Corporate Governance at Silicon Valley Companies 2012

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday December 20, 2012 at 9:06 am
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Editor’s Note: The following post comes to us from David A. Bell, partner in the corporate and securities group at Fenwick & West LLP. This post is based on portions of a Fenwick publication, titled Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies (2012); the complete survey is available here.

Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for all Silicon Valley companies and publicly-traded technology and life science companies across the U.S. as well as public companies and their advisors generally. 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) and the high technology and life science companies included in the Silicon Valley 150 Index (SV 150). [1] In this report, we present statistical information for a subset of the data we have collected over the years. These include:

  • makeup of board leadership
  • number of insider directors
  • gender diversity on boards of directors
  • size and number of meetings for boards and their primary committees
  • frequency of maintaining and number of other standing committees
  • majority voting
  • board classification
  • use of a dual-class voting structure
  • frequency and coverage of executive officer and director stock ownership guidelines
  • frequency and number of shareholder proposals

In each case, comparative data is presented for the S&P 100 companies and for the high technology and life science companies included in the SV 150 as well as trend information over the history of the survey. In a number of instances we also present data showing comparison of the top 15, top 50, middle 50 and bottom 50 companies of the SV 150 (in terms of revenue), [2] illustrating the impact of scale on the relevant governance practices.

Significant Findings

Governance practices and trends (or perceived trends) among the largest companies are generally presented as normative for all public companies. However, it is also somewhat axiomatic that corporate governance practices should be tailored to suit the circumstances of the individual company involved. Among the significant differences between the corporate governance practices of the SV 150 high technology and life science companies and the uniformly large public companies of the S&P 100 are:

  • While there has been a general downward trend in both groups, the SV 150 companies are substantially less likely to have a combined board chair/CEO than S&P 100 companies (in 2012, 34% compared to 71%). Where there is a separate chair, they are also substantially more likely to be a non-insider at SV 150 companies (in 2012, 68% compared to 41%). Lead directors are substantially more common among S&P 100 companies (in 2012, 76% compared to 39%).
  • The S&P 100 companies tend to have larger boards than SV 150 companies (median of 12 compared to median of 8 in 2012), and trend toward larger primary committees (audit, compensation and nominating). They also are substantially more likely to have other standing committees (86% of S&P 100 companies do, compared to 21% of SV 150 companies in 2012).
  • Female directors are substantially more common among S&P 100 companies whether measured in terms of average number of female directors (in 2012, 2.4 compared to 0.7) or in terms of average percentage of each board that are women (in 2012, 19.8% compared to 8.1%). While female board membership peaked among SV 150 companies in 2008 (average of 12.3% compared to 17.2% for the S&P 100) the overall trend is clearly upward in both groups (compared to averages of 16.5% in the S&P 100 and 5.4% in the SV 150 in 2004). From 2004 through 2012, the percentage of companies with no women directors declined from 4% to 1% in the S&P 100 and 61% to 48% in the SV 150.
  • SV 150 companies continue to have more insiders as a percentage of the full board, while S&P 100 companies continue to have more insider directors measured in absolute numbers.
  • While there is a clear trend toward adoption of some form of majority voting in both groups, the rate of adoption is substantially higher among S&P 100 companies (90% compared to 41% of SV 150 companies in 2012), although it declined 7% from the prior year (compared to a 4% increase for the SV 150).
  • Stock ownership guidelines for executive officers are substantially more common among S&P 100 companies (in 2012, 93% compared to 44%), although that is a substantial increase for both groups over the course of the survey (compared to 58% for the S&P 100 and 8% for the SV 150 in 2004). Similar trends hold for stock ownership guidelines covering board members.
  • While classified boards used to be similarly common among both groups (about 44% for S&P 100 and 47% for SV 150 in 2004), there has been a marked general decline in the rate of their use among S&P 100 companies but not among SV 150 companies (13% for S&P 100 compared to 48% for SV 150 in 2011) – though that reflects a 5% increase for the S&P 100 from the prior year (compared to a 2% increase in the SV 150).
  • Stockholder activism, measured in the form of proposals included in the proxy statements of companies, continues to be substantially lower among the high technology and life science companies in the SV 150 than among S&P 100 companies (whether measured in terms of frequency inclusion of any such proposals or in terms of number of proposals). This is true even among the largest companies in the SV 150. [3]

The complete Fenwick & West 2012 Corporate Governance Practices Survey is available here.


[1] Compared to the S&P 100, SV 150 companies are generally much smaller and younger, have lower revenue and are concentrated in the high technology and life science industries. The 2012 constituent companies of the SV 150 range from Apple and Hewlett-Packard (HP) with revenue of approximately $128B and $125B, respectively to Meru Networks (Meru) and Intevac with revenue of approximately $90M and $85M, respectively, in each case for the four quarters ended on or about December 31, 2011. HP went public in 1957, Apple in 1980, Intevac in 1996 and Meru in 2010. Apple’s and HP’s peers clearly include companies in the S&P 100, of which they are also constituent members (seven companies were constituents of both indices for the survey in the 2012 proxy season), where market capitalization averages approximately $88B.
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[2] The top 15, top 50, middle 50 and bottom 50 companies of the SV 150, include companies with revenues in the following respective ranges: $6B or more, $1B or more, $260M but less than $1B, and $83M but less than $260M.
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[3] Among the high technology and life science companies in the top 15 of the SV 150 (all of which are of a scale similar to S&P 100 companies), only 53% had at least one stockholder proposal included in the company’s proxy statement (an increase from 43% in the 2011 proxy season), the average number of proposals ( among those with any) was 2.0 (down from 2.2 in the 2011 proxy season) and only one had more than three proposals during the 2012 proxy season (compared to 70% of S&P 100 companies with an average of 2.7 proposals and 17% having more than 3 proposals – substantially the same as during the 2011 proxy season).
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