Leveraging recent benchmarking data, Spencer Stuart’s “Nominating/Governance Committees: Top Issues for 2025” homes in on common board composition practices that impede or fail to promote optimal board composition and suggests ways in which Nom/Gov Committees can more proactively foster the types of changes on the board that meet shareholders’ expectations and best support the company’s interests.
Recommendations include:
- Not relying (or not relying primarily) on tenure limits and retirement policies to effect changes in composition. According to Spencer Stuart’s 2024 US Board Index (which we reported on here), of the 67% of S&P 500 boards with retirement policies, half of the independent directors who departed those boards during the prior year were within three years of the retirement age limit and 35% retired at the retirement age or later. And in its 2024 annual survey of Nom/Gov Committee chairs (which we reported on here), mandatory retirement or term limits ranked just below adding new skills to the board as a top driver of board refreshment – much more common than, e.g., replacing directors with skills that were no longer a priority or due to underperformance, as shown here:
- Regularly evaluating the rate of board turnover against the changes in the company’s risks and opportunities
- Nurturing a board culture that expects and supports limits on board service and changes in board composition
- Periodically refreshing the annual board and committee evaluation processes with the use of third party evaluation facilitators
- Periodically using peer evaluations as part of the evaluation process
See our recent report: “Board Refreshment: Here’s How” and additional resources on our Board Composition and Board Recruitment & Succession / Refreshment pages.
This post first appeared in the weekly Society Alert!