Director tenure moves to front burner

Friday, 19 September 2014


    The appropriate term for individual directors needs to be considered more closely when creating and maintaining a high performance board with the right mix of competencies, according to recruitment and consulting firm Heidrick & Struggles (H&S).

    The question of tenure has been brought to the fore by four convergent trends that have given the issue new momentum, H&S said in a recent note to clients.

    The first is the bar for director independence has been raised considerably, as someone who has been on the board for 15 years and working with the same CEO, could become too cosy with management and cease to be genuinely independent.

    Secondly, boards, institutional investors and advocates for good governance increasingly frame director tenure as a question of board "refreshment", with a reliable mechanism needing to be found to bring new ideas and fresh perspectives to the board.

    The third point highlighted by H&S is that the emergence of new technologies means many boards want and need to tap into candidates on the cutting edge of this change, yet many of these potential candidates are younger than the average director. Limiting the length of tenures could help to pave the way for these candidates.

    Finally, H&S adds that limiting tenure by either age or term will also increase opportunities to create more diverse boards.

    For a full copy of the report, click here.

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