Last week, ISS released the results of its annual global benchmark voting policy survey. Of the 439 total respondents, 120 were institutional investors; 270 were "corporates" - including companies, consultants/advisors to companies, and other trade organizations representing companies; and the remainder were academics, non-profits, and other governance stakeholders.
As previously reported (here and here), among the "big ticket" US items was "Board Refreshment" based on this survey question:
Lengthy director tenure has been identified by commentators as a potential obstacle to adding new skill sets and diversity to boards and a potential risk to the independence of long-serving directors.
Which of the following tenure factors would prompt your organization to consider that there may be concerns with a board's nominating and refreshment processes? (Choose all that apply.)
- The absence of any newly-appointed independent directors in recent years (e.g., five years)
- Lengthy average tenure on the board (e.g., average director tenure greater than 10 years, or greater than 15 years)
- A high proportion of directors with long tenure (e.g. three-fourths of the board having tenure of 10 years or more)
- Tenure is not a concern
- Other (please specify): _______________________________________
Survey results revealed a huge gap in perception among investors and non-investors on the suggested board refreshment indicators:
- Among investors, 53% identified an absence of newly-appointed independent directors in recent years as indicative of a problem - compared to just 26% of non-investors.
- 51% of investors - compared to just 19% of non-investors - identified lengthy average tenure as problematic.
- 68% of investors identified a high proportion of directors with long tenure as concerning - compared to 31% of non-investors.
- 11% of investors - compared to 34% of non-investors - said that tenure itself is not a concern, although several of the respondents from both groups indicated that a lack of newly appointed directors is a concern.
Providing more color on the results, several investors reportedly commented on other factors of concern, e.g., director ages, a high degree of overlap between the CEO's tenure and the tenure of the non-executive directors, or lengthy average tenure coupled with underperformance, while several corporate respondents reportedly indicated that directors' experience resulting from long tenure can be beneficial to the board by, e.g., giving directors the "'confidence and stature to challenge management' or the ability to provide historical context - and suggested that a lack of the right skills and experience, or a lack of balance of skills or tenures, is more problematic than long tenure, per se."
As to whether the “overboarding” standard for an executive chair who is not also the company’s CEO should be the same standard as that applied to a sitting CEO (no more than three total boards) or the standard applied to a non-executive director (no more than five total boards in 2017), 64% of investor respondents vs. just 38% of non-investors favored the more stringent overboarding standard applicable to CEOs, whereas 36% of investors compared to 62% of non-investors favored the more permissive standard.
See ISS's release, and numerous additional resources on our Proxy Advisors topical page.