Board Succession Planning: Composition, Director Independence, and the Evaluation Process

Focus on board composition and director performance has never been greater. With regulations and listing standards requiring disclosure of board diversity and expertise in climate and cybersecurity, the rise of activist investors with an increased focus on individual directors under the universal proxy, the complexity of operating in a global marketplace, and additional scrutiny on directorial independence, corporations are under increasing pressure to assemble a board with the right mix of experience, specialized skills, industry-specific expertise, international exposure, and gender, racial, ethnic, and age diversity. Many shareholder advisory firms and institutional investors argue that director tenure should be scrutinized more heavily, with some advocating term limits or mandatory retirement ages to refresh boards with entrenched directors or stale skill sets, and to accelerate the turnover of board seats. In addition, uncertainty can abound as to whether and when directors qualify as independent, and new procedures may be necessary to address that uncertainty. Taken together, these pressures can force nominating and governance committees to reconsider the process by which they assess board composition, identify board candidates, onboard new directors, and evaluate individual director performance. This session will discuss successful strategies for ensuring that companies focus on long-term planning for board succession to build and maintain a board with the right mix of director skills and backgrounds given the company’s current and projected needs.