Society public company members across sizes weighed in on their practices regarding the rotation of board chairs/lead directors and committee chairs.
Among the key takeaways:
Board Leadership
Mandatory term limit or rotation requirement (N=106) – The vast majority of companies represented by respondents (75%) do not have a mandatory term limit, rotation requirement, or other change-forcing mechanism for their Lead Independent Director (LID) or Independent Chair, whether in writing or understood. Among the 18% of companies that do, such requirements are more likely to be codified in writing (79%) rather than understood (21%).
Public disclosure of mandatory term limit or rotation requirement (N=15) – At almost all companies that have a mandatory term limit, rotation requirement, or other change-forcing mechanism for their LID or Independent Chair, the limit or requirement is publicly disclosed (93%), with most companies (67%) disclosing this information in multiple places, including the proxy statement.
Term limit or rotation requirement (N=21) – Among companies that impose a term limit or rotation requirement for their LID or Independent Chair, the specific length of those limits varies.
Transition plan (N=104) – The majority of companies (69%) do not have a transition plan to allow for an overlap of incoming and outgoing leadership for the LID or Independent Chair.
Committee Leadership
Mandatory term limit or rotation requirement (N=102) – The vast majority of companies (75%) do not have a mandatory term limit, rotation requirement, or other change-forcing mechanism for their committee chairs, whether in writing or understood. Among the 17% of companies that do, such requirements are more likely to be codified in writing (71%) rather than understood (29%).
Public disclosure of mandatory term limit or rotation requirement (N=12) – All companies that have a mandatory term limit, rotation requirement, or other change-forcing mechanism for their committee chairs publicly disclose the limit or requirement, with most companies (83%) disclosing this information in multiple places, including the proxy statement.
Term limit or rotation requirement (N=23) – Among companies that impose a term limit or rotation requirement for their committee chairs, the limit typically is set at four to six years (61%).
Transition plan (N=101) – The majority of companies (69%) do not have a transition plan to allow for an overlap of incoming and outgoing leadership for the LID or Independent Chair.
Limits on outside activities (N=101) – A plurality of companies (38%) have formal, written limits on outside activities – such as other directorships, executive roles, business ventures, and philanthropic engagements – for directors in board leadership roles. Another one-third of companies do not impose any such limits, while 19% have a mix of written and understood limits, depending on the nature of the activity.
Members may access the results by company size by emailing Merel Spierings.
This post first appeared in the weekly Society Alert!