Added Perspective

Institutional Investors and Trends in Board Refreshment

April 14, 2016

By Cam Hoang, Gary Tygesson and Ime Ibok, Dorsey & Whitney LLP

As many institutional investors have concluded, prevailing governance policies and practices have not produced desired board refreshment, which these investors would support in order to strengthen expertise, promote diversity and provide fresh perspectives in the boardroom. At the same time, companies and investors alike appreciate that term and age limits, as they have been typically applied, may not be the solutions because they force the arbitrary retirement of valuable directors.

 

As the mandatory retirement age for directors has continued to increase and longer tenure remains the norm, certain investors are adopting more explicit voting policies to prompt board refreshment. Companies are being called upon to reexamine whether there are alternative governance policies and practices that can lead to more effective board refreshment, and ultimately, more engaged, dynamic and productive boards. These alternatives may include a more robust application of existing practices, like director evaluations and succession planning. They may also involve more nuanced approaches to term limits, such as adopting a “comply or explain” approach or keying limits off of milestones like retirement from principal occupations.

 

To read the full piece authored by Cam Hoang, Gary Tygesson, Ime Ibok (pictured, left to right), click here.

 

 

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