Board Members Education

Part
01
of two
Part
01

Board Members & Mandates - US

After an extensive search, we have determined that the total number of board members and board mandates in the United States is not available. However, we were able to gather some useful information such as the number of board members, board sizes, compositions, and mandates in S&P and 500 boards. Our findings and an explanation of our research strategy are detailed below.


NUMBER OF BOARD MEMBERS


BOARD SIZE

  • The average board size of S&P 500 companies is 10.9, S&P MidCap 400 is 9.7 (Ref: Source 1)
  • The average board size in S&P SmallCap 600 is 8.5, S&P 1500 is 9.6 and Russell 3000 is 9.1 (Ref: Source 1)
  • There is only one Director required for a Delaware Company and the same person can have other titles like President, Vice-President, etc.
  • According to DGCL, section 141(b), a board of directors should consist of one or more members and beyond the requirement of at least one director, corporate law does not set a minimum or a maximum. (Ref: Source 5)
  • The ISS stated that a company should have no fewer than six nor more than 15 directors, with a board size of between nine and 12 directors considered ideal.

BOARD COMPOSITION

MANDATES IN S&P 500 BOARDS

  • About 71% of boards in 2018 had a mandatory retirement age. Of those, 44% of boards had a mandatory retirement age of 75 and about 96% of boards had a mandatory retirement age of 72.


NUMBER OF COMPANIES IN UNITED STATES

MANDATORY BOARD MEMBERS

  • According to the NYSE and NASDAQ, companies are required to have audit committees of independent directors.
  • According to the requirement of Sarbanes-Oxley Act, all boards of companies with listed securities must have audit committees composed entirely of directors who receive no compensation from the company other than directors’ fees, and who are not affiliated with the company.


RESEARCH STRATEGY

Strategy #1

We began our search by looking for research reports, surveys, and government documents to find any information on the total number of board members and board mandates in the United States. With this strategy, we were able to find the average board size in different companies (ex: S&P 500, Russell 3000). We also found examples of board leadership structures, compensation, and other similar information. We had thought that this strategy might work because some companies conduct research on various topics, and thus may have published information on this topic in their reports. However, there was no information on the total number of board members or mandates in these reports.

Strategy #2

My second strategy was to look for information on government database websites like NAICS and Census.gov, among others. This strategy did not work as there was no information on the number of board members and board mandates. Instead, we found information on the number of companies in the United States by the size of employees, sales, etc. We had thought that this strategy may work as government sources maintain a database on businesses, employees and may have information on this in their databases. We also looked for the information on the total number of companies (small, medium, large) which has a Board of Directors. With this information, we could potentially find the average size of boards in the United States and then calculate the data. However, even this strategy was not possible as there was no such data available on these websites.

Strategy #3

Our third strategy was to look for news articles and press release published on this topic. We found some information on sites like Reuters, Directors and Boards. We hoped this strategy may return information on the total number of board members and mandates in the US since sites like these publish news and articles citing information from studies or surveys that are not available to the public. We did, however, find information about the California state law mandating women directors. However, further information on the number of board members and mandates was not available.

Strategy #4:

Our final strategy was to calculate the information on the number of board members in the United States. We looked for the number of companies with board members in the United States and planned to multiply it with the average board size in the United States. We looked for various reports and articles. However, this strategy did not work as there was no information on the number of companies with board members in the United States. Instead, we found additional statistics on the percentage of women directors in the United States. Our aim behind this strategy was to triangulate the information to provide the number of board members in the United States.

WHY THE INFORMATION COULD NOT BE TRIANGULTED

  • There are no reports or studies conducted to find the total number of board members and board mandates and which categorizes these figures by company size (small, medium & large) and by company status (private versus public).
  • One of the reasons for non-availability of such information could be that the cost to conduct such in-depth survey is likely to be pretty high as there are 16,502,694 companies in the United States and hence, no agencies/organizations have conducted such in-depth research.

CALCULATIONS

Below are the calculations we used to determine the number of directors in each company. The formulas we used are as follows:
  • Number of Board Directors = (Number of Companies x Average size of Directors)
  • The average Board Size in S&P 500 companies is 10.9, S&P MidCap 400 is 9.7, S&P SmallCap 600 is 8.5, S&P 1500 is 9.6 and Russell 3000 is 9.1 (Ref: Source 1)

Number of Directors

  • Number of Directors in S&P 500 companies= (500 x 10.9)= 5,450
  • Numbers of Directors in S&P Midcap 400 = (400 x 9.7)= 3,880
  • Numbers of Directors in S&P SmallCap 600= (600 x 8.5)= 5,100
  • Numbers of Directors in S&P 1500= (1500 x 9.6)= 14,400
  • Numbers of Directors in Russell3000 = (3000 x 9.1)= 27,300
Part
02
of two
Part
02

Board Members & Mandates - Europe1

Information on the total number of board members and board mandates in Europe by company size (small, medium and large) and by company status (private versus public) is not publicly available. In attempting to triangulate an answer, we found information on average board size, women's involvement, and strength of employee representation.

Average board size:

  • From 2006-2016, board size has declined on average in all countries except France, where the average number of board members has increased nearly one percentage point up to 12.4, a value which is slightly higher than the corresponding value for supervisory boards in Germany where it is 12 members on average.
  • At the end of 2016, the smallest boards were English (9.5 directors on average), followed by Italian (10.3 directors) and Spanish boards (10.5 members).

Women's involvement:

The strength of employee representation:

  • The number and/or percentages of representatives on the board vary considerably from country to country.
  • The strength also varies within the specific countries according to type of business structure and financing.
  • In some countries, the number of representatives on boards varies according to number of employees (escalator system).
  • In Croatia and Greece, in eligible companies, the workers are represented by one member on the board. In Spain, eligible trade unions can appoint members.
  • In a number of countries worker representation is set at one-third of the board. This is the case for Austria, Czech Republic, Ireland, Luxembourg (privately owned companies) and the Netherlands.
  • In Poland, the limit is two-fifths or 25%, depending on the ownership.
  • In some countries, the level of representation can be varied with a minimum and maximum set by law. This is the case for Denmark (decided by the shareholders, minimum two seats, maximum one-third), Hungary (can be negotiated, default is one-third of seats), Slovak Republic and Slovenia (defined in articles of association, minimum one-third up to one-half of seats, not the chair)
  • In France, the threshold is set at 200 employees in state-owned companies; two members and up to one-third of board members for the smaller companies, and one-third of board members for the larger state-owned companies.
  • In France, for privately owned companies, the threshold is set at 1000 employees (5000 worldwide).
  • In France, on boards with 12 seats or fewer, the employees have a right to one seat, and on boards with 13 seats or more, they have the right to two seats.
  • In France, representation rights on all boards can be negotiated, the maximum being one-quarter of the board or four seats.
  • In Germany, the law provides for several steps in board representation.
  • The first step is companies with 500-2000 employees, where the employees have the right to one-third of board members.
  • The second step is companies with more than 2000 employees, where the worker representation is one-half of the board; the chairman, the casting vote, is elected by the shareholders.
  • A distinct system is the original system in the iron, coal and steel industry for companies with more than 1000 employees. The employees elect one-half of the board members and the casting vote is a neutral person agreed to by both the employee side and the shareholder side. The employees have a member on the managing board, who can block the appointment of the labor director.
  • In Luxembourg, in state-owned companies, the employees can elect one board member per 100 employees, the minimum being three seats and the maximum one-third of the board.
  • In Norway, the employees can elect a minimum of one member and up to one-third of the board, plus an additional member depending on the size of the company.
  • In Sweden, in companies with less than 1000 employees, the workers can elect two members and up to one-half of the board (depending on the general assembly).
  • In Sweden, in companies with more than 1000 employees and which are operating in several industries, the workers can elect three members and up to one-half of the board (depending on the general assembly).
  • In Slovenia, in companies with more than 500 employees, the employees are additionally entitled to elect one member of the management board, or one executive member of the board of directors.
  • In Poland, in companies with more than 500 employees, the workers can additionally elect one member of the management board.

Other Key findings:

Research Strategy:

What information is not available?

The information on total number of board members and board mandates in Europe by company size (small, medium and large) and by company status (private versus public) is not publicly available.

Why is it not available?

It is likely that no in-depth surveys or studies are done across Europe which includes total number of board members and board mandates and which bifurcates figures by company size and company status.
The reason behind that may be that there are almost 27 million enterprises (source 7) in Europe and the cost to conduct such an in-depth survey is likely to be quite high. Another reason may be that the demand for data on the number of board members and board mandates in Europe may be limited, so no agencies/organizations have conducted such in-depth research. Also, the governments may have such data but they have not made it available to the public.

Methodology:

#1

We first looked for case studies, surveys and other research across sources such as EC.europa, worker participation.EU, EIGE, researchgate and escapeeuropa, which had immense data on board members in Europe, however the data was limited to the threshold of board members per country across Europe.
We also looked for reports published by the government of any country within the EU or authorized regulations of the EU. We looked into reports from Bain, McKinsey, Delloitte, EWOB, oced, Centre on Regulation in Europe and global reporting, where we found data on models of boards of directors in Europe, Responsibilities of Board mandates in general, gender bifurcation, etc. but no information on the total numbers by company size and by company status.

#2

Next we looked for information on the total number of companies (small, medium, large) which have boards of directors and then the average size of boards across EU companies. This way we would arrive at an estimated figure which could give us the number of board of directors by company size which can then be added (small+medium+large) to arrive at a reliable figure. However, we could still not find out whether the companies are private or public because no such data was available. We looked into reports and data from European Union statistical websites such as EC.europa, EUI.EU and third party statistical and infographics websites such as statista, NumberOf.net, Gallup, etc., which usually have infographic data on various continents. However, these covered business demographic statistics of Europe, size of the companies in Europe, population, number of employees, etc., but had nothing on how many of those companies have boards of directors and whether they are publicly or private listed. Hence, this strategy could not be taken further to calculate the data.

#3

We then checked for reports about corporate board diversity in Europe, hoping to find data such as the percentages and straight numbers of female board members, with which we could have then calculated the number of men to find the total number of board members across Europe. We looked into sources like ethicsandboards, boardroomdiversity, weforum and consob, which had data on involvement of women, relationship between board diversity and firm performances and insights on board representation, etc. These were limited to top few companies and not to all European companies. Hence, this strategy could not be taken further.

#4

Last we looked into media reports and articles on this topic where we were hoping to find in-depth information released by news websites citing some quality studies or surveys conducted which were not available to the public. Here we checked media reports and articles from entrepreneur, economist, europeansources, euronews, edition and eubusiness, etc. However, no relevant information was found here. These sites mostly covered information on general business practices in the EU, the latest coverage on new companies joining in and newly hired members in the boards of some companies.
Sources
Sources