20th Annual Corporate Governance & Executive Compensation Survey Released by Shearman & Sterling

SHEARMAN & STERLING RELEASES 20TH ANNUAL CORPORATE GOVERNANCE & EXECUTIVE COMPENSATION SURVEY

Global law firm Shearman & Sterling released the 20th edition of its annual Corporate Governance & Executive Compensation Survey which examines the corporate governance and compensation practices of 100 of the largest U.S. public companies listed on the NYSE and Nasdaq. Shearman & Sterling has been chronicling developments in corporate governance and executive compensation matters since 2003.

While shareholders and boards continue to wrestle with traditional governance concepts, new challenges have emerged for companies that require additional focus from management and boards of directors. This year’s survey found that amid the continued increased calls for transparency by shareholders and other stakeholders and evolving disclosure requirements related to environmental, social and governance (ESG) matters, companies have shifted their focus and commitments in stride. From the increased attention on the board agenda, to the rise of ESG officers to setting climate-related targets and goals, companies are making significant changes to chart a course to respond to the demands presented by a growing number of stakeholders.

As with past years, Shearman & Sterling's survey explores key issues including human capital management; diversity and inclusion (D&I) practices; ESG metrics; cybersecurity and risk management; governance practices of newly public companies; compensation clawback policies; CEO pay ratio; and shareholder activism, among others.

Key insights and findings presented in this year’s report include:

ESG: More than half (60%) of surveyed companies incorporated ESG metrics into their executive compensation programs - a 19% increase from the previous year. Results also showed a growing emphasis on ESG principles permeating other areas of corporate governance with 73 of the Top 100 Companies setting a net zero carbon/greenhouse gas emissions target and 84 of the Top 100 Companies stating that a “social purpose” is important to the corporation.

D&I: Companies vary considerably in how they present information regarding board diversity in their proxy statements. The number of Top 100 Companies that presented information about the diversity of their boards on a director-specific basis increased from 2021 to 2022, from 26 to 43 respectively. The survey also found that 71 of the Top 100 Companies had 30% or more women on the board, up from 58 companies in 2021. Additionally, 15 board chairs of the top 100 Companies are women in 2022, up from 6 in 2021.

Human Capital Management: Nearly 75% of companies disclosed information on recruitment and hiring practices; however, only 60% of companies chose to disclose information on turnover or retention rates.

Cybersecurity and Risk Management: Cybersecurity, data protection and related risk management discussions continue to be areas of focus for directors. According to the survey, boards and/or board committees are taking on more responsibility for cybersecurity matters, with 56% of companies specifically identifying directors with cybersecurity or data security experience this year, up from 53% in 2021.

Leading up to the release of this report, the SEC has been extremely active. In addition to providing a more in-depth look into these areas, the report provides an overview of the current corporate governance landscape and identifies best practices for boards grappling with these numerous rule proposals.

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