The trend towards appointing Independent Board Chairs has plateaued in the US

According to a study published by the Harvard Law School Forum on Corporate Governance, the trend of appointing Independent Board Chairs has reached a plateau. Approximately 36% of S&P 500 firms have Independent Chairs, a figure unchanged since 2021. Conversely, 44% of S&P 500 companies have their current CEO doubling as the Board Chair, a slight increase from 42% in 2022. Despite this, the average shareholder support for separating the roles of CEO and Chair remains around 30%, and around 20% of Chairs are non-Independent directors.

Company size often dictates the Board’s leadership model. Larger companies frequently combine the roles of CEO and Board Chair, while smaller companies tend to opt for an Independent Chair. Flexibility in determining leadership structures is on the rise, with 76% of S&P 500 companies allowing the Board to decide based on circumstances, according to the study.

The qualifications for Independent Board Chairs are evolving, with a slight decline in business strategy experience and an increase in experience related to ESG, business operations, and finance. The decrease in Chairs with strategic experience raises concerns, as this experience is crucial for providing informed guidance on a company’s long-term strategy.

Despite increasing responsibilities, the average frequency of Board meetings has dropped below pre-pandemic levels. Companies are holding more informal calls, and the flow of information has shifted through online portals. Although the decline in reported Board meetings may raise concerns, maintaining in-person meetings is crucial for fostering trust and respect among Board members.

Companies are adapting to expanding responsibilities by assigning ESG-related responsibilities to existing committees rather than creating stand-alone ESG committees. The allocation of ESG responsibilities often falls under nominating/governance committees.