What is the current thinking on whether corporate boards should impose director term limits, or a maximum age for service?
According to the National Association of Corporate Directors/New England panel, there is a risk, with either term limits or maximum age limits, that valuable institutional knowledge can be lost. However, at least with public company boards, maximum age and term limits are often imposed.
Nelda Connors, Director of several public companies including locally based Boston Scientific, noted that her experience in the United Kingdom was that term limits were capped at three elections each for three years, a total of nine years. After that much exposure to the company, the director was no longer considered to be “independent.”
At Eastern Bank, after extensive consideration the maximum age limit for directors was recently amended from age 70 to age 72, with a maximum service of 20 years in the aggregate.
Based on experience, a corporation can bridge the experience gap and still term out directors by placing vibrant ex-board members onto an active advisory board or “promoting” them to “emeritus” status; these solutions often obtain in non-profit settings. For business corporations this is not a common practice and, for public companies, virtually nonexistent.