The Healthy Departure: Considerations for Effective Off-Boarding

Long viewed as a point of arrival rather than a point of entry, a board seat is not what it used to be. Gone should be the days when re-nomination is assumed as a given. A significant minority (46%) of directors believe that members of their boards—including board leaders, board chairs, lead directors, and committee chairs—should be replaced. That statistic is a sign of an insufficient process that has failed to keep up with the increasing expectations of board performance by all stakeholders, both internal and external.

As one director noted, “We have a hard time with appropriate turnover because we as a society have always considered board work as the ultimate demonstration of accomplishment.” The director went on to add, however, “you have to be ready to do the hard work of governance.”

Changing board culture, both at the individual board level and as a collective whole, is a slow and deliberate process. As performance expectations of board members continues to increase, especially during a time of crisis, boards need to think clearly and critically about the skillset of their members, including themselves, and whether those skills align with the future needs of their company.

Investors and proxy advisors have historically created policies to help encourage regular refreshment of the board to ensure skills properly align with business needs. Some investors have taken this refreshment concept to the extreme, with William Steiner going so far as to submit a shareholder proposal to Allstate Corp. that the “Board adopt a rule that whenever possible [its] Lead Director have less than 12-years tenure.”

Boards, in turn, have created tenure-limiting or refreshment mechanisms, such as age limits and director term restrictions. These measures, however, belie the cultural and emotional difficulty of removing a fellow director. They also deflect the responsibility of the individual director to critically evaluate their own professional and personal goals, relying instead on process over substance. Some of the challenge is self-inflicted, too. While most boards have a robust onboarding process, few have similar discipline around directors leaving the board or off-boarding—voluntarily or for performance reasons. Boards must approach their own renewal through the lens of shifting strategic needs to ensure longterm competitive advantage.