United States: Nontraditional Board Candidates Made Headway In 2017

Last Updated: May 18 2018
Article by Cydney Posner

According to a new report from the EY Center for Board Matters, 54% of the 2017 class of directors of Fortune 100 companies served in non-CEO roles and 40% were female. More than half of the Fortune 100 added at least one independent director, slightly less than in 2016, but together, over the two-year period, over 80% of the Fortune 100 added at least one independent director. The result was that, taking director exits into account, "nearly all of the companies experienced some type of change in board composition during this period." The EY Center's associate director told the WSJ that the report showed "'an increase in board diversity along the different dimensions of gender, age, ethnicity and in some cases socioeconomic background,'.... That means demand is growing for people who can offer 'a more nuanced, multidimensional look' at what is... happening with regard to consumer demographics, disruptive technology and workforce management, among other areas, she said. 'The consensus is the best way to provide for boards to be able to see around corners, to ask the right critical questions, to get to the best answer possible, is to have a board that has the right mix of skills, expertise, background and perspective....There's more openness to considering more and different perspectives.'"

EY's study involved a review of proxy statements for the Fortune 100 for the 2017 class of directors as well as, for comparative purposes, proxy statements for the same 83 companies' class of 2016 directors. EY suggests that boards are seeking more diverse candidates that offer "a range of functional expertise, including on complex, evolving areas such as digital transformation, e-commerce, public policy, regulation and talent management," with the result that "boards are increasingly considering highly qualified, nontraditional candidates, such as non-CEOs, as well as individuals from a wider range of backgrounds."


Some of these attitude shifts may reflect responses to pressures from institutional shareholders. For example, asset manager BlackRock's 2018 Proxy Voting Guidelines for U.S. Securities indicated that directors should have diverse experience and competencies to effectively oversee the company's long-term strategy. As discussed in this PubCo post, BlackRock indicated that it expected to see at least two women on each board. Note that, in the past, BlackRock has frequently put its vote where its mouth is, having voted in favor of a number of proposals for board diversity (see this PubCo post); in its Investment Stewardship Report for Q2 2017, BlackRock indicated that, in the second quarter, it supported eight out of nine shareholder proposals that requested the adoption of a policy on board diversity or disclosure around plans to increase board diversity. (See this PubCo post.) And, in 2017, State Street Global Advisors announced that it was "calling on the more than 3,500 companies [in which] State Street invests on behalf of clients, representing more than $30 trillion in market capitalization to take intentional steps to increase the number of women on their corporate boards." According to State Street's president and CEO, diversity is important to good governance: "A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise." Although State Street's preferred approach was to encourage change through active engagement, it advised that it could well use stronger measures, including voting against directors. (See this PubCo post.) Also in 2017, NYC Comptroller Scott Stringer, who oversees the NYC pension funds, launched a new campaign that called on the boards of 151 U.S. companies—80% of which are in the S&P 500—"to disclose the race and gender of their directors, along with board members' skills, in a standardized 'matrix' format—and to enter into a dialogue regarding their board's 'refreshment' process." Stringer contended that this level of transparency would "push more boards to be diverse and independent," positioning them to "deliver better long-term returns for investors." According to the press release, Stringer and the pension funds "are pressing companies to commit to working with them and other large, long-term shareowners to identify suitable independent candidates — including ones that bring diverse perspectives and other skills, such as climate expertise, to the boardroom." (See this PubCo post.)

Corporate finance and accounting was ranked the number one most common area of director skill and expertise identified by companies for the director class of 2017, up from a ranking of fifth in 2016. Coming in second was expertise in international business for the 2017 class, falling from first place in the prior year. Qualifications in government, public policy and other regulatory issues were ranked third for the 2017 class, up from eighth place in the preceding year. Expertise in technology remained at a fourth place ranking—one to watch for next year, together with expertise in risk oversight, in light of the current focus on cybersecurity risk—followed by expertise in marketing and business development (up from fifth place in 2016); operations, manufacturing and supply chain (up from tenth place); transactional finance (up from eleventh place); industry expertise (same as in 2016); board service and corporate governance (down to a tie for seventh place from second place in 2016); and risk oversight (down one place to eighth from a ninth place ranking in 2016). Interestingly, expertise in corporate strategy fell off the charts this year from third place in 2016.

Here are some of EY's other key findings:

  • 72% of companies reviewed identified gender, race or ethnicity as factor in identifying candidates (compared with 64% in 2016);
  • 63% used graphics to highlight elements of diversity (compared with 48% in 2016);
  • 23% included a board skills matrix (up from 20% in 2016);
  • 55% added at least one new independent director (a decline compared with 59% in 2016);
  • 30% added two or more new directors (compared with 45% in 2016);
  • 44% of the new class was assigned to the audit committee (compared to 41% for 2016), with 63% designated as "audit committee financial experts" (compared to 59% in 2016);
  • 24% were assigned to the comp committee (25% in 2016) and 33% assigned to the nominating and corporate governance committee (34% in 2016).
  • 54% of the 2017 director class served in non-CEO roles (representing an increase of three percentage points from 51% in 2016), such as other executive roles (40%) or non-corporate roles (14%) including academia, scientific organizations, nonprofits, government, military, etc.;
  • 30% (approx.) had not previously served on a board, about the same as for the prior year;
  • 40% of the 2017 class were women, but overall, the proportion of women directors was relatively unchanged, with women directors in 2017 averaging 28% board representation compared to 27% in 2016.
  • The average ages for women and men were about the same, with women directors averaging 57 compared to 58 for men;
  • Where director qualifications were disclosed, over one-half of the women in the 2017 director class had expertise in corporate finance and accounting, marketing and business development, or risk oversight, while over one-third had expertise in government, public policy and regulatory; industry; operations, manufacturing and supply chain; or technology;
  • The demographic is shifting younger, with the average age of the 2017 director class at 57, compared to 63 for incumbents and 68 for exiting directors; and
  • 15% of the 2017 new class were under 50 years of age (compared with 9% for 2016), 37% were in the 50 to 59 bracket (compared to 47% for 2016), 48% were in the 60 to 67 bracket (compared to 42% for 2016) and none were over 68 (compared to 2% for 2016).

Notwithstanding the trend toward more diverse perspectives, EY observes that "these developments may be slow to manifest. For example, consider that the average Fortune 100 board has 10 seats. In this context, the addition of a single new director is unlikely to dramatically shift averages in terms of gender diversity, age, tenure or other considerations. That said, whether a board's pace of change is sufficient depends on a company's specific circumstances and evolving board oversight needs. Boards should challenge their approach to refreshment, asking whether they are meeting the company's diversity, strategy and risk oversight needs. Waiting for an open seat to nominate a diverse candidate may mean waiting for the value that diversity could bring."

In this context, EY suggested the following questions for the board to consider:

  • "How is the company aligning the skills of its directors—and that of the full board—to the company's long-term strategy through board refreshment and succession planning efforts?
  • How is the company providing voluntary disclosures around its approach in these areas? Does the company's pool of director candidates challenge traditional search norms such as title, age, industry and geography?
  • How is the company addressing growing investor and stakeholder attention to board diversity, and is the company providing disclosure around the diversity of the board—defined as including considerations such as age, gender, race, ethnicity, nationality—in addition to skills and expertise?"

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions