MSCI ESG GovReport EntrenchedBoards 20150429 PDF

THEMATIC REPORT
ENTRENCHED BOARDS
Director Tenure and Performance
Ric Marshall
April 2015
APRIL 2015
ENTRENCHED BOARDS | APRIL 2015
CONTENTS
Executive Summary ............................................................................................ 3

Key Findings ....................................................................................................... 3
Introduction ........................................................................................................ 3
Entrenched Boards and Investment Returns ..................................................... 4
The Prevalence of Entrenched Boards .............................................................. 8
Entrenched Boards and Board Refreshment ................................................... 11
Director Tenure and Board Independence in the US ...................................... 12
Appendix I Entrenched Board Criteria ............................................................. 14
Appendix II Board Tenure and Age Statisitics .................................................. 15
Appendix III Sample Company Lists ................................................................. 17
References ........................................................................................................ 21
© 2015 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document. MSCI.COM | PAGE 2 OF 21
ENTRENCHED BOARDS
EXECUTIVE SUMMARY
This report examines the recent performance characteristics of entrenched boards, where
long-tenured and aging directors often serve primarily the interests of family owners,
company founders, or other dominant shareholders.
KEY FINDINGS
 Over the past five years, companies with entrenched boards have on average
significantly outperformed their non-entrenched peers.
 In the US, however, only family firms with entrenched boards outperformed, and
the performance of entrenched founder firms generally suffered.
 Performance differences were even greater among emerging market companies,
where family firms outperformed in general but turned in the highest returns when
served by entrenched boards.
 Entrenched boards are less prevalent in markets such as the UK and France with
more stringent tenure restrictions. If US companies adhered to current UK
standards for assessing director independence, as many as 30% of US companies
would fail to attain independent majority status.
INTRODUCTION
When 95 year old Melvin Gordon passed away this past January, US candy manufacturer
Tootsie Roll lost both its CEO and chairman of the board. Traded on the New York Stock
Exchange for the past 93 years, Gordon had filled both those positions for well over half that
period, beginning in 1962.
Gordon is succeeded as CEO and chairman by his long-time wife, Ellen, who was previously
the company’s president and chief operating officer and a director of the company since
1969. Ellen Gordon is 83.
Also still serving on the Tootsie Roll board are Lana Jane Lewis-Brent, 68, director since
1988; Richard P. Bergeman, 76, director since 2001; and Barre A. Seibert, 73, director since
2005. A new director, Paula Wardynski, 57, has been nominated for election at the
company’s annual meeting on May 4, 2015. Based on Ms. Gordon’s control of nearly 78% of
Tootsie Roll’s voting shares, Ms. Wardynski’s election on that date seems a certainty.
MSCI defines a board composed of directors with such long tenure and advancing ages as an
‘entrenched board.’ Tootsie Roll is also both a family firm and a controlled company, in that
one or more representatives of a controlling family shareholder block are in active service
on the board. And yet throughout the past half century the company has maintained a well-
deserved position among the most consistent dividend paying stocks in US corporate
history, and the company has proven to be a very safe and rewarding investment.
Evaluating the minority ownership risks versus the potential investment rewards presented
by such companies can be difficult for investors. Does a preponderance of aging, long-
tenured directors compromise board independence, and diminish the board’s effectiveness
in representing the interests of shareholders? Or does the presence of such individuals
contribute an invaluable degree of knowledge and deep business experience to such
boards?
ENTRENCHED BOARDS AND INVESTMENT RETURNS

For this analysis we conducted a high level assessment of one, three and five year total
returns for all rated companies, and then compared both average and median values for
each of several different groupings. In the short term the differences are minimal, based on
a comparison of one year total shareholder returns between these various groups, but five
year returns tell a very different story. Results over the five year period suggest that
investors should indeed consider the involvement of entrenched boards, particularly at
family-dominated firms, but as a potentially positive rather than negative attribute of such
boards (see Figure 1).
Performance results for US companies were more complex. Figure 2 shows the five year
performance differences between the US companies surveyed with both entrenched and
non-entrenched boards, based on the average total returns for each group. While
entrenched family firms did quite well, other ownership forms such as entrenched founder
firms did not, and entrenched boards overall were marginal underperformers.
Results for emerging markets exhibited more dramatic differences, as shown in Figure 3,
with family firms overall dominating but with entrenched family firms the strongest
emerging market performers of all.
While exceptionally strong or weak performance by a few key firms did contribute to these
results, the same overall performance differentials by ownership type remain even when
such outliers are excluded, and all sectors are represented, as shown in Figure 5.
Figure 1 Average five year total returns for all companies
Entrenched Non-Entrenched
180
% Total Shareholder Return (Apr 2010 - 160

+26% gap +9% gap
140
+18% gap
120
Mar 2015)
100
80
60
40
20
0
All Companies (n=6507) Family Companies (n=697) Founder Companies (n=911)
Average 5 year total returns for all rated companies, entrenched versus non-entrenched boards.
Figure 2 Average five year total returns for all US rated companies
200
% Total Shareholder Return (Apr 2010 -
180
-30 % gap
160
-7 % gap +31% gap
140
Mar 2015)
120
100
80
60
40
20
0
Average total returns for all US rated companies, comparing entrenched versus non-entrenched boards.
Figure 3 Average five year total returns for all Emerging Markets rated companies
300
% Total Shareholder Return (Apr 2010 -
250
+50% gap
200
Mar 2015)
150 +40% gap

+75 % gap
100
50
0
Average total returns for all Emerging Market rated companies, comparing entrenched versus non-
entrenched boards.
Despite the aggregate underperformance of entrenched founder companies, Google and

Berkshire Hathaway top the US list of highly successful companies with entrenched boards.
Nine of Google’s eleven directors have served on that board for 10 or more years, and four,
including the company’s co-founders, have been directors for 15 or more years. The
Berkshire Hathaway thirteen member board includes ten directors with 10 or more years of
service, with five having served for 15 or more years. Seven Berkshire Hathaway directors
are age 70 or over, and five are over 80, including company founder, CEO and Chairman,
Warren Buffet. Berkshire Hathaway Vice Chairman Charles T. Munger, who at 91 is one of
the oldest active directors in the US, also serves on the entrenched boards of Costco
Wholesale and Daily Journal Corporation, where he is currently Chairman.
Other US entrenched boards clustered around a well-known founder or controlling

shareholder include CBS and Viacom (Sumner Redstone) and Liberty Media, Liberty Media,
Liberty Global and Lion’s Gate Entertainment (John C. Malone, PhD). News Corp (Rupert
Murdoch) and Cablevision (Charles F. Dolan) also have entrenched boards, as do family firms
Dillard’s, W. R. Berkley, and Heico Corporation.
Notable emerging market companies with entrenched boards include Brazil’s Ambev, India’s
Reliance Energy and Mexico’s Grupo Mexico S.A. de C.V., a founder firm. Hutchison
Whampoa and founder firm Sun Hung Kai Properties top the list of entrenched boards in
Hong Kong, while in Japan, Mizuho Financial Group and Seven & i Holdings, are both widely
held. Additional examples are listed in Appendix III.
THE PREVALENCE OF ENTRENCHED BOARDS

How common are such boards, and who are they?
MSCI defines an entrenched board as one where any of the following conditions are true:
• More than 35% of the board has a tenure greater than 15 years
• There are more than 4 directors whose tenure is greater than 15 years
• There are more than 4 directors who are over 70 years old
• More than 22% of the board has a tenure greater than 15 years AND more than
15% of the directors are over 70 years old
Of the 6,500 listed companies currently rated by MSCI,1 1,095 qualify for this designation,
approximately 16.8% of all companies. US companies account for 684 of these, with nearly
one in four US companies qualifying. As defined here entrenched boards are virtually non-
existent in the UK, Europe, Australia and New Zealand. For the MSCI World and ACWI
indexes the overall percentage is approximately 13.3%, with Japan joining the US and
Canada in accounting for a majority of such companies.
Table 1 lists the ten countries contributing the greatest number of companies to these
totals, and Appendix III provides sample lists of key entrenched board companies in the US,
global developed and emerging markets.
Table 1 Top Ten Countries with the Highest Number of Entrenched Boards
Country Total Companies Entrenched Boards Pctg
United States 2789 684 24.5%
Canada 251 50 19.9%
Taiwan 129 40 31.0%
Malaysia 175 39 22.3%
Japan 509 33 6.5%
Thailand 75 24 32.0%
Bermuda 105 24 22.9%
Philippines 43 19 44.2%
Singapore 104 17 16.3%
Mexico 35 16 45.7%
Top ten countries with the highest number of entrenched boards
In each of these markets except Japan, the percentage of listed companies with entrenched
boards is higher than 16.8%, the overall percentage of entrenched boards across MSCI’s full
coverage. At 6.5%, the percentage of entrenched boards in Japan is significantly lower.
Entrenched boards are also closely associated with certain ownership types. Figure 4
highlights the incidence of entrenched boards at both family- and founder-dominated firms
in both the US and emerging markets.
Figure 4 The Prevalence of Entrenched Boards by Ownership Category
Prevalence of entrenched boards by ownership category
Figure 5 The Prevalence of Entrenched Boards by Sector
1% 2%
7%
9%
7% 19%
17% 4%
8% 26%
Basic Materials (75)

Cyclical Consumer Goods / Services (211)
Energy (46)
Financials (285)
Healthcare (86)
Industrials (194)
Non-Cyclical Consumer Goods / Services (78)
Technology (101)
Telecommunications Services (11)
Utilities (26)
Percentage of entrenched boards by sector
ENTRENCHED BOARDS AND BOARD REFRESHMENT

Entrenched boards are not only comprised of more long-tenured and aging directors, they
are also less likely to make new additions, as shown in Figure 6. For this test we identified
boards as having made “recent new additions” as those who had added at least one new
director in the past two years. We compared the percentage of entrenched boards having
made such additions against the overall market percentages. We find that in nearly every
market the entrenched boards made significantly fewer new additions. In the US, for
example, where recent additions were reported at 19.6% of all rated companies, this figure
dropped to just 11.3% for companies with entrenched boards.
Figure 6 Rate of Board Refreshment , All Boards v. Entrenched Boards
All Boards Entrenched Boards
35.0%
% of Boards with At Least One New Director
30.0%
Added in Past 12 Months
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Developed Market Companies (n=5144) Emerging Market Companies (n=1217)
Rate of board refreshment, all boards v. entrenched boards.
DIRECTOR TENURE AND BOARD INDEPENDENCE IN THE US

A number of countries have now adopted director independence standards based on length
of tenure, effectively reducing the number of entrenched boards to be found in those
markets. In France the standard is quite explicit, with directors no longer qualifying as
independent once they have served for more than 12 years. The UK standard applies a
stricter tenure standard, but this may be applied at the option of the individual company, on
the basis of ‘comply or explain’. According to the latest version of the UK Governance Code2,
a company must explain why it considers any non-executive director to be independent
who, “has served on the board for more than nine years from the date of their first
election.”
This approach has begun to gain traction in the US as well. One of the leading proxy advisory
firms has already adopted the UK standard as part of its governance assessment, and several
prominent pension funds have announced their support as well.
While there are no formal mechanisms currently to impose a tenured based standard such
as the UK Governance Code on US companies, investors interested in assessing US
companies based on this higher standard would see a significant rise in the number of US
boards considered ‘non-independent,’ based on our analysis.
Currently in MSCI’s coverage universe of over 2,700 US companies, our governance database
includes 21,284 individual directorships, excluding CEOs and executive directors. Of these,
2,324 directors – or fewer than 11% -- have been assessed as being less than fully
independent from management, using MSCI's current assessment of non-executive director
independence1; we designate these directors as being "Outside Related"/ non-independent.
Imposing a standard in line with the UK Code of Governance would result in an additional
6,773 directors being no longer considered fully independent. The new total count of non-
independent US directors would be 9,097, or just under 43% of all US non-executive
directors. At the company level, the number of US companies whose boards would be
considered to have less than a majority of independent directors would rise from 212 to
830, an increase of 618 companies out of the total of 2,789, and a percentage change from
under 8% to nearly 30% (Figure 7).
1
For full definition, please refer to MSCI ESG Research GovernanceMetrics Methodology Document.
Figure 7 US Boards With Non-Independent Majorities (n=2,789)
900
800
830
700
600
500
400
300
200
212
100
0
Current US Standard If UK Standard Applied
US boards with non-independent majorities, current US standards for independence v. the application of
tenure-based standards similar to the current UK standard
APPENDIX I: ENTRENCHED BOARD CRITERIA
Number of Companies That Meet Each of the Four ‘Entrenched Board’ Criteria
Test Companies Pctg
All Entrenched Boards 1095
More than 35% of the board has a tenure greater than 15 years 763 69.7%
More than 22% of the board has a tenure greater than 15 years AND
267 24.4%
more than 15% of the directors are over 70 years old
There are more than 4 directors whose tenure is greater than 15 years 13 1.2%
There are more than 4 directors who are over 70 old 52 4.7%
Entrenched boards counts by each of the four criteria applied.
APPENDIX II: BOARD TENURE AND AGE STATISTICS
MSCI World
Country Director Director Age CEO Tenure CEO Age
Tenure Averages Averages Averages
Averages
Hong Kong 9.7 61.1 5.5 53.1

United States 8.6 61.9 8.1 55.8
Israel 8.2 61.5 6.0 54.8
Canada 8.2 62.2 5.7 54.8
Belgium 8.2 58.0 7.9 55.7
Spain 8.0 61.9 6.4 56.5
Switzerland 7.9 59.2 5.4 53.7
Singapore 7.3 60.7 7.9 54.6
Sweden 7.1 56.6 5.1 50.9
Austria 7.1 56.5 8.7 58.3
Luxembourg 6.9 57.4 6.8 53.8
Portugal 6.7 60.2 6.0 55.4
Ireland 6.6 60.7 7.4 53.5
France 6.6 59.1 7.1 56.3
Australia 6.2 60.5 5.1 54.7
Germany 6.1 57.9 6.6 54.8
Denmark 5.8 54.4 2.0 54.1
United Kingdom 5.7 58.9 6.5 51.8
New Zealand 5.5 57.3 5.6 53.3
Netherlands 5.5 60.6 4.8 53.8
Finland 5.3 56.6 1.3 49.3
Japan 4.1 66.2 4.9 62.7
Norway 4.0 56.1 3.3 53.3
Italy 3.4 57.5 2.8 53.7
Board statistics by country, MSCI World
MSCI Emerging Markets

Country Director Director Age CEO Tenure CEO Age
Tenure Averages Averages Averages
Averages
Mexico 10.5 61.0 11.4 51.8

Taiwan 9.7 62.1 5.0 60.7
Philippines 9.1 63.9 6.7 59.9
Malaysia 7.5 60.3 8.5 54.4
South Africa 7.2 56.4 5.7 51.0
Chile 6.5 59.5 9.6 52.3
India 6.3 61.9 5.7 53.2
Indonesia 6.0 59.0 4.6 54.9
Thailand 5.8 61.9 6.8 58.3
Brazil 5.6 58.2 3.8 52.1
Turkey 5.1 58.1 4.4 53.3
China 4.5 56.1 2.9 51.0
Poland 4.4 53.8 2.9 50.5
Russia 4.3 54.4 4.0 49.5
South Korea 3.2 59.4 1.9 56.7
Board statistics by country, MSCI Emerging Market countries
APPENDIX III: SAMPLE COMPANY LISTS
Top 25 MSCI ACWI US Companies with Entrenched Boards

Company Ticker Directors Directors Directors Directors
Total with over with over Over 70
10 Years 15 Years
Tenure Tenure
Google Inc GOOGL 11 9 4 0
Berkshire Hathaway Inc. BRK.A 13 10 5 7
The Coca-Cola Co KO 17 6 5 7
Amazon.com, Inc. AMZN 10 6 3 2
Gilead Sciences, Inc. GILD 10 6 2 5
Comcast Corporation CMCSA 12 8 3 3
UnitedHealth Group Inc. UNH 11 5 4 3
McDonald's Corporation MCD 14 9 5 3
U.S. Bancorp USB 16 8 7 2
Starbucks Corporation SBUX 12 8 3 4
Costco Wholesale Corporation COST 13 11 9 7
Danaher Corporation DHR 10 7 5 2
Simon Property Group Inc SPG 10 7 4 3
McKesson Corporation MCK 11 6 3 3
PNC Financial Services Group PNC 16 8 4 5
Inc
Las Vegas Sands Corp. LVS 9 4 0 5
Regeneron Pharmaceuticals Inc REGN 12 9 7 7
Adobe Systems Incorporated ADBE 13 7 3 4
Charles Schwab Corp SCHW 15 8 6 6
Kroger Co KR 12 8 5 2
Aetna Inc AET 13 7 3 4
Ecolab Inc. ECL 15 6 5 1
Public Storage PSA 8 4 3 0
General Mills, Inc. GIS 14 9 4 5
CME Group Inc CME 30 15 8 7
Top 25 MSCI ACWI Index US companies with entrenched boards, as of April 30, 2015
Top 25 MSCI ACWI ex-US Companies with Entrenched Boards

Company Directors Directors Directors Directors
Total with with Over 70
over 10 over 15
Years Years
Tenure Tenure
Ambev SA 11 5 4 3
LVMH Moet Hennessy Louis Vuitton SE 18 11 7 5
Hutchison Whampoa Limited 14 12 10 6
Teva Pharmaceutical Industries Ltd (ADR) 14 1 1 6
Liberty Global PLC 12 9 0 7
Cheung Kong Holdings Ltd 21 19 16 8
Mizuho Financial Group, Inc. 13 1 0 5
Reliance Industries Limited 14 8 4 5
Sun Hung Kai Properties Limited 20 12 9 5
Neftyanaya kompaniya LUKOIL OAO 11 6 3 4
The Siam Cement PCL 12 0 0 6
Siam Commercial Bank PCL 13 7 5 2
Housing Development Finance Corp Ltd 12 8 7 3
Brookfield Asset Management Inc. 16 7 5 4
Seven & i Holdings Co., Ltd. 14 6 0 5
Fomento Economico Mexicano, SAB de CV 17 14 8 3
Shin-Etsu Chemical Co Ltd 25 12 4 10
Sun Pharmaceutical Industries Limited 9 7 4 3
Renault SA 19 5 0 5
Banco Bradesco SA 9 5 2 2
MediaTek Inc. 8 5 3 0
Wipro Limited 10 4 4 4
Carnival Corp 9 5 2 2
FirstRand Limited 20 6 5 0
Fresenius Medical Care AG & Co. KGaA 6 4 4 2
Top 25 MSCI ACWI ex-US companies with entrenched boards, as of April 30, 2015
CONTACT US AMERICAS ABOUT MSCI ESG RESEARCH PRODUCTS

AND SERVICES
+ 1 212 804 5299
esgclientservice@msci.com
MSCI ESG Research products and services
EUROPE, MIDDLE EAST & AFRICA are provided by MSCI ESG Research Inc.,
and are designed to provide in-depth
+ 44 20 7618 2510 research, ratings and analysis of
environmental, social and governance-
ASIA PACIFIC related business practices to companies
worldwide. ESG ratings, data and analysis
+ 612 9033 9339 from MSCI ESG Research Inc. are also used
in the construction of the MSCI ESG
Indexes. MSCI ESG Research Inc. is a
Registered Investment Adviser under the
Investment Advisers Act of 1940 and a
subsidiary of MSCI Inc.
ABOUT MSCI
For more than 40 years, MSCI’s research-

based indexes and analytics have helped
the world’s leading investors build and
manage better portfolios. Clients rely on
our offerings for deeper insights into the
drivers of performance and risk in their
portfolios, broad asset class coverage and
innovative research.
Our line of products and services includes
indexes, analytical models, data, real estate
benchmarks and ESG research.
MSCI serves 98 of the top 100 largest
money managers, according to the most
recent P&I ranking.
For more information, visit us at
www.msci.com.
NOTICE AND This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is
the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct or indirect suppliers or any third party involved in making
or compiling any Information (collectively, with MSCI, the “Information Providers”) and is provided for informational purposes only. The Information
DISCLAIMER may not be modified, reverse-engineered, reproduced or redisseminated in whole or in part without prior written permission from MSCI.
The Information may not be used to create derivative works or to verify or correct other data or information. For example (but without limitation),
the Information may not be used to create indexes, databases, risk models, analytics, software, or in connection with the issuing, offering,
sponsoring, managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to,
tracking or otherwise derived from the Information or any other MSCI data, information, products or services.
The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF THE INFORMATION
PROVIDERS MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE INFORMATION (OR THE RESULTS TO BE
OBTAINED BY THE USE THEREOF), AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH INFORMATION PROVIDER EXPRESSLY
DISCLAIMS ALL IMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, TIMELINESS,
NON-INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO ANY OF THE
INFORMATION.
Without limiting any of the foregoing and to the maximum extent permitted by applicable law, in no event shall any Information Provider have any
liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits) or any other damages even if
notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited,
including without limitation (as applicable), any liability for death or personal injury to the extent that such injury results from the negligence or
willful default of itself, its servants, agents or sub-contractors.
Information containing any historical information, data or analysis should not be taken as an indication or guarantee of any future performance,
analysis, forecast or prediction. Past performance does not guarantee future results.
The Information should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees,
advisors and/or clients when making investment and other business decisions. All Information is impersonal and not tailored to the needs of any
person, entity or group of persons.
None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), any security, financial product or other investment vehicle or
any trading strategy.
It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only
available through third party investable instruments (if any) based on that index. MSCI does not issue, sponsor, endorse, market, offer, review or
otherwise express any opinion regarding any fund, ETF, derivative or other security, investment, financial product or trading strategy that is based on,
linked to or seeks to provide an investment return related to the performance of any MSCI index (collectively, “Index Linked Investments”). MSCI
makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment returns. MSCI Inc. is
not an investment adviser or fiduciary and MSCI makes no representation regarding the advisability of investing in any Index Linked Investments.
Index returns do not represent the results of actual trading of investible assets/securities. MSCI maintains and calculates indexes, but does not
manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the
index or Index Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to be
different than the MSCI index performance.
The Information may contain back tested data. Back-tested performance is not actual performance, but is hypothetical. There are frequently
material differences between back tested performance results and actual results subsequently achieved by any investment strategy.
Constituents of MSCI equity indexes are listed companies, which are included in or excluded from the indexes according to the application of the
relevant index methodologies. Accordingly, constituents in MSCI equity indexes may include MSCI Inc., clients of MSCI or suppliers to MSCI. Inclusion
of a security within an MSCI index is not a recommendation by MSCI to buy, sell, or hold such security, nor is it considered to be investment advice.
Data and information produced by various affiliates of MSCI Inc., including MSCI ESG Research Inc. and Barra LLC, may be used in calculating certain
MSCI indexes. More information can be found in the relevant index methodologies on www.msci.com.
MSCI receives compensation in connection with licensing its indexes to third parties. MSCI Inc.’s revenue includes fees based on assets in Index
Linked Investments. Information can be found in MSCI Inc.’s company filings on the Investor Relations section of www.msci.com.
MSCI ESG Research Inc. is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except with
respect to any applicable products or services from MSCI ESG Research, neither MSCI nor any of its products or services recommends, endorses,
approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s
products or services are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment
decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include MSCI Inc., clients of MSCI
or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research. MSCI ESG Research materials, including
materials utilized in any MSCI ESG Indexes or other products, have not been submitted to, nor received approval from, the United States Securities
and Exchange Commission or any other regulatory body.
Any use of or access to products, services or information of MSCI requires a license from MSCI. MSCI, Barra, RiskMetrics, IPD, FEA, InvestorForce, and
other MSCI brands and product names are the trademarks, service marks, or registered trademarks of MSCI or its subsidiaries in the United States
and other jurisdictions. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard &
Poor’s. “Global Industry Classification Standard (GICS)” is a service mark of MSCI and Standard & Poor’s.
© 2015 MSCI Inc. All rights reserved. MSCI.COM | PAGE 20 OF 21

REFERENCES
1
All data cited in this report is taken from MSCI corporate governance and individual director
database as of March 31, 2015. While this data is updated weekly, all director ages and tenure
figures cited are based on the most the recent information reported by each company, and could
in certain cases be as much as a year old.
2
Financial Reporting Council, UK Governance Code 2014. London, UK: Financial Reporting
Council, September 2014. Website.
https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-
Governance-Code-2014.pdf
© 2015 MSCI Inc. All rights reserved. MSCI.COM | PAGE 21 OF 21

MSCI ESG GovReport EntrenchedBoards 20150429 PDF

Uploaded by

Copyright:

Available Formats

You might also like

MSCI ESG GovReport EntrenchedBoards 20150429 PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MSCI ESG GovReport EntrenchedBoards 20150429 PDF

Uploaded by

Copyright:

Available Formats

THEMATIC REPORT

Director Tenure and Performance

Executive Summary ............................................................................................ 3

ENTRENCHED BOARDS AND INVESTMENT RETURNS

Figure 1 Average five year total returns for all companies

% Total Shareholder Return (Apr 2010 - 160

150 +40% gap

Despite the aggregate underperformance of entrenched founder companies, Google and

Other US entrenched boards clustered around a well-known founder or controlling

THE PREVALENCE OF ENTRENCHED BOARDS

Top ten countries with the highest number of entrenched boards

Figure 4 The Prevalence of Entrenched Boards by Ownership Category

Prevalence of entrenched boards by ownership category

Figure 5 The Prevalence of Entrenched Boards by Sector

Basic Materials (75)

Percentage of entrenched boards by sector

ENTRENCHED BOARDS AND BOARD REFRESHMENT

Figure 6 Rate of Board Refreshment , All Boards v. Entrenched Boards

All Boards Entrenched Boards

Rate of board refreshment, all boards v. entrenched boards.

DIRECTOR TENURE AND BOARD INDEPENDENCE IN THE US

Figure 7 US Boards With Non-Independent Majorities (n=2,789)

APPENDIX I: ENTRENCHED BOARD CRITERIA

Entrenched boards counts by each of the four criteria applied.

APPENDIX II: BOARD TENURE AND AGE STATISTICS

Hong Kong 9.7 61.1 5.5 53.1

Board statistics by country, MSCI World

MSCI Emerging Markets

Mexico 10.5 61.0 11.4 51.8

Board statistics by country, MSCI Emerging Market countries

APPENDIX III: SAMPLE COMPANY LISTS

Top 25 MSCI ACWI US Companies with Entrenched Boards

Top 25 MSCI ACWI ex-US Companies with Entrenched Boards

CONTACT US AMERICAS ABOUT MSCI ESG RESEARCH PRODUCTS

For more than 40 years, MSCI’s research-

© 2015 MSCI Inc. All rights reserved. MSCI.COM | PAGE 20 OF 21

© 2015 MSCI Inc. All rights reserved. MSCI.COM | PAGE 21 OF 21

You might also like