In the last of my 3 part blog about last week’s Annual Meeting of Corporate Secretaries and Governance Professionals in D.C., I want to bring up a very interesting discussion that took place during one of the “break-out sessions”. This particular session was devoted to board composition. An expert panel of corporate governance professionals examined such issues diversity, independent boards and board succession. It was an interesting discussion that suddenly took a detour when the topic of term limits was brought up. It immediately came clear that one of the panelists was in opposition to any form of term limits. Although he initially took on just one of the panelists who took the position that term limits are an integral part of corporate governance best practices, 2 others joined his “opponent” and took on the “Term Limit Foe” (as I shall refer to him).
The discussion captured the audience, who I am sure like me, felt relieved that only one of the panelists was opposed to term limits. I am a huge proponent of term limits for board members as a means to ensure that the boardroom encourages new ideas, perspectives and expertise. The Term Limit Foe proposed the following scenario to the rest of the panel: “so you would have a board get rid of its best board member who had served for 9 years and been an important part of a company’s turnaround, simply because of term limits?”; to which the rest of the panel, and most of the audience responded in unison, “yes”.
The Term Limit Foe then turned to a different, but what he believed to be, somewhat related issue: age restrictions for board members. He proposed another scenario to the panel: ”what if that same board member from his previous example was about to start his third three year term on the board, but was told he had to step down because he had just turned 80 years old and had reached the board’s age limit for service…do you think that is fair?” The panel (and again, most of the audience), responded “no”, and that the board’s rule was not in accordance with best practices. The Term Limit Foe argued in response that in both situations the board was getting rid of a fantastic board member because of rules that he felt had no bearing on the individual’s ability to serve as an exceptional corporate board member. This is where the Term Limit Foe was wrong. The 2 issues — term limits and age restrictions — are not linked. The members of the panel and almost everyone in the audience, could cite an example of an exceptional board member who was still serving on a board in his late 70′s and 80′s. This does not mean that the individual should not exit the board when his/her term was up. (Rather, it raises the issue of when it is time to have the discussion with that board member when questions arise concerning his/her ability to meet their Board of Directors responsibilities — a blog for another day).
What was encouraging about this session at the Annual Meeting was that the Term Limit Foe appeared to be in the minority with respect to his position regarding term limits.
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