Throughout the years, corporate directors have assumed increasingly significant responsibilities, amplifying their influence within the organizations they lead. However, who among these board members really excels in this enhanced capacity?
The Wall Street Journal’s Premier List of Leading Board Directors seeks to address that query. It emphasizes the 250 Most Impactful and Efficient Corporate Directors Based on their positions on boards and the achievements and visibility of the organizations they belong to.
To qualify for this year’s list, a director needs to be slated to serve on an S&P 500 board for all of 2025. Over 4,000 directors fulfilled this requirement. Since the rankings also consider their roles on non-S&P 500 company boards, information from around 1,300 additional firms was included in the analysis.
The rankings, created for The Wall Street Journal Leadership Institute by Bendable Labs, a privately held company, rely on 18 metrics sourced from seven distinct data suppliers.
The information is utilized to calculate three separate scores—a personal profile score, a corporate performance score, and a 'notable board bonus'—which are then combined to generate an overall score.
Leadership counts
For the personal profile score, which incorporates information from Diligent—a service provider offering governance, risk, and compliance tools—and from the analytics firm ESGauge, 2 points are awarded when an individual serves as the lead independent director (or holds an equivalent role under a different designation).
Receiving promotion to serve as an independent director "indicates a higher level of confidence from the other board members," according to Doug Chia, a senior fellow at the Center forCorporate Law and Governance at Rutgers Law School, who provided input during the development of the ranking system's methodology.
A director earns 1.5 points for membership on the audit committee and 1 point for participation in either the nominating or compensation committees, which are considered highly important.
Furthermore, the chair of the audit committee receives 1.5 points, the chair of the compensation committee earns 1.25 points, the chair of the nominating committee obtains 1 point, and every other committee chair gets 0.75 point.
If any director serves on both the audit, compensation, and nominating committees within the same organization, their rating is reduced by 1.5 points. As Diligent has pointed out, "best practices recommend that board members should not be part of more than two committees to ensure they remain dedicated and efficient," let alone all three key committees.
External directors who previously served as CEOs at another corporation receive an additional significant increase of 1.5 points. This adjustment acknowledges their considerable influence within the boardroom due to their prior leadership experience. "Understanding the challenges firsthand gives them insight into broader organizational issues," explains Chia.
An additional benefit is that if a corporation’s top leader departs voluntarily or is compelled to leave, a board member who has previously served as a CEO might be ideally positioned to take over temporarily. "Having such alternatives available can be advantageous for the board," remarks Josh Black, the editorial director at Diligent Market Intelligence.
Just right
Non-executive directors who serve on the board for between five and eleven years receive 0.5 points. This duration strikes a balance—it provides enough time for them to accumulate significant expertise and influence without compromising their impartiality due to prolonged tenure.
A director who identifies themselves as diverse based on factors like gender, race, or ethnicity will receive an additional 0.5 points. Despite becoming a contentious issue in politics, business, and broader societal discussions, numerous studies show that having varied viewpoints enriches decision-making processes for boards. According to a PwC study conducted recently, 79% of directors believed that enhancing diversity contributed distinct insights to their boardroom dynamics, with another 68% asserting that it improved overall board effectiveness.
A director's personal rating may decrease due to shareholder votes. Directors receiving between 66% and 80% of the vote during their election will have their score reduced by one point. If they secure between 50% and 65%, they'll face a deduction of two points. Should they obtain under 50% of the votes, five points will be deducted from their score.
Measuring risk
Since the 1970s—when the major railroad corporation Penn Central collapsed into bankruptcy as its board remained indifferent to critical operational issues and the dire financial state of the firm—the expectations for directors to demonstrate greater diligence and supervision have increased. Over time, various new instruments have been developed to better assess their performance, and our rankings incorporate several of these external evaluations.
To evaluate company performance, a director gets scores between 0 and -1 for reflecting the audit and financial risks identified by Ideagen. Similarly, directors receive ratings within this range based on the assessment of legal risks conducted by Ideagen.
If a firm served by a director is classified as highly vulnerable to activist investors according to Diligent Market Intelligence, the director will lose one point. However, the director’s score remains unchanged if the business shows only moderate vulnerability. Conversely, should the enterprise exhibit minimal vulnerability, the director gains an additional point.
Diligent also evaluates businesses based on the robustness of their board governance procedures. For each director serving at a firm with top ratings in this aspect, one point is added to their tally. If the organization receives an average rating, these points remain unchanged. Conversely, directors see a deduction of one point should their affiliated entity be graded poorly in such assessments.
Sustainalytics provides a controversy score that assesses a firm's degree of participation in events with adverse environmental, social, and governance impacts. Board members may receive scores ranging from 1 point down to -1.5 points based on their company's performance.
Market indicators
Directors are evaluated based on the stock performance of the organizations they lead. They earn points between -0.5 and 3, contingent upon whether their organization surpasses or falls short compared to the S&P 500 index. Additionally, directors can gain or lose up to 1.5 points each way (-0.5 to 3) depending on how well an organization's stock fares against its competitors within the same sector.
A director who sits on the board of a firm listed among the top 100 companies annual Management Top 250 A list compiled by The Wall Street Journal awards 1 point to directors whose companies rank between 1 and 100, while those associated with firms positioned from 101 to 250 receive 0.5 points. The Management Top 250 ranking comes from a statistical model designed to gauge corporate efficiency, developed by the Drucker Institute at Claremont Graduate University.
Lastly, apart from each personal profile score and corporate performance metrics, directors can earn extra through the notable board incentive program. They receive an additional 0.5 point for serving on a Fortune 500 board, 1 point for being part of a Fortune 100 board, and 1.5 points for membership on a Fortune 50 board. These rankings depend on the companies' overall revenues as per the Fortune lists.
In the coming years, our aim is to leverage additional data sources to provide a more comprehensive view of directors' activities, which typically occur beyond public scrutiny. For now, despite its constraints, the ranking still offers valuable insights.
“Many crucial events occurring within boardrooms remain undisclosed,” states Dottie Schindlinger, who serves as the executive director of the Diligent Institute, the firm’s research division focused on corporate governance. “However, this does not imply that measurable aspects lack significance.”
Rick Wartzman is the co-president, and Kelly Tang serves as the chief data scientist at Bendable Labs. You may contact them there. reports@wsj.com .
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