A growing number of investors have begun to take refreshment matters into their own hands. Some shareholders routinely oppose the reelection of long-tenured directors to encourage turnover and fresh blood.

Importing a practice from the U.K. and other global markets, other investors threaten to slap “affiliated” (non-independent) labels on long-tenured board members in hopes of spurring boardroom succession. While long tenure, by itself, is typically not enough to sway an election result, it can create a tipping point in contested elections. Notably, hedge funds increasingly seek to tap into investors’ angst over refreshment by targeting long-serving board members.

Largely missing from this debate is hard data on: (1) the scope of the perceived problem, (2) the most effective methods for promoting board refreshment and (3) the benefits and possible sideeffects of adopting them. To close this data gap, IRRCi asked ISS to benchmark director demographics and existing refreshment mechanisms. Specifically, ISS set out to provide answers to some nagging questions such as:

·         What is the state of board refreshment at U.S. firms?

·         Do long board tenures and rising director ages inhibit boardroom turnover?

·         What impact is the aging of the director population having on boardroom renewal rates?

·         Do “forced exit” mechanisms or boardroom/director evaluations offer a solution to the refreshment riddle?

·         Do positive governance trends—such as maintaining high levels of board independence and the migration of board oversight to key boardroom committee – encourage longer tenures and higher director ages?


Read the full IRRCi report here