Based on empirical research, Harvard Business Review’s “Why Your Board Should Include a Long-Tenured Director” advocates boards include one or two long-tenured, independent directors—a practice that is associated with better stock price performance than boards with no long-tenured directors and boards with many long-tenured directors. Armed with institutional knowledge and credibility to advise management and hold CEOs accountable, long-tenured directors reportedly preserve value by, e.g., reducing the occurrence of shareholder class-action litigation and activism and other value destroying activities.
The author advises companies to allow long-tenured directors to develop organically, and advises regulators, investors, and others who target long-tenured directors or average tenure without regard to company-specific circumstances to take a more discriminate approach.