Press release

Independent Board Leadership Among S&P 500 Companies Grows from 8% to 71% since 2002, Says EY Report

New York, 5 May 2014

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Gender diversity gap still exists within IPO company boards, with women representing only 8% of Directors

Investors are challenging companies across a wide spectrum of governance practices as their influence in the boardroom has grown. To help IPO-bound companies develop plans to attract maximum long-term investor support by responding to these new governance expectations, EY released a paper today, “Charting the right course: Insights on board governance for US IPO-bound companies.” The report, which examines the governance practices of companies in the Standard & Poor’s 500 index (S&P 500), as well as companies that went public in the US and were included in the Russell 3000 in 2013, identifies four areas where companies can develop a plan now to address.

“Demonstrating good governance practices, or robust plans to establish and finalize those practices, helps build investor confidence,” said Allie Rutherford, Director of Corporate Governance in the EY Center for Board Matters. “When companies demonstrate an understanding and a meaningful level of responsiveness on corporate governance matters, many investors are more likely to give the benefit of the doubt during a rough patch – an important element in long-term success.”

What should leading IPO-bound companies do? EY outlines four areas of focus.

  • Independent board leadership: Independent board leadership has grown substantially in recent years among S&P 500 companies – from just 8% in 2002 to 71% in 2013. However, just over half of IPO companies have independent board leadership. IPO companies often start out as a public company with separate chair and CEO roles, but move away from this structure by combining duties when they bring on a new CEO.
  • Annual director elections: Large companies are moving away from classified boards and plurality voting in director elections. Instead, they are focusing on demonstrating greater board accountability to investors. Given this momentum, investors are now looking at smaller companies to adopt these measures as well. Companies that can demonstrate that they have plans in place regarding director elections and majority voting are very likely to fare better with investors.
  • Diversity and independence in board composition: Investors have not been shy about their expectations of gender and ethnic diversity, as well as independence. Women directors make up 18% of the boards of S&P 500 companies but only 8% of IPO company boards.  This is one area where IPO companies have an opportunity to move beyond more mature companies. Although IPO company boards tend to be seriously lacking in gender diversity, IPO companies have an advantage mature companies often do not – that of flexibility in changing the composition of their boards.
  • One share – one vote: Nearly all investors believe that each share of a public company’s common stock should have one vote, and that voting rights should be proportional to holdings. Companies with dual- or multi-class shares are increasingly being targeted by shareholders. IPO companies, which are two to three times more likely to have dual-class stock than more established companies, are best served by moving away from such a structure.

“IPO companies often have some distance to travel before attaining what investors would consider maturity when it comes to governance. But, in today’s hot market, the path from IPO to an index can be a short one,” said Jackie Kelley, EY Americas IPO Leader. “This means that companies should act now. Though some investors may give new IPO companies time for their governance practices to evolve, companies should develop a plan to address investor expectations as early as possible to attract maximum long-term investor support.”

To view the full report, please visit

About EY's IPO offerings
EY firms are leaders in helping to take companies public worldwide. With decades of experience our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight. Our EY Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source.

About The EY Center for Board Matters
Effective corporate governance is an important element in building a better working world. The EY Center for Board Matters is committed to bringing together and engaging with boards, audit committee members and investors to exchange ideas and insights. Using our professional competencies, relationships and proprietary corporate governance database, we are able to identify trends and emerging governance issues. This allows us to deliver timely and balanced insights, data-rich content and practical tools and analysis to boards, audit committees, institutional investors and others interested in governance topics.

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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This news release has been issued by Ernst & Young LLP, an EY member firm serving clients in the US.