According to the recently-released 2016 Board Practices Report, a collaborative board practices benchmarking effort between the Society and Deloitte LLP's Center for Board Effectiveness, of those boards with a lead or presiding director, just 27% impose term limits on that position. Of those, about half have a 4-year term limit, with a 2-year term limit being the next most common response. However, these overall figures reflect significant industry and company size variations - with almost 30% of Nonfinancial Services and 30% of large-cap companies having lead/presiding director term limits vs. just 11% of Financial Services companies and zero small-caps.
In comparison, based on Spencer Stuart's 2016 Board Index, of those S&P 500 boards with a lead or presiding director, 46% have no set term. Of those that do, 19% have a 1-year term, 6% have a 2-year term, and 4% have a 3-year term. Other approaches reportedly include a 3 - 5 year term guideline, a 5-year term, or an understanding that the board will consider rotating the position every two years, and 90% said that the lead/presiding director’s term is renewable.
As previously reported in the Society Alert, in February, leading asset manager and global investor Legal & General Investment Management re-issued its guidance on board refreshment (initially published last year, which we then reported on here and here) - which will inform its engagement and proxy voting decision-making for US portfolio companies beginning as of this year - indicating that it will vote against lead independent directors if they have been serving for 15 years or longer. And other investors have adopted director tenure proxy voting guidelines (see, e.g., this Dorsey memo) that also may effectively serve as position term limits based on a particular director's overall tenure.
Access additional resources on our Board Leadership and Board Succession/Refreshment topical pages.
The iconic Society/Deloitte Board Practices Report - which presents findings from a survey distributed to the Society's public company members in late 2016 - covers trends in over 15 areas of board practices and hot topics including cyber risk, shareholder activism, and board diversity.