Thursday, November 26, 2015

Decline in U.S. Domestic Firms?

The decline in the number of domestic U.S. corporate listings on public exchanges has been a concern for governance professionals because it implies a shrinkage in the number of public company boards and opportunities for board service.

The trend has been noted  by  others since 2011,  including  “Wall  Street’s  Dead  End” by Felix Salmon in  The  New  York  Times  (February  13, 2011),

“Missing:  Public  Companies  –  Why  is  the  Number  of  Publicly  Traded  Companies  in  the  US  Declining?” by Alix Stuart in CFO  Magazine (March  22,  2011), 

“The  Endangered  Public  Company:  The  Big  Engine  that  Couldn’t” in  The  Economist  (May  19,  2012),

and  “The State  of  the  Public  Corporation:  Not  So  Much  an  Eclipse  as an  Evolution” by Conrad S. Ciccotello in the Journal of Applied Corporate Finance (Fall  2014)

The most recent report is “The U.S. Listing Gap” by Craig Doidge, G. Andrew Karolyi, and RenĂ© M. Stulz in their NBER Working Paper No. 21181 (Issued May 2015).

In all of the above instances, the data only goes as far as the S&P Factbook and the World Bank data reports up to 2012.  At that time S&P discontinued reporting on U.S. domestic exchange listed firms.

The World Exchange Federation took over the reporting and included foreign exchange listed companies in the totals.  Their data is as of January of each year and currently includes 2015 data.  What is interesting is that the shrinkage of U.S. domestic listed firms appears to have bottomed out in 2013 and showed a slight upswing in 2014 and 2015.  This slight uptick was also evident among foreign listed firms.

So, any analysis of the U.S. Listing Gap now needs to include an assessment of this most recent change in direction.  We shall see what January 2016 has to offer very soon.

Women Directors in 2016

In the November 15, 2015 issue of Fortune, the magazine forecast the 2016 projected number of women directors at Fortune 500 firms.  In an online article, Erika Fry detailed the number for 2015 as well.  The latest data from Catalyst was only to 2013, so we extrapolated the figures in an estimate for 2014.

Fortune and Ms. Fry continue to focus on the increase in women directors.  As we have reported on multiple occasions, we ought to be looking also at the overall decline in both total number of directors and the number of male directors.  While Fortune reports that 1,057 women represented 19.5% of the total of 5,415 directors in 2015 and 1,130 women will represent 21% of the total of 5,381 directors in 2016, this represents an increase of 6.9% in women directors at the expense of a decline of 3.9% for men and an overall decline in total number of directors of 1.8%.

Why has there been no focus on this trend which has continued without interruption since the early 1990s when Catalyst began reporting women directors at the Fortune 500 firms?  Why is this happening?  Is it because of increased turnover and attention to tenure of existing board members? Is it an indication of heightened risk due to cybersecurity concerns, activist shareholder suits, or the increased hourly demands on director time?

Even more fundamentally, do women understand what is happening in these long term boardroom changes?

Saturday, October 31, 2015

An Update From Howard Sherman of MSCI ESG Research Inc.

The latest memo (October 30, 2015) from Howard Sherman, Executive Director of MSCI ESG Research Inc., is a welcome update from MSCI regarding their Diverse Director DataSource, MSCI’s database of women and minority board of director candidates.

Mr. Sherman begins by saying that “As you know, the issue of board diversity continues to attract investor and company attention.” That’s like saying, shareholder activism is on the rise.  Or, we read a lot in the media about Black Lives Matter.

The 3D database issued a press release announcing they were in business July 19, 2012, starting with 400 profiles in place and another 300 profiles in the queue.  That’s the last data we’ve heard from Mr. Sherman and his folk.

"Diverse Director DataSource (3D) Opens for Business"

A bit earlier, on October 4, 2011, I posted an entry on the 3D (Diversity Director DataSource) blog which challenged us all to begin to put performance metrics behind our efforts to increase the numbers of diverse candidates actually sitting on corporate boards of directors.

"To Ensure That We Succeed"

I challenged the leaders of the then-GMI 3D Registry in three specific ways:
  1. How would you know if your 3D Registry were succeeding?
Is success defined by a significant increase in qualified candidates listing themselves on the Registry or by a significant increase in the number of qualified candidates selected from the Registry to serve on public or private company boards per year?

     2.  Would another measure of success be based on who is using the 3D Registry?

Would success be defined by the number of boards that inquired of the Registry per month? Or would it matter if board executive search professionals accessed the Registry on a regular basis?

     3.  What would the leaders at the 3D Registry offer by way of metrics to measure their own success?

Is the 3D Registry an innovation with creative talent at the helm or is this just another fly by night database that sits on the electronic shelf rather than the physical shelf?

We have on October 30, 2015 – four years later – an UPdate that tells us nothing with regard to the hoped-for metrics above.  Instead, we get more of the same ol’ same ol’: 
  • MSCI ESG Research teams “made an effort” to include the 3D in their presentations “when board diversity was on the agenda.”
  • They gave “background briefings” to reporters.
  • They referenced the 3D in the MSCI ESG Research’s 2014 Women on Boards survey. (A search of the report revealed no references whatsoever in the text, located at
  • They “engaged” with other board diversity activist organizations.
  • In the summer of 2015, they mailed a communication to their 23,000 contact list to tell them how they might use the 3D Registry.
  • They “set up a number of logins for firms and individuals” to search the 3D Registry.
  • In 2014, CalPERS/CalSTRS wrote to 130 of the largest California headquartered-firms with ZERO women directors; over 30% responded; at total of 27 appointed at least one woman to their board. (it is not clear if these 27 were companies appointing their FIRST woman to their board.)

The people at MSCI don’t seem to be able to distinguish efforts from results.  Even the 2014 Women on Boards survey is a mish-mash of global economy comparisons that tells us little about whether progress is occurring or not.

It reminds me of the people who keep trying to sell me t-shirts “to raise awareness” about an issue.  I’m perfectly AWARE.  But, so far, I am not impressed by any of the databases that pretend to be able to actually advance the specific number of diversity candidates on boards. 

Tell me how many diversity candidates are now in the Registry? How many were added each year since we started playing this game? How many candidates have become disenchanted and left the Registry each year?  How many companies have used the Registry to search and how many executive search inquiries have been posted on the Registry monthly? How many of these talented candidates have actually been placed on a company board of directors?

Why has it taken you this long to even UPDATE the marketplace?