The best practices and processes through which companies manage their corporate affairs have long been analyzed and discussed under the “corporate governance” umbrella. Corporate governance practices and trends among large public companies are often presented as a benchmark for all companies. Less often discussed are the industry-specific practices tailored by companies to fit their businesses.
One Silicon Valley law firm, Fenwick & West LLP (Fenwick), has taken a closer look at these differences. Fenwick collects and compares data on the corporate governance practices of large publicly traded companies and technology and life science companies via an annual survey. In an article entitled Corporate Governance: A Comparison of Large Public Companies and Silicon Valley Companies, Fenwick compares the governance practices of companies included in the Standard & Poor’s 100 Index (S&P 100) against those of the technology and life sciences companies included in the Silicon Valley 150 Index (SV 150).
Fenwick identifies a number of significant findings, summarized as follows:
- Dual-Class Voting Stock Structure: While dual-class voting stock structure has historically been more prevalent among S&P 100 companies, it has been gaining popularity among SV 150 companies in recent years and is now practiced by 11.3% of SV 150 companies, compared to 9.0% of S&P 100 companies.
- Classified Boards: Classified boards (where the term length of each director is dependent upon his or her classification) are significantly more common among SV 150 companies, accounting for about half of all companies. In contrast, the use of classified boards among S&P 100 companies is on a steady decline, accounting for only 4% of companies in 2016.
- Majority Voting: The implementation of some form of majority voting has been consistently increasing among companies in both cohorts, now accounting for 95% of S&P 100 companies and 55% of SV 150 companies. The increase is especially dramatic among S&P 100 companies: rates rose in those companies from just 10% in the 2004 proxy season to 95% in 2016.
- Stock Ownership Guidelines: The prevalence of stock ownership guidelines is increasing among both cohorts, with the SV 150 recently surpassing the S&P 100 in terms of frequency.
- Stockholder Proposals: Stockholder activism is significantly lower among SV 150 companies, although a downward trend has been observed among both grounds. 2016 saw no contested director elections among either group.
- Executive Officers: While the number of executive officers is trending downward among both groups, the number is significantly lower among SV 150 companies.
- Leadership: Combined Chair/CEO positions continue to be significantly more common among S&P 100 companies at a rate of 69%, compared to approximately one third for SV 150 companies.
- Board Meeting Frequency: Companies in the SV 150 tend to hold more board meetings than their S&P 100 counterparts, despite an overall downward trend among both groups.
- Board Size and Composition: The overall number of directors is substantially lower among SV 150 companies and while the prevalence of insider directors is decreasing among both groups, the role continues to be more common among SV 150 companies.
- Board Diversity: The presence of female directors continues to increase. The rate of increase is higher among SV 150 companies. Of note, SV 150 companies report increasing numbers of female directors and declining numbers of boards without female members. Among the SV 150, 74% of companies now have at least one female director.
A full copy of Fenwick’s 2016 report can be obtained here.
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The author would like to thank Erika Anschuetz, articling student, for her assistance in preparing this legal update.
 David A. Bell, Fenwick & West LLP, “Corporate Governance: A Comparison of Large Public Companies and Silicon Valley Companies” (2016) Harvard Law School Forum on Corporate Governance and Financial Regulation.