compared to the S&P 100.
Stockholder Proposals. Stockholder activism - measured in the form of proposals included in the proxy statements of companies - is substantially lower among the SV 150 than among S&P 100 companies. There is a current general downward trend of stockholder activism in both groups, although the SV 150 has had an upward trend in number of proposals in recent years. This year there were no contested director elections actually held in either group.