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Board Refreshment: A Topic on Fire

A recent post on the Harvard Corporate Governance blog called board refreshment “a topic on fire.”  The blog’s authors suggest that a board consider its composition in light of the goals and needs of the company it serves.  The authors encourage a board to use its annual self-assessment to consider the unique contributions of individual directors and identify any areas that are not represented or are underrepresented.    In addition, the authors suggest that boards consider succession planning.  According to the post, the most common reasons for board turnover are term limits, voluntary retirements, and overboarding.  The authors note that boards can use succession planning as a mechanism to add desired experience to the board.

The authors also explore the effect that active and institutional shareholders can have on board composition.  For example, the authors note that these shareholders often oppose longer-tenured directors and focus on diversity and gender issues.  The post also notes the influence that individual states may attempt to have on board composition.  The authors describe a California resolution that encourages companies incorporated in that state to have a minimum number of female directors.  In addition, the authors point out that California pension funds also are active in encouraging gender diversity on the boards of their portfolio companies.