A sharper focus on board refreshment.

• Position: BOARD REPORT

This year's study tracked 1,428 companies and 13,453 directorships, reflecting their most recent disclosures for annual shareholder meetings for the one-year period ending June 30, 2014. Key findings from this year's study include:

* The number of companies with independent board leadership is steadily increasing, and has been for several years. The combined chair/CEO position is on the decline, and the number of independent board chairs is increasing. While the majority of independent board leaders are still lead directors, and not chairs, the proportion of companies with lead directors has decreased at both MidCap and SmallCap companies in response to the increasing number of independent chairs.

* Shareholder-friendly trends are continuing in board elections, as more companies allow for annual elections and adopt majority vote standards. The majority of companies in the S&P 1500 hold annual elections for directors. While this has been the norm for a number of years at larger companies, for the first time since our analysis began in 1996 more than 50% of SmallCap companies have declassified their boards and turned to annual elections for directors. At the same time, over half of all study companies now have a majority vote standard for director elections for the first time. In 2013, just under 50% of the S&P 1500 had a majority vote standard; in 2014, that number shot up by over five percentage points to 55%. Nearly 90% of S&P 500 companies have a majority vote standard.

* The growing attention given to increasing diversity in recent years is becoming evident in boardroom makeup, especially the substantial attention given to increasing gender diversity. The number of female directorships increased by two percentage points, to 16% of all board seats in the S&P 1500. Also, 81% of all study companies have at least one female director, which is a new high.

* Board refreshment in the S&P 1500 increased in 2014, and director turnover is greater, as evidenced by both the decline in average director tenure for the first time in seven years and the decline in average director age for the first time in five years.

* The profile of an average new director reflects trends seen in other areas. New directors, or directors who have sat on a board for under two years, tend to be younger--which may be unsurprising, but is nonetheless an indication that nominating committees are looking outside the realm of established directors for candidates to fill the ranks. New directors are also more likely to serve on fewer, if any, other boards, and to be currently employed as executives (as opposed to longer-tenured directors, who are most likely to be "retired"). These two facts further support the conclusion that nominating committees are looking to younger executives at otherfirms with limited prior board experience to refresh boardroom ranks. New directors are also far more likely to be female or an ethnic minoritythan longer-tenured directors.

"Though we do not see a wholesale reshaping of corporate boards, study findings clearly point to a sharper focus on board refreshment more than at any time over the past decade," said Dr. Martha Carter, ISS global head of research. "One notable result of this trend has been accelerated movement toward greater board gender diversity, with 81% of study companies now having at least one female director, compared with just 69% in 2006."

For more ISS board research visit www.issgovernance.com.

Dr. Martha Carter: Noteworthy declines seen in average director tenure and age.

Ed. Note: Leading proxy advisor Institutional Shareholder Services Inc. (ISS) annually undertakes a detailed review and analysis of the structure and composition of boards of directors among S&P 1500 companies in order to identify the latest practices and emerging trends. In March the firm released the 2015 edition of its annual Board Practices study. Following are some highlights.

DELTA AIR LINES INC.

Atlanta, GA

has added to its board

Thomas E. Donilon

Partner and Vice Chairman

O'Melveny & Myers

Washington, DC

He returned to the law firm in 2014 after serving in the Obama administration for over four years, most recently as senior security advisor, overseeing the U.S. National Security Council staff. He served as the President's personal emissary to a number of world leaders, including Xi Jinping, Vladimir Putin, Benjamin Netanyahu, and King Abdullah of Saudi Arabia. He has worked closely with and advised three U.S. Presidents since his first position at the White House in 1977.

Delta was named the 2014 Airline of the Year by Air Transport World magazine. Revenues are $40 billion.

DUPONT CO.

Wilmington, DE

has added to its board

Edward D. Breen

James L. Gallogly

Breen currently serves as chairman of Tyco International PLC. He was chairman and CEO of the company from 2002 until 2012. He is a director of Comcast Corp. and a member of the advisory board of PE firm New Mountain Capital LLC. Gallogly served as the chairman of the management board and CEO of Lyondell-Basell Industries N.V. from 2009 to 2015. Previously he was executive vice president of exploration and production at ConocoPhillips.

DuPont offers a range of science and technology-based products. Revenues are $35 billion.

EBAY INC.

San Jose, CA

has added to its board

Tony Bates

President

GOPRO INC.

San Mateo, CA

Gail McGovern

President and CEO

American Red Cross

Washington, DC

Bates previously served as EVP of Microsoft's Business Development and Evangelism group and was CEO of Skype from 2011 to 2013. Earlier he worked at Cisco. McGovern (pictured) has been in her current position since 2008. She has more than 28 years of corporate experience, including serving as president of Fidelity Personal Investments, and has been a faculty member of Harvard Business School. She is a member of President Obama's Management Advisory Board. Also joining the eBay board: Bonnie Hammer, chairman of NBCUniversal Cable Entertainment; Perry Traquina, who spent a 34-year career at Wellington Management, retiring in 2014 as chairman, CEO and managing partner; Frank Yeary, executive chairman of CamberView Partners, who was vice chancellor of the University of California, Berkeley, from 2008-2012 and previously held leadership positions at Citigroup Global Markets; and Jonathan Christodoro, managing director of Icahn Capital LP, who was appointed to eBay's board as a result of a standstill agreement with Carl Icahn.

eBay provides platforms and services for online commerce. Revenues are $18 billion.

EMC CORP.

Hopkinton, MA

has added to its board

Jose Almeida

Chairman and CEO

COVIDIEN PLC

Minneapolis, MN

Donald J. Carty

Almeida (pictured) has served as chairman of Covidien since 2012 and as president and CEO since 2011. Carty is a retired vice chairman of Dell Inc. and former chairman and CEO of AMR Corp., the parent I company of American Airlines. Both new directors have joined the board as part of a standstill agreement with activist investor Elliott Management Corp.

EMC develops information infrastructure technologies and services. Revenues are $24 billion.

EXLSERVICE HOLDINGS INC.

New York, NY

has added to its board

Deborah Kerr

EVP-Chief Product and Technology Officer

Sabre holdings Corp.

Southlake, TX

In her current position since 2013. She previously had senior leadership roles at FICO, a provider of analytics and decision management technology, Hewlett-Packard, Peregrine Systems, and a 10-year tenure with NASA's Jet Propulsion Laboratory.

ExlService offers operations management, analytics, and other services. Revenues are $488 million.

FIREEYE INC.

Milipitas, CA

has added to its board

Kimberly E. Alexy

Since 2005 she has served as principal of Alexy Capital Management, a private investment management firm she founded. She has more than 20 years of experience in capital markets, corporate finance and investments, with expertise in equity analysis and financial modeling.

FireEye provides products and services for detecting, preventing, and resolving advanced cybersecurity threats. Revenues are $340 million.

FREIGHTCAR AMERICA INC.

Chicago, IL

has added to its board

Malcolm F. Moore

President and CEO

DIGI-STAR LLC

Fort Atkinson, WI

In his current position since 2013 with Digi-Star, a supplier of electronic components and software used in agriculture. Between 1999 and 2010 he worked in executive roles at Gehl Co., a manufacturer of construction equipment.

FreightCar manufactures railcars and coal cars. Revenues are $599 million.

GENERAL EMPLOYMENT ENTERPRISES INC.

Naperville, IL

has added to its board

George A. Bajalia

Dr. Arthur B. Laffer

Chairman

LAFFER ASSOCIATES

Nashville, TN

Bajalia has over 30 years of business experience, providing consulting, advisory and interim management services to executive management, boards, business owners and private equity firms. Laffer was a member of President Reagans Economic Policy Advisory Board from 1981 to 1989 and is widely credited as "The Father of Supply-Side Economics." His firm provides investment research services.

General Employment provides staffing services for IT and engineering professionals. Revenues are $40 million.

GENERAL MOTORS CO.

Detroit, MI

has added to its board

Linda Gooden

She started her career at the former Packard Electric Division at GM before working for Lockheed Martin for 34 years, holding several senior leadership positions. She retired as executive vice president in 2013.

GM designs, builds, and sells cars, trucks and auto parts. Revenues are $156 billion.

GOODYEAR TIRE & RUBBER CO.

Akron, OH

has added to its board

Laurette T. Koellner

She most recently was executive chairman of International Lease Finance Corp., a subsidiary of AIG, until its 2014 sale to AerCap Holdings. Previously she spent 11 years with Boeing Co. in a variety of financial and business leadership roles, including president of Boeing International.

Goodyear manufactures tires and related products. Revenues are $18 billion.

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