The Society of Corporate Secretaries & Governance Professionals and the Ernst & Young LLP Release Study of Corporate Governance Practices and Trends of 3,000 US Companies

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Historically, little attention has been paid to corporate governance practices at small- and mid-cap companies. This new and comprehensive review from the Society of Corporate Secretaries & Governance Professionals and the Ernst & Young LLP Corporate Governance Center provides a look into the governance practices of small- and mid-cap companies and how these practices changed throughout the past five years.

To provide insight into the corporate governance practices of small- and mid-cap companies, The Society of Corporate Secretaries & Governance Professionals (the Society) and the Ernst & Young LLP Corporate Governance Center today released Governance trends and practices at US companies: a review of small- and mid-sized companies. The new report offers a unique and comprehensive review of the governance and compensation practices of companies based on market capitalization and industry, and where appropriate, considers the historical landscape. Additionally, the publication highlights emerging trends in governance and compensation practices among the smaller companies. The data-intensive report is based on actual company data as disclosed in proxy statements filed with the Securities and Exchange Commission and may serve as a reference guide for individuals serving in corporate governance roles.

“Corporate governance professionals finally have a resource that describes governance trends by company size and industry with a focus on small and mid-cap companies,” said Stacey Geer, Chair of the Society’s Small & Mid-Cap Companies Committee and Senior Vice President & Associate General Counsel of Primerica. “The report is clear and concise, and I appreciate that it calls out noteworthy governance practices that are distinct for smaller companies. I will use this report regularly to assist our Board in evaluating our governance practices.”

Key findings include:

1. There is a significant ongoing transformation in the structure of director elections and board leadership.

  • Companies are moving from staggered to annual elections for the full board, and implementing majority voting requirements (versus plurality voting), although the pace of change is slower among smaller companies. The number of small- and mid-cap companies with annual elections is at about 50% and 60% respectively, compared to about 85% for large-cap companies.

2. Board composition decisions are shaped by efforts to balance existing, more seasoned directors with new perspectives, even as board and key committee sizes decline.

  • Independent board leadership is becoming more prevalent and boards are increasingly favoring the use of independent board chairs and lead directors. Small-cap companies are most likely to have an independent board chair with larger companies preferring an independent lead director.
  • Average age and tenure of directors are up.
  • Small-cap companies tend to have smaller boards and they tend to be younger. Audit committee members tend to be slightly younger, and have less tenure than members of other key committees.
  • There is little change in gender diversity, with overall level of diversity at around 11%. About a quarter of mid-cap and 45% of small-cap companies have no women directors.

3. Compensation practices and values vary significantly based on company size and industry.

  • Total compensation increased more rapidly for CEOs than for all other NEOs and the difference in change between CEOs and other NEOs was more pronounced for large-cap companies than for small- and mid-cap companies.
  • Smaller companies tend to not use stock options or maintain a pension plan for their executives. Also a smaller percentage of small-cap companies provide change in control or termination payouts to their CEOs compared to mid- and large-cap companies.

4. Investors are more influential on corporate governance.

  • Investors are driving change and prioritizing governance reform in board structure, takeover protections and board composition to enhance board accountability to shareholders. While investors have historically focused on larger companies, they are beginning to pay more attention to the practices of smaller companies.

“Companies of all sizes will find this report helpful when assessing their governance practices relative to peers and broader trends,” said Allie Rutherford, Associate Director of the Corporate Governance Center at Ernst & Young LLP. “This study’s significance lies in its comprehensiveness. The report looks at actual board and governance data of 3,000 US companies and highlights the governance practices of smaller companies, which often go overlooked.”

Key differences in the governance practices of small-cap companies from that of their larger counterparts include:

1. Annual elections:

  • Evenly split on annual elections vs. staggered boards
  • Majority voting in director elections is not common practice

2. Board composition:

  • More likely to have an independent board chair than lead or presiding director
  • Directors less likely to serve on other public company boards
  • Smaller board sizes and key committees tend to meet less often
  • Significantly less likely to include a woman on the board

3. CEOs:

  • Less pronounced increase in CEO pay
  • CEO compensation less likely to include use of options, pension programs or deferred compensation plans

4. Investor voting:

  • Greater percentage of director nominees receive votes against
  • Fewer shareholder proposals filed at fewer companies but these proposals see higher average voting support

This report covers companies in the Russell 3000 index, and data is from the Ernst & Young LLP Corporate Governance Center’s proprietary Corporate Governance Database.

For more information and to access Governance trends and practices at US companies: a review of small- and mid-sized companies and other reports, visit

About Society of Corporate Secretaries and Governance Professionals

Founded in 1946, the Society of Corporate Secretaries and Governance Professionals, Inc. (the "Society") is a non-profit organization (Section 501(c)(6)) comprised principally of corporate secretaries and business executives in governance, ethics and compliance functions at public, private and not-for-profit organizations. Members are responsible for supporting their board of directors and executive management in matters such as board practices, compliance, regulation and legal matters, shareholder relations and subsidiary management.

About Ernst & Young LLP’s Corporate Governance Center
Ernst & Young LLP’s Corporate Governance Center (EYCGC or the Center) offers balanced insights and data-rich content and analysis that foster alignment and bridges gaps among management, boards of directors and investors – raising awareness, creating understanding and serving as a conduit of information. The Center’s insights and content are supported through its proprietary corporate governance database, relationships with outside governance organizations and ongoing conversations with members of the investor and governance community.

About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information, please visit

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. This press release is issued by Ernst & Young LLP, a member firm providing services to clients in the US.

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Lauren Condoluci
Ernst & Young U.S. LLP
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