Director tenure, board entrenchment, and board refreshment are corporate governance buzzwords that increasingly are becoming hot-button issues for institutional investors, proxy advisory firms, shareholder activists, and other governance advocates. One board’s experienced and knowledgeable director, however, may be viewed by a shareholder activist as an “entrenched” director. Although views of various stakeholder groups differ as to whether a board should adopt a director tenure policy explicitly limiting the number of years (or terms) a director may serve, there is little debate that the issue is under heightened scrutiny. Contributing to that debate are conflicting research findings (as to whether expressly limiting director tenure correlates positively with corporate performance) and persuasive arguments supporting both sides of the issue.
Corporate Governance Quarterly Update