Board of Directors Age and Term Limits: Requiring Refreshment

Board recruiting, refreshment and succession planning all have become hot topics of conversation at public companies in recent years. Shareholders are demanding more diversity on boards, and as the baby boomer population continues to grow older, many directors are reaching retirement age.

Most boards will agree that bringing in fresh ideas and new perspectives can lead to positive outcomes. However, board refreshment can be a sensitive subject, particularly since directors work so closely together, and often for as long as a decade or more—after all, the average tenure for an S&P 500 director was 8.6 years in 2016, according to a recent Equilar report, Board Composition and Recruiting Trends.

A separate Equilar study looked at board disclosures among public companies in the energy sector and found that just over 20% had a mandatory retirement age—or 60 total companies out of the 293 included in the study. Among those, the most common retirement age was 75, with 36.7% of the companies reporting this figure. The second-most common retirement age for these energy companies was 72. This supports the claim from a recent report that “75 is the new 72” when it comes to retirement ages at public companies.

In comparison to the S&P 500, trends for the energy companies studied for this report differed on a couple different points. First and foremost, the S&P 500 over time has shown increased prevalence of mandatory retirement age disclosures, reaching 38.9% of companies in 2016, up from 29.8% in 2012, well above the 20.5% in the energy sector.

boardblog-1-31-equilar-mandatory-retirement-ages-energy-and-sp500


boardblog-1-31-equilar-mandatory-retirement-board-disclosure-2012-2016

Furthermore, of those S&P 500 companies that did include a retirement age in their proxy statements, the most common was 72, with nearly half of companies doing so.

boardblog-1-31-equilar-mandatory-retirement-ages

It’s important to note that just because a company does not disclose this information does not mean that they do not have a process in place to limit director terms or ages.

While data on term limits for the S&P 500 is incomplete—very few have announced they will implement such a limit—the energy company study found 10 different companies with term limits, which ranged from six to 20 years. US Energy Corp. by far had the lowest term limit, being the only company with a threshold of fewer than 10 years. Notably, the company also had a 70-year-old age limit, on the lower end of the spectrum.

Meanwhile, Trican Well Service and Secure Energy Services each had a 20-year term limit, and both had a 75-year-old age limit as well. Notably, two of the same directors sit on both Trican and Secure Energy’s boards, showing the overlap in the industry. Snapshots of these companies’ boards are available based on the BoardEdge connections map—which provides a visual display of which directors are associated with other companies and how the corporate landscape is interconnected. Trican’s is displayed below.

boardblog-1-31-equilar-boardedge-connection-map-trican

Board refreshment is already a hot-button issue, and is likely to be one of the most prominent discussion points between investors and issuing companies this year. Equilar will join PwC and Vanguard on February 9 to cover this important topic in a webinar.

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The data in this post is powered by BoardEdge, which includes information on more than 150,000 directors and executives from public companies. The database includes more than a dozen categories about each board member’s background and leadership experience. The platform’s defining feature is a networking tool that clearly displays how board members are connected to each other, as well as the Equilar Diversity Network. 

 To learn more about this study, for options to purchase the underlying data or other custom research available through Equilar Research Services, please contact the Equilar research team at research@equilar.com.

For more information on Equilar research and data analysis, please contact Dan Marcec, Director of Content & Communications at dmarcec@equilar.com

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