TheCorporateCounsel.net

The results of the Spencer Stuart report came as a bit of a surprise to me, particularly since board refreshment is an increasingly important topic – not just to investors, but also to a surprising number of board members.  This Debevoise memo has some advice for boards on how to approach the refreshment process. This excerpt says that an effective refreshment strategy starts with succession planning:

Start with Succession Planning. Rather than reacting to vacancies as they arise, boards should establish an ongoing process for evaluating future leadership needs and preparing for expected and unexpected director departures. Responsibility for overseeing succession planning typically rests with the nominating and governance committee, with clearly defined roles for both the full board and management.

Boards should consider making succession planning a recurring agenda item, periodically reviewing anticipated retirements and discussing directors’ longer-term plans. Documented succession procedures help to ensure that transitions occur efficiently and with minimal disruption.

Succession planning also provides an opportunity for boards to look beyond anticipated vacancies and consider what expertise may be needed over the coming years. Regular discussions about future strategies, emerging risks, and changing regulatory expectations help to identify the skills and experiences that would help future directors add value to the boardroom.

Boards should also consider creating a culture of refreshment (even without formal term limits) in which directors understand that after some period of time, it is expected that they will step down to allow for new directors to be added.

Other recommendations include using board evaluations to inform refreshment decisions, periodically assessing whether the board’s composition remains aligned with the company’s strategic priorities and risk profile, and maintaining an active candidate pipeline.

– John Jenkins