CalPERS to Corporate Boards: Time to Get Younger, More Diverse

CalPERS is aiming to reduce corporate “board stagnation” with a proposal, released Thursday, that aims to make corporate boards more diverse and the churn of directors more frequent.

From Bloomberg:

“We’ve got board stagnation,” said Anne Simpson, director of corporate governance at Sacramento-based Calpers. “We’re not going to create an opportunity for new members for diversity to progress unless there’s some space.”

Directors’ independence can be compromised after 10 years, and companies should either classify them as nonindependent or provide an annual explanation why, Calpers said in a set of principles released Thursday. Routine discussions about replacing directors would ensure boards have a “necessary mix of skills, diversity and experience,” Calpers said in the document.

S&P 500 boards replace about 7 percent of their members annually and the average tenure is 8.5 years, according to Spencer Stuart, an executive search consulting firm. Among those boards, only 3 percent set an explicit term limit for directors and 73 percent have a mandatory retirement age, typically age 72 or older.

[…]

Pressure has been building for companies to assess the diversity and tenure of their boards, said Dan Siciliano, law professor and director of the Rock Center for Corporate Governance at Stanford University near Palo Alto, California. Board composition has become easier to track, and high-profile examples of homogeneous boards at Facebook Inc. and Twitter Inc. drew attention to the issue, he said.

White males account for 73 percent of board seats for Fortune 500 companies, according to the advocacy group Alliance for Board Diversity.

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