Wachtell Lipton's "Board Development and Director Succession Planning in the Age of Shareholder Activism, Engagement and Stewardship" suggests many sound practices to facilitate board composition development and refreshment in a way that is responsive to investors' and others' heightened scrutiny, and consistent with maximizing the board's effectiveness over the long term.
Key takeaways include:
Disclosures & Communications
- Express in the governance documents and in public disclosures the importance of board development and succession planning as part of the company’s commitment to strong governance.
- Consider voluntary favorable communications on board composition-related changes, ensuring that board composition actions align with the company's broader messaging.
- Regularly assess how best to communicate board development and succession plans to investors and the company’s progress against them.
- Consider expanded board self-evaluation disclosures.
Board Succession Planning Processes & Practices
- Plan for director succession in advance of retirements.
- Expand the director candidate pool.
- Maintain a strong director candidate pipeline.
- Plan for the rotation or succession of board roles over time.
- Prioritize robust director orientation and onboarding.
- The board should self-assess for current and future needs - potentially with the aid of a skills & attribute matrix.
- Carefully consider the value/benefit of substantive evaluations vs. policy-based refreshment triggers such as age limits, term limits, etc.
Board Composition
- Balance board refreshment with retaining institutional knowledge (i.e., tenure diversity). Strategize on how to actively manage a long-tenured board situation over time.
- Promote board diversity in the self-assessment, recruitment, and nomination processes.
- Consider whether niche needs are best met with a new director, expert consultants, an advisory group, director education, strengthening expertise at the management level, or otherwise.
Board Practices - General
- Discuss how to foster the right board culture.
- Expand director education, tutorials, and retreats to ensure that all directors stay apprised of relevant developments, changes in the business environment, etc.
See these prior reports "UK: Board Evaluation Effectiveness Initiative," "CII Releases Board Evaluation Disclosure Best Practices," "New Director Onboarding: Here's How!" and "Board Composition," and numerous additional resources on these pages: Board Composition, Board/Director Evaluations, Director Orientation/Onboarding, Board Recruitment & Succession/Refreshment, and Board Diversity. This post first appeared in the weekly Society Alert!