Five trends in board refreshment: while directors are of many minds about the mechanisms for doing so, they are taking more seriously than ever the challenge of genuinely refreshing their boards.

• Author: Gwin, Bonnie
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER

In corporate governance, board recruitment increasingly means board refreshment--continually improving the board's ability to oversee the successful operations of the company. Reasonable people disagree about the best mechanisms for refreshment, but agree on its goals: a board composed of diverse members whose experience, competencies, and perspectives provide the optimal mix for overseeing the company at each point in its evolution.

For the past several years, our firm has conducted two ongoing studies that together provide a kind of parallax view of board refreshment. Board Monitor, initiated in 2009, tracks data on new appointments to Fortune 500 boards by gender, ethnicity, age, experience, and other attributes. The Heidrick & Struggles Board of Directors Survey, a global survey conducted annually, tracks developments across a wide range of issues in board governance.

Here is what the latest editions have to tell us about trends in board recruitment and refreshment:

CEOs and CFOs Rule the Roost

In 2014, Fortune 500 companies filled 339 new board seats with independent directors. Current or former CEOs claimed 159, or 47%, of those seats. Current or former CFOs claimed 69, or 20%. This marks the fifth time in the past six years that current and former CEOs and CFOs together claimed two-thirds or more of new appointments.

At 47%, the CEO share of new appointments represents a drop of eight percentage points from a six-year high of nearly 55% in 2013. But it is a return to the average over the previous five years of just under half of new appointments. At 20%, the CFO share of 2014 appointments rose more than five percentage points over the figure for 2013. Current and former CEOs and CFOs together attained their largest share of new appointments over the past six years--some 70%--in 2009, immediately following the global financial crisis (see Exhibit 1).

Women Gain Momentum

Despite the preponderance of new appointments continuing to go to CEOs and CFOs, the overwhelming majority of whom are men, the rate at which boards are bringing on female directors appears to be accelerating. For the second consecutive year, the percentage of new female directors increased by more than three percentage points. Of the 339 new directors recruited in 2014, 99 are female, representing 29.2% of the total. That compares with 25.9% in 2013 and 22.8% in 2012. In the three years before 2012, the percentage increased only about one to two points per year.

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