Corporate Governance at Mid-Market Companies
By April Hall

Survey finds most companies have independent chairs, and a rise in dual-class stock structures

A new survey of mid-market public companies sheds light on a host of corporate governance practices, from board size to stockholder activity.

The study, by law firm Benesch, looked at companies with market caps ranging between $200 million and $1.50 billion.

Here are some of the findings:

Classes of Stock: Public companies maintaining dual classes of stock have increased, according to other governance reports, but Benesch found the mid-market companies they surveyed were not following that.

Board size: Among the companies surveyed, 85% of the companies have a board of directors with seven or more members; 69% of the boards have between seven and nine directors.

Frequency of director elections: When looking at all the surveyed companies’ boards of directors, the companies are roughly split 50-50 as to whether directors are elected annually or on a staggered basis. More specifically, 55% of the companies conduct annual director elections; 45% of the companies have directors elected on a staggered basis. When directors are elected on a staggered basis, they are predominately elected every three years.

Vote standards in uncontested elections: Of the companies surveyed, 76% had a “majority” vote standard for uncontested director elections. Though a majority vote standard is clearly prevalent among the companies surveyed, this majority falls below that of major public companies. According to the Council of Institutional Investors, 90% of S&P 500 companies maintain a majority vote standard for uncontested elections.

Committee chair independence: Almost all of the companies surveyed have independent committee chairs and all members of the committees are independent with few exceptions. The main exceptions occur where there is a controlled company or no requirement for a standing nominating or compensation committee (e.g., Nasdaq-listed companies). For the audit committee, there are no exceptions — all audit committee chairs and all directors on such committee are independent in the survey sample.


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