The governance and nominating committee may wish to consider, and compare against its own policies, current trends with respect to director refreshment, in part as summarized in a recent paper from ISS Analytics.
Director refreshment is a term often used to describe the various ways in which boards seek to address issues associated with director and full board effectiveness, board composition and length of service. It most often is considered to include matters of term limits, age limitations, diversity commitments, competency standards, board and director evaluations, change in board/committee size, “fitness to serve” qualifications, “change in status” conditions, director succession policies and independence standards.
The ISS paper makes two notable conclusions from its survey data: first, that companies with balanced board composition, as it relates to director tenure, project more desirable performance indicators than companies whose board composition is heavily weighted in terms of director tenure (e.g., either short or long term). Specific recommendations include the following:
- Conduct “robust” annual board and director evaluations that address the needs of the company.
- Revisit previously targeted director skills and competency levels in the context of long-term corporate needs and the evolving market environment.
- Establish specific board renewal programs that shape refreshment and tenure balance according to specific goals.
The ISS Analytics report serves as a prompt to health system board governance and nominating committee efforts to avoid director entrenchment and address the need for director independence, new board perspectives and enhanced diversity.