2 0 11 C O R P O R AT E B O A R D O F D I R E C T O R S S U R V E Y
1
2011 Corporate Board of Directors Survey
T ab l e of C o n te n ts
Introduction
2
Executive Summary: Key Results and Recommendations
Survey Questions and Descriptive Statistics
About The Rock Center for
Corporate Governance at Stanford University
About Heidrick & Struggles
Contact Information
2
4
21
21
24
Copyright © 2011 by the Board of Trustees of the Leland Stanford Junior University and Heidrick & Struggles. All rights reserved
E x ec u t i v e S u m m a ry:
K e y Res u l t s a n d Re c o m m e n d a t i o n s
Do Active CEOs Make the
Best Board Members?
the board and one who will actively contribute real
work as a director,” says Mr. Miles.
New Survey from Stanford’s Rock Center and Heidrick &
Struggles Examines the Pros and Cons
n
CEOs of companies that have experienced public
ethical lapses are seen as far more “tainted” by
the scandal than their boards are. “While only 37%
of directors believe that an ex-CEO of a company
that experienced substantial accounting or ethical
problems can be a good board member, 67% believe
a director of a similarly-plagued company can,” says
Professor Larcker. “Some directors do see value in
having a CEO who has experienced – and hopefully
learned from – mistakes in judgment. But far more
are concerned about the stigma and perception
issues in bringing aboard a CEO like this.”
n
Boards are struggling to evaluate whether
prospective board members will be a good fit for
the company. “Fifty-one percent of directors see it
as moderately difficult and 20% see it as extremely
or very difficult to gauge whether a prospect will be a
good addition to the board,” says Mr. Miles. “Boards
are clearly finding it a challenge to determine
someone’s ‘fit.’ A single person can ruin a great
board, so boards need to spend considerable time
evaluating this very subjective quality.”
n
More than half of directors think that board
turnover is too low. “The challenge of getting rid
of board members is that there is a widespread
assumption of board ‘tenure,’” says Professor
Larcker. “You may want to bring them on for three
to five years, but they end up staying for ten. While
egregious problems might be taken care of more
quickly, it is much more difficult to get rid of an
underperforming or irrelevant director who just
happens to stay on too long.”
n
Forty-six percent of companies do not engage in
succession planning for their board of directors.
“Just as we found in our study last year that
companies are seriously lagging in CEO succession
planning, boards aren’t doing a great job of planning
for board succession either,” said Mr. Miles. “Sixtysix percent of directors do believe that board
succession planning is an important best practice,
but only 54% actually do it.”
Active CEOs Might Be “Too Busy” to Be Effective
CEOs also more tainted by ethics lapses than
board directors
A new survey from Stanford University’s Rock Center for
Corporate Governance and Heidrick & Struggles has
uncovered surprises about who makes the best board
directors: it’s not necessarily the current CEOs that most
companies seek out.
“The popular consensus is that active CEOs make the
best board members because of their current strategic
and leadership experience,” says David Larcker, professor
at the Stanford Graduate School of Business. In the 2011
Corporate Board of Directors Survey, when asked about
potential problems a full 87 percent said that active CEOs
are too busy with their own companies to be effective
directors. A third of the respondents said that active CEOs
were “too bossy/used to having their own way.”
“It’s great to have sitting CEOs on a board, but companies
need to be aware of the costs associated with having
them,” says Stephen A. Miles, Vice Chairman at
leadership advisory firm Heidrick & Struggles. “Because
active CEOs are so busy, they might be unavailable during
a crisis or have to cancel meeting attendance at the last
minute. They also have less time to review materials. For
some, the demands of their full-time job make it hard for
them to consistently be as engaged as they need to be.”
Analyzing responses from 163 directors of public and
private companies across North America, the 2011
Corporate Board of Directors Survey reveals how
directors think about the composition of the board and
the effectiveness of various types of board members. Key
findings include:
n
2
Despite the fact that sitting CEOs are highly
sought-after for board seats, 79% of directors
said that, in practice, active CEOs are no better
than non-CEO board members. “Companies need
to differentiate between a CEO who brings caché to
2011 Corporate Board of Directors Survey
n
Nearly 20% of lead directors are chosen by the
CEO or chairman. “For obvious reasons, CEOs
should not choose the lead director,” says Mr. Miles.
“The CEO should be asked for input, but the ultimate
choice needs to be made by the board.” Forty-seven
percent of respondents said that their lead director
was elected by the independent directors, but this
number should be much higher.”
n
More than 80% of board members are somewhat
skeptical of the value of “professional directors.”
“Even though there has been a call among some
for increased use of professional directors — those
who make it a full-time job to sit on boards — most
directors don’t think that professional directors are
any better than traditional board members,” says
Professor Larcker. “While some respondents believe
that this group’s diversity of experience is an asset
to a board, many are concerned that professional
board members are too busy with other directorships
to be effective.”
As companies think about who to bring onto the board
that can deliver the greatest value, Professor Larcker
and Mr. Miles offer the following suggestions:
1. Re-think appointing the “name” CEO to the
board. “Yes, a company gets great publicity when it
recruits a big name onto the board,” says Professor
Larcker, “but you really need to think about what this
person will actually deliver in value. If they are too
busy or if they don’t fit the culture or have the right
chemistry, it might not be worth it.”
2. Weigh “failure” when evaluating a prospective
board member. “Obviously, personal ethical lapses
should preclude someone from being chosen as
a director, but there might be value in someone
coming from a company that failed,” says Professor
Larcker. “Boards need to understand what this
person’s contribution was to the failure. Did they
learn important lessons, or are they likely to repeat
past mistakes?”
3
3. Tread carefully when evaluating professional
directors as board candidates. “It’s important to
remember that boards must have a good, working
relationship with their CEO in order to build value,”
says Mr. Miles. “Ideally, a professional director comes
from a background of multiple leadership positions
where he or she has a deep understanding for what
the CEO is going through. For these reasons, retired
CEOs have the potential to make great professional
directors. They can have a constructive dialogue with
the CEO and can really contribute strategically and
operationally.”
4. Take the lead director position much more
seriously. “You should conduct a succession
process for your lead director just as you would for
a CEO or board seat,” says Mr. Miles. “The lead
director should be the most respected member on
the board — a first among equals. The nominating/
governance committee needs to run this process
and make sure that the best director is in the
position. It should never be rotational as not every
director is suited for this leadership role.”
5. Evaluate and refresh your board. “Of course most
board members think they are above average,” says
Professor Larcker. “It’s human nature. However, the
evaluation process should be structured so that
companies get a clear understanding of who is adding
real value and who is not. It is time to move beyond
check-the-box board reviews and start to seriously
evaluate the board’s effectiveness and its individual
directors. Once you have this information, the chairman
or lead director has to be ready to have the difficult
conversation about how a director can improve, or
whether it is better for them to step down.”
To speak with David Larcker or Stephen Miles about
this research survey, please contact Helen Chang,
Stanford Graduate School of Business, (650) 7233358 or chang_helen@gsb.stanford.edu; or Jennifer
Nelson, Heidrick & Struggles, (404) 682-7373 or
jnelson@heidrick.com.
2011 Corporate Board of Directors Survey
Survey Questions
a n d D e s c r i p t i v e S tat i s t i c s
Total Number of Respondents = 163 responses (mostly complete) collected April to May, 2011
A. Background
1.
2.
What is your present position?
(Please check all that apply.)
What is the revenue for the company that you
are most closely identified with?
Percent
Percent
<$500 million
31
14
Chief Executive Officer
15
$500 million to $1 billion
Retired Chief Executive Officer
15
$1 billion to $5 billion
25
Chairman of the Board
17
$5 billion to $10 billion
14
Retired Chairman of the Board
5
$10 billion to $20 billion
7
Lead Director
10
>$20 billion
9
Executive Officer
13
Total Percentage
Retired Executive Officer
7
Outside Board Member
66
Other
9
100
<$500 million
$500 million
to $1 billion
Chief Executive
Officer
$1 billion
to $5 billion
Retired Chief
Executive Officer
$5 billion
to $10 billion
Chairman
of the Board
$10 billion
to $20 billion
Retired Chairman
of the Board
>$20 billion
Lead Director
0
5
10
15
20
25
30
35
Percent
Executive Officer
Retired
Executive Officer
Outside
Board Member
Other
0
10
20
30
40
50
60
70
80
Percent
4
2011 Corporate Board of Directors Survey
3.
What is the industrial sector for the company
that you are most closely identified with?
Percent
5.Age
Percent
< 30
0
Natural Resources
5
31 to 40
2
Non-durables
12
41 to 50
12
Durables
21
51 to 60
37
Regulated Utility
2
61 to 70
40
Wholesale/Retail
7
> 70
9
Financials
13
Services
26
High Technology
14
Total Percentage
Total Percentage
100
< 30
100
31 to 40
Natural
Resources
41 to 50
Non-durables
51 to 60
Durables
61 to 70
Regulated Utility
> 70
Wholesale/Retail
0
5
10
15
Financials
6.
Services
20
25
Percent
30
35
40
What is your present board service?
6.a.Number of public, for-profit boards
High Technology
Percent
0
5
10
15
20
25
30
Percent
4.Gender
Percent
Female
26
Male
74
Total Percentage
0
26
1
40
2
16
3
13
4
4
5
1
0
100
1
Female
2
Male
3
0
10
20
30
40
50
60
70
80
90 100
4
Percent
5
0
5
5
10
15
20
25
Percent
30
35
40
2011 Corporate Board of Directors Survey
6.b.Number of private, for-profit boards
6.d.Total number of boards - this is computed from
the above three questions
Percent
0
Percent
48
1
32
0
5
2
10
1
13
3
4
2
19
4
2
3
22
5
1
4
13
>5
3
5
10
>5
18
0
0
1
1
2
2
3
3
4
4
5
5
>5
>5
0
10
20
30
40
50
0
Percent
10
5
15
20
25
Percent
6.c. Number of not-for-profit boards
Percent
7.Are you a professional board member or
director (a director whose primary job is to
serve on boards)?
0
35
1
30
2
22
3
4
Yes
29
4
6
No
71
5
2
Total Percentage
>5
1
Percent
100
Yes
0
No
1
0
2
10
20
30
40
50
60
70
80
90 100
Percent
3
4
5
>5
0
5
10
15
20
25
30
35
Percent
6
2011 Corporate Board of Directors Survey
B.Planning for New Board Members
8.
CEO
Who in your company is responsible for
identifying new candidates to serve on the
board of directors (Please check all that apply):
Chairman
Percent
Lead Director
CEO
18
Chairman
16
Nominating
& Governance
Committee
Lead Director
6
Full Board
of Directors
Other Directors
8
Nominating & Governance Committee
28
External
Consultants
Full Board of Directors
15
Other
External Consultants
6
Other (please specify
1
0
10
20
30
40
50
60
70
Percent
10. When does your company typically begin the
process of identifying candidates to serve on
the board: (please check only one)?
CEO
Chairman
Percent
Lead Director
Other Directors
Nominating
& Governance
Committee
Full Board
of Directors
26
Before an outgoing director announces plans
to step down
49
Other
19
100
After…
Other
0
5
10
15
20
25
30
Percent
Other
Who in your company has primary
responsibility for identifying candidates to
serve on the board (please check only one):
CEO11
Chairman
14
Lead Director
1
Nominating & Governance Committee
62
Full Board of Directors
7
External Consultants
2
Other
3
Total Percentage
While…
Before…
0
100
10
20
30
40
50
60
Percent
Percent
7
6
Total Percentage
External
Consultants
9.
After an outgoing director has stepped down
While an outgoing director is in the process
of stepping down
Selected other responses:
Need new skills
When a need for a particular skill set is identified or required
(new expertise sought OR replacement)
When someone that would add value to the board is identified
Ongoing with assumed 1-2 year lead; ongoing review of
potential candidates
We are constantly looking to expand the Board
When board assessments reveal the need for certain capabilities/
skills/insights that are not currently represented on the Board
When modifications to the strategy are made
Approaching mandatory retirement
Well in advance of mandatory retirement dates
When a director is approaching mandatory retirement or
term limits
Acquisition
Acquisitions bring directors
2011 Corporate Board of Directors Survey
11.Does your company develop a formal
written document that outlines the skills,
competencies, and experiences required
for the next board member (“skills and
experience profile”)? (please check only one)
13. How difficult is it to evaluate whether a
prospective board member will be a good
choice (in terms of “chemistry,” experience,
and knowledge) for the company? (please
check only one)
Percent
Percent
Yes
60
Extremely difficult
3
No
40
Very difficult
17
Total Percentage
100
Moderately difficult
51
Slightly difficult
22
Not at all difficult
Yes
7
Total Percentage
100
No
0
10
20
30
40
50
60
70
80
Extremely
difficult
90 100
Percent
Very difficult
Moderately
difficult
12. (If Yes to q11) How different is the skills
and experiences profile for your next board
member from the skills and experiences
profile of the outgoing director (please check
only one):
Slightly difficult
Not at all
difficult
Percent
Extremely different
0
10
20
4
Very different
21
Moderately different
46
Slightly different
20
Not at all different
9
Total Percentage
100
30
40
50
14.Is the present turnover of board members on
U.S. Corporate Boards (please check only one)
Percent
Extremely
different
Much too low
8
Low
47
About right
44
High
1
Much too high
Very different
0
Total Percentage
Moderately
different
Slightly different
Much too low
Not at all
different
Low
0
10
20
30
Percent
40
50
60
Percent
60
100
About right
High
Much too high
0
10
20
30
40
50
60
Percent
8
2011 Corporate Board of Directors Survey
17. (If Yes to q15) How often is board succession
planning discussed in formal board or
committee meetings (please check only one):
C. Board Succession Planning
15.Does your company engage in succession
planning for the board of directors? (please
check only one)
Percent
One meeting per year
24
54
Two meetings per year
36
46
More than two meetings per year
33
Every few years
6
Never
1
Percent
Yes
No
Total Percentage
100
Total Percentage
Yes
100
One meeting
per year
No
0
10
20
30
40
50
60
70
80
90 100
Percent
Two meetings
per year
More than two
meetings per year
16. (If Yes to q15) Where is board succession
planning primarily discussed (please check
only one):
Every few years
Never
Percent
Meetings of the full board
21
Meetings of the nominating and
governance committee
71
Informally among directors
4
Other (please specify)
4
Total Percentage
0
15
20
25
30
Percent
Other
(please specify)
20
30
40
Percent
50
60
70
40
18. Which of the following statements best
summarizes your opinion of board succession
planning (please check only one):
100
10
35
Percent
Meetings of
the full board
Meetings of
the nominating
and governance
committee
Informally
among directors
0
10
5
80
It is an important best practice
66
It is useful only when the board has critical directors
whose loss would be very bad for the company
26
It is not useful at all
8
Total Percentage
100
19.Does your company have board members
with an expertise in CEO succession planning
(i.e., they have led or have participated in
three or more succession processes in the
past as a CEO or director):
Percent
Yes
66
No
34
Total Percentage
100
Yes
No
0
10
20
30
40
50
60
70
80
90 100
Percent
9
2011 Corporate Board of Directors Survey
20. (If Yes to q19) Which of the following directors
have expertise in succession planning (please
check all that apply):
Number
Chairman
79
Lead Director
48
Yes
No
0
10
20
30
40
50
60
70
80
90 100
Percent
Chair of the Nominating and Governance Committee 69
Director(s) other than these
23. What traits of active CEOs make them
attractive board candidates (please check all
that apply):
93
Chairman
Percent
Lead Director
Chair of
the Nominating
and Governance
Committee
Director(s)
other than these
0
20
40
60
80
100
Percent
21. When recruiting for an open board seat, does
your company consider whether a candidate
has previous experience in CEO succession
planning?
Percent
Yes
24
No
76
Total Percentage
Strategic expertise
77
Risk management expertise
45
Operational expertise
74
Experience responding to a crisis or failure
43
Leadership qualities
67
Extensive personal and/or professional networks
46
Other (please specify)
13
Strategic
expertise
Risk management expertise
Operational
expertise
Experience
responding…
100
Leadership
qualities
Yes
Extensive
personal…
No
Other
0
10
20
30
40
50
60
70
80
90 100
0
10
20
30
40
50
60
70
80
Percent
Percent
Selected other responses:
D. CEOs as Board Members
Current Knowledge
22.Are directors who are active CEOs better than
non-CEO board members?
Current industry knowledge
Percent
Yes
No
Total Percentage
Current issues, current issues experience
External global market dynamics perspective
21
Ability to identify with the CEO in terms of issues
79
They are currently “in the flow” of business issues
100
They are currently experiencing some of the same problems
as our CEO
Retired CEOs bring considerable perspective but not the
immediacy of serving CEOs
10
2011 Corporate Board of Directors Survey
24. What traits of active CEOs make them
unattractive board candidates (please check all
that apply):
Percent
26.Are directors who are retired CEOs better
than average board members?
Percent
Yes
46
Too busy with their company to be effective directors 87
No
54
Too interested in networking/promoting their
own company to be effective directors
21
Total Percentage
Too bossy/used to having their way
33
Not good collaborators
28
Other (please specify)
5
100
Yes
No
0
Too busy…
10
20
30
40
50
60
70
80
90 100
Percent
Too interested…
27. How many years before the experiences of
a retired CEO become outdated and are no
longer valuable to current board service?
Too bossy…
Not good
collaborators
Percent
Never
Less than 3 years
0
20
40
60
80
100
Percent
10
More than 3 but less than 5 years
16
More than 5 but less than 10 years
20
Selected other responses:
More than 10 years
16
Big ego
CEO experience never becomes outdated
38
Not good listeners
Total Percentage
100
Too generous with compensation
Less than 3 years
25.Are directors who are retired CEOs better
board members than active CEOs?
More than 3 but
less than 5 years
Percent
Yes
55
No
45
Total Percentage
More than 5 but
less than 10 years
More than
10 years
CEO experience
never outdated
100
0
5
10
15
20
25
30
35
40
Percent
Yes
No
0
10
20
30
40
50
60
70
80
90 100
Percent
11
2011 Corporate Board of Directors Survey
28. Can an ex-CEO of a company that
experienced substantial accounting and
ethical problems be a good board member at
another company? (please check only one)
Percent
Yes
37
No
63
Total Percentage
20
30
40
50
60
70
80
If the issues arose on the CEO’s watch they should have had
the processes in place to see the risks and correct before
they became problems for the company, the employees and
shareholders
A good CEO learns why he missed the flaws, and does not
drop the ball twice, though be careful of flawed characters.
No
10
Assuming the problems occurred during his/her tenure, there is
a reputational risk that may affect his/her ability to perform well
Earnings experience may be a good teacher
100
Yes
0
Not a good fit as ability to assess risk may be deficient
90 100
Percent
As long as the CEO was not involved (aware of or acting in)
in personal egregious behavior and the CEO is able to openly
speak to lessons learned so that Board can learn from his/her
experience. However, there may always be a question mark
around that person
I would say yes depending on the situation — if the CEO has
learned from the mistake, he/she could be very valuable
They may be a productive board member in a private company
depending on their expertise in the segment or growth
initiatives that do not track culture
29.Please briefly explain your answer to q28
Selected other responses:
If the CEO recognized the deficiencies and tried to be
transformational, then yes. But if the CEO accepted status
quo, then no
Not a good fit due to credibility and ethical issues
Directors need to be role models for ethical behavior
Ethical problems are not caused by a lack of knowledge, they
are caused by character flaws (and character doesn’t change)
I would have more problems with the ethical issues than the
accounting ones, but both are problematic — he/she was in
charge.
Although I think someone with this experience could be great,
the stigma and perception issues would prevent them from
being effective
May have difficulty establishing credibility/trust, however
depends on who caused them, but it does show a problem
managing and controlling information and risk
Tone at the top is a key driver of corporate culture and the
CEO is the most influential person in setting tone at the top.
Accounting and ethics issues at his / her company are usually
the result of problems with CEO performance.
Not a good fit due to potential reputational and
judgment issues
There either is or is not a culture of ethical behavior and
compliance or not. The CEO sets the tone. HOWEVER, there
are CEOs who have inherited problems they did not create and
they should not be blanketed with the above statement
These problems may have strengthened the CEOs ability to
respond effectively and plan proactively
30. Can a board member (not the CEO) at a
company that experienced substantial
accounting and ethical problems be a good
board member at another company? (please
check only one)
Percent
Yes
67
No
33
Total Percentage
Absolutely not. This concept smacks of ‘reward for bad
behavior’ thinking. Different if the CEO went in and reversed
the problems.
100
Yes
The risk to the new organization is too difficult to assess
relative to the upside. Was it a failure in oversight, knowledge,
other? How does the board assess whether the CEO has
learned from the past problems adequately? How can the
board assess this?
No
0
10
20
30
40
50
60
70
80
90 100
Percent
Reputation risk outweigh[s] the experience
12
2011 Corporate Board of Directors Survey
E.Separating the Chairman and
CEO Positions
31. Please briefly explain your answer to q30
Selected other responses:
OK if not closely involved-is highly situation dependent
As long as they are not too closely associated with the scandal
and the perception is that this particular board member was
not complicit in the problems
Each circumstance can be different. A board member must
rely on information supplied to him. You can question, but not
get honest answers
32.Does your company separate the Chairman
and CEO roles? (please check only one)
Percent
Yes
68
No
32
Total Percentage
If this board member was part of the solution and not part of
the problem, (s)he might make an outstanding board member
Yes
Not a good fit due to potential reputational, judgment
and trust issues
No
Although less strongly than the explanation to the preceding
question (we may think of mitigation factors such as the
behavior of the Board Member in trying to prevent or resolve
the problem), there is also a potential reputational risk
involved…
0
100
10
20
30
40
50
60
70
80
90 100
Percent
33. (If Yes to q32) How many years ago were the
positions separated?
If it is not the CEO or the CFO - possibly. Even then you have
to decide if it is worth the reputational risk to the company
Percent
At the end of the day it is the Board that shareholders place
trust in and they must have and show understanding of the
company’s accounts
Most likely not since the level of the person being recruited to
the Board is C Suite and they are responsible for running the
Enterprise along with their peers and CEO
Yes, if they were brought in to solve the problem. No if they
were part of the problem. If they were part of ethical issues,
NEVER!
Yes– experience is a good teacher
A good director learns why he missed the flaws, and does not
drop the ball twice, though be careful of flawed characters.
As long as the person was not the cause of the problem —
s/he must have high integrity and scrupulous ethics
1
6
2
8
3
11
4
8
5
16
6 to 10
24
>10
8
Always
19
Total Percentage
100
1
Assuming the Board member was not involved in the
irregularities, he or she should have learned valuable lessons
from the experience
2
3
If the director was the person who uncovered the problems
and led the investigation, he/she could be a great board
member. In contrast, if he/she was there for a decade and
never dug into issues that ultimately proved problematical…
4
5
This truly depends on the situation. For example, if a new
board member was instrumental in discovering the problems,
then this board member is hugely valuable to others!
6 to 10
> 10
Always
0
5
10
15
20
25
Percent
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2011 Corporate Board of Directors Survey
34. (If Yes to q32) What event or events caused
the separation of CEO/Chairman positions?
(please check all that apply)
36. (If Yes to q35) Is this separation expected to
be permanent or temporary?
Percent
Percent
Permanent
95
Pressure from large shareholders
4
Temporary
5
Proxy advisor (ISS or Glass-Lewis) recommendation
4
Total Percentage
Legislative action
2
Board members view this as a best practice
38
It has always been the case for our company
25
Other
20
100
Yes
No
Pressure from
large shareholders
0
10
20
30
40
50
60
70
80
90 100
Percent
Proxy advisor (ISS
or Glass-Lewis)
recommendation
Legislative action
F.Lead Independent Director
Board members
view this
as a best practice
37.Does your company have a lead independent
director?
It has always
been the case…
Percent
Other
0
5
10
15
20
25
30
35
40
Yes
50
No
50
Total Percentage
100
Percent
Selected other responses:
Yes
Concern over leadership qualities of promoted CEO
No
Part of implementation of succession plan. Needed
transition period
0
Retirement of the previous CEO and hiring of a new first time
CEO who the board felt needed mentoring
10
20
30
40
50
60
70
80
90 100
Percent
35. (If Yes to q32) Is the separation due to a CEO
succession event?
Percent
Yes
41
No
59
Total Percentage
100
Yes
No
0
10
20
30
40
50
60
70
80
90 100
Percent
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2011 Corporate Board of Directors Survey
38. (If Yes to q37) How is the lead director
selected?
40. (If Rotated to q38) How frequently is the lead
director position rotated?
Percent
Chosen by the CEO or chairman
18
Percent
Every year
20
Every 2 years
60
Chosen by the Nominating and
Governance Committee
21
Every 3 years
0
Elected by independent directors
47
No set schedule
20
Rotated among independent directors
7
Other reason
7
Total Percentage
Total Percentage
100
100
Every year
Chosen by the
CEO or chairman
Chosen by
the Nominating
and Governance
Committee
Elected
by independent
directors
Rotated among
independent
directors
Every 2 years
Every 3 years
No set schedule
0
10
20
30
40
50
60
Percent
41. (If Yes to q37) Is the lead independent director
at your company the senior-most outside
(nonexecutive) director?
Other reason
0
10
20
30
40
50
Percent
39. (If Elected to q38) How frequently does the
lead director election occur?
Percent
Yes
40
No
60
Total Percentage
Percent
Every year
43
Every 2 years
12
Every 3 years
12
No set schedule
33
Total Percentage
100
Yes
No
0
10
20
30
40
50
60
70
80
90 100
Percent
100
42. (If Yes to q37) Is the lead independent director
at your company the most highly respected
nonexecutive director?
Every year
Every 2 years
Percent
Yes
Every 3 years
39
No
No set schedule
61
Total Percentage
0
10
20
30
Percent
40
100
50
Yes
No
0
10
20
30
40
50
60
70
80
90 100
Percent
15
2011 Corporate Board of Directors Survey
43. (If Yes to q37) Does the lead independent
director have personality attributes (such as the
ability to build consensus) that specially equip
this person to be effective in this position?
Percent
Yes
86
No
14
Total Percentage
100
G.Professional Board Members
In the following questions, we refer to a professional
board member as a director whose primary job is
to serve on boards (i.e., these individuals have prior
executive experience, but currently they have no other
full-time job than to sit on boards). Traditional board
members are individuals that either have a full-time job or
other professional interests. Most of their annual income
is not derived from compensation for board positions.
46.Do you have any professional directors on
your board?
Yes
No
Percent
0
10
20
30
40
50
60
70
80
90 100
Percent
Yes
63
No
37
Total Percentage
44. (If Yes to q38) Does the lead independent
director have prior board experience that is
more extensive than the average director?
Yes
Percent
Yes
55
No
45
Total Percentage
100
No
0
10
20
30
40
50
60
70
80
90 100
Percent
100
47.Are professional directors better than
traditional board members?
Yes
Percent
No
0
10
20
30
40
50
60
70
80
90 100
Yes
19
No
81
Total Percentage
Percent
45. Which of the following statements best
summarizes your opinion of the lead
independent director position in your
company (please check only one):
Yes
No
Percent
It is an effective position that is a best practice
81
It is something that is done to simply satisfy
exchange listing requirements
7
It is something that is simply “window dressing”
for our shareholders
100
0
10
20
30
40
50
60
70
80
90 100
Percent
12
Total Percentage
100
Effective position
Exchange listing
requirements
Window dressing
0
20
40
60
80
100
Percent
16
2011 Corporate Board of Directors Survey
48. What traits about professional board
members make them attractive board
candidates (please check all that apply):
Percent
Too busy with
directorships
Too interested
in networking/
promoting
Experience with multiple companies
86
Lack
independence
Diversity of background
62
Experience with successful companies
58
Experience with failed companies
36
Experience managing a crisis
50
Extensive professional networks
40
No experience
Doing this
for the money
Too old
Other
Experience
with multiple
companies
0
10
20
30
40
50
60
Percent
Diversity
of background
Experience
with successful
companies
H. Board Observers
Experience with
failed companies
In the following questions, we refer to a board observer
as an individual who attends board meetings or
committee meetings, but is neither a full-time board
member nor a paid consultant.
Experience
managing a crisis
Extensive professional networks
0
20
40
60
80
100
50.Does your company have board observers?
Percent
Percent
Yes
49. What traits of professional board members
make them unattractive board candidates
(please check all that apply):
17
No
83
Total Percentage
100
Percent
Too busy with other directorships to be effective
56
Yes
Too interested in networking/promoting their
own career to be effective
27
No
Lack independence (because they rely on
director fees as primary income)
24
No current experience in executive position
31
They are simply doing this for the money
26
Too old
16
Other
10
17
0
10
20
30
40
50
60
70
80
90 100
Percent
2011 Corporate Board of Directors Survey
51. (If Yes to q50) How many board observers are
present in a typical meeting?
Yes
Percent
No
1
32
2
5
3
0
4
26
>4
37
Total Percentage
0
10
20
30
40
50
60
70
80
90 100
Percent
54.If Yes to q53 Do these positions rotate among
internal managers of the company (e.g., a new
person(s) every year or every other year)?
100
Percent
1
Yes
23
No
2
77
Total Percentage
100
3
4
Yes
>4
No
0
5
10
15
20
25
30
35
40
0
Percent
10
20
30
40
50
60
70
80
90 100
Percent
52. (If Yes to q50) How are board observers
compensated for their services? (please check
all that apply)
55. (If Yes to q50) Are board observers ever
(please check all that apply)
Percent
Percent
Cash
12
Options or stock
4
They are not compensated
84
Total Percentage
100
Cash
Investors
21
Customers
1
Suppliers
0
Employee representatives
18
Other
25
Investors
Options or stock
Customers
They are
not compensated
Suppliers
0
20
40
60
80
100
Percent
53. (If Yes to q50) Do any of your board observers
include internal management employees
that have high potential to become senior
executives within the company?
Employee
representatives
Other
0
5
10
15
20
25
Percent
Percent
Yes
52
No
48
Total Percentage
18
100
2011 Corporate Board of Directors Survey
56. (If Yes to q50) How are board observers
identified and sourced? (please check all
that apply):
Deeper company
knowledge
Percent
Management recommendation
46
Director recommendation
18
Recommendation by an investor
1
Recommendation by a consultant
4
Recommendation by an outside third party
0
Other
18
Deeper industry
knowledge
Deeper functional
knowledge
Scientific
Knowledge
Regulatory
Knowledge
Business
Relationships
Governmental
Relationships
Management
recommendation
Other
Director
recommendation
0
Recommendation
by an investor
10
20
30
40
50
60
70
80
Percent
Recommendation
by a consultant
58. (If Yes to q50) Which of the following are most
likely to have a board observer (please check all
that apply):
Recommendation
by an outside
third party
Other
Percent
0
10
20
30
40
50
Percent
Meeting of the full board
79
Meeting of the audit committee
39
Meeting of the compensation committee
57. (If Yes to q50) What value do board observers
add to the company? (please check all that
apply):
21
Meeting of the nominating and governance committee 11
Meeting of a specialized committee
(such as finance, risk, technology, etc.)
14
Percent
Deeper company knowledge
61
Deeper industry knowledge
29
Deeper functional knowledge
29
Scientific Knowledge
4
Regulatory Knowledge
21
Business Relationships
25
Governmental Relationships
4
Other
11
Meeting of
the full board
Meeting of the
audit committee
Compensation
committee
Nominating
and governance
committee
Specialized
committee
0
10
20
30
40
50
60
70
80
Percent
19
2011 Corporate Board of Directors Survey
59. (If Yes to q50) Does the presence of a board
observer influence the discussion or level of
candor in the formal boardroom?
60. (If Yes to q50) Has a board observer ever been
added to the board as a full voting member?
Percent
Percent
Yes
17
17
No
83
83
Total Percentage
Yes
No
Total Percentage
100
100
Yes
Yes
No
No
0
0
10
20
30
40
50
60
70
80
90 100
10
20
30
40
50
60
70
80
90 100
Percent
Percent
20
2011 Corporate Board of Directors Survey
A b o u t S ta n f o r d U n i v e r s i t y ’ s R o c k
C e n t e r f o r C o r p o r at e G o v e r n a n c e a n d
H e i d r i c k & S t r u gg l e s
About Stanford University’s Rock Center for
Corporate Governance
About Heidrick & Struggles
The Arthur and Toni Rembe Rock Center for Corporate
Governance is a joint initiative of Stanford Law School
and the Stanford Graduate School of Business, created
with the idea that advances in the understanding and
practice of corporate governance are most likely to
occur in a cross-disciplinary environment where leading
academics, business leaders, policy makers, practitioners
and regulators can meet and work together. The Rock
Center’s goal is to conduct research and tap this wealth
of expertise to advance the practice and study of
corporate governance. The Rock Center works closely
with the Corporate Governance Research Program.
21
Heidrick & Struggles International, Inc., (Nasdaq:HSII)
is the leadership advisory firm providing executive
search and leadership consulting services, including
succession planning, executive assessment, talent
retention management, executive development, transition
consulting for newly appointed executives, and M&A
human capital integration consulting. For almost 60
years, we have focused on quality service and built
strong leadership teams through our relationships with
clients and individuals worldwide. Today, Heidrick &
Struggles leadership experts operate from principal
business centers globally. . For more information about
Heidrick & Struggles, please visit www.heidrick.com.
2011 Corporate Board of Directors Survey
David F. Larcker
James Irvin Miller Professor of Accounting; Director of the Corporate Governance Research
Program; Senior Faculty, Arthur and Toni Rembe Rock Center for Corporate Governance at
Stanford University; Codirector of the Directors’ Consortium Executive Program
Website
http://www.gsb.stanford.edu/cgrp
Phone
(650) 725-6159
Email
larcker_david@gsb.stanford.edu
Professor Larcker’s research focuses on executive compensation, corporate governance, and
managerial accounting. His work examines the choice of performance measures and compensation
contracts in organizations. He has current research projects on the valuation implications of
corporate governance, role of the business press in the debate on executive compensation, and
modeling the cost of executive stock options.
Professor Larcker presently holds the James Irvin Miller Professorship. He is the director of the
Corporate Governance Research Program at the Stanford Graduate School of Business and
senior faculty of the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford
University.
He recently co-authored the book Corporate Governance Matters: A Closer Look at
Organizational Choices and Their Consequences, published by FT Press-Pearson Prentice
Hall in April, 2011. He has also authored numerous academic research papers, case studies,
corporate governance closer look studies, and articles for the popular press including Do You
Have A Plan For Finding Your Next CEO? The Corporate Board September/October 2010 with
Stephen Miles of Heidrick & Struggles.
Dave’s research has been often cited by the WSJ, BloombergBusinessWeek, FT, Forbes, NY
Times, Agenda, NACD Directorship, Corporate Board Member, SHRM and Corporate Secretary
Magazine among others.
Professor Larcker was previously the Ernst & Young Professor of accounting at the Wharton
School of the University of Pennsylvania and Professor of accounting and information systems at
the Kellogg Graduate School of Management at Northwestern University. He received his PhD
in Business from the University of Kansas and his BS and MS in Engineering from the University
of Missouri- Rolla.
He is on the editorial boards of the Journal of Accounting and Economics, Journal of Accounting
Research, Accounting, Organizations and Society, Journal of Accounting and Public Policy,
Journal of Applied Corporate Finance. Professor Larcker received the Notable Contribution to
Managerial Accounting Research in 2001. He is also a trustee of the Wells Fargo Advantage Funds.
22
2011 Corporate Board of Directors Survey
Stephen A. Miles
Vice Chairman, Heidrick & Struggles
Phone
(404) 538-0119
Email
smiles@heidrick.com
Stephen Miles is a vice chairman of Heidrick & Struggles. He runs Leadership Advisory
Services within the Leadership Consulting Practice and oversees the firm’s worldwide executive
assessment and succession planning activities. He is also a key member of Heidrick & Struggles’
Chief Executive Officer & Board of Directors Practice. With more than 15 years of experience in
assessment, top-level succession planning, organizational effectiveness and strategy consulting,
Stephen specializes in CEO succession and has partnered with numerous boards of global
Fortune 500 companies to ensure that a successful leadership selection and transition occurs.
He also has led many chairman successions and board effectiveness reviews, partnering
with boards of directors to help them with their overall effectiveness, committee effectiveness
and individual director effectiveness. Additionally, he is a recognized expert on the role of the
chief operating officer, and has consulted numerous companies on the establishment and the
effectiveness of the position and supporting the transition from COO to effective CEO.
Stephen is a coach to many CEOs and COOs around the world. He has built the Practice’s
coaching expertise by focusing on high-performance leadership competencies with a heavy
emphasis on the business and cultural context. Stephen works extensively internationally, and
his clients cut across all industry sectors. Stephen and his CEO advisory services were profiled
in the BusinessWeek article “The Rising Star of CEO Consulting”.
Prior to joining Heidrick & Struggles, Stephen held various positions at Andersen Consulting.
Stephen is author and co-editor of the best-selling business book Leaders Talk Leadership. He
also co-authored Riding Shotgun: The Role of the Chief Operating Officer, as well as the cover
article in the May 2006 issue of Harvard Business Review* on the same topic. Stephen also
co-authored the feature article in the April 2007 issue of Harvard Business Review titled: “The
Leadership Team—Complementary Strengths or Conflicting Agendas? Great top teams work to
their members’ disparate strengths—but those differences can cause discord, too, especially
during succession.”
His third book, Your Career Game: How Game Theory Can Help You Achieve Your Professional
Goals, was released in April 2010 (Stanford University Press) and he has also recently completed
a chapter on “Assessing the Leader” for Linkage Inc.’s Best Practices in Leadership Development
Handbook 2nd edition; Wiley 2009. Stephen is the author of the Stanford Graduate School of
Business case study entitled “Multimillionaire Matchmaker: An Inside Look at CEO Succession
Planning.” Stephen has also been featured in Forbes, BusinessWeek, Boardroom Intelligence,
Strategy + Business, WSJ/MIT, Consulting Magazine, MIT Sloan, Ivey Business Journal, and
CEO Magazine. He is a frequent speaker on the topics of CEO succession, coaching C-level
executives, talent management and complementary leadership at the top (high performance
teams).
Stephen is a member of the Heidrick & Struggles’ Management Committee. He is an independent
director for Overlay.TV and DNA13, and an advisory board member at Rypple and The Pythian Group.
He has lived in Kenya, South Africa, Iraq, Argentina and Canada.
* “Second in Command: The Misunderstood Role of the COO” was a McKinsey Award finalist for the best article in Harvard
Business Review in 2006.
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2011 Corporate Board of Directors Survey
C o n ta c t I n f o r m at i o n
If you have any questions about this survey, please contact:
Michelle E. Gutman
Associate Director, Corporate Governance Research Programs
Arthur and Toni Rembe Rock Center for Corporate Governance
Stanford Graduate School of Business
Knight Management Center
655 Knight Way, C222
Stanford, CA 94305-7298 (USA)
Phone: +1.650.736.7420
Email: gutman_michelle@gsb.stanford.edu
Copyright © 2011 by the Board of Trustees of the Leland Stanford Junior University and Heidrick & Struggles. All rights reserved. 10.21.2011
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2011 Corporate Board of Directors Survey