Term limits have long been regarded as too blunt an instrument for board refreshment, particularly in comparison with annual board evaluations. But it appears that term limits may be poised to stage a comeback.
Since 2015, such boards as General Electric, Illumina, Microsoft, Signet Jewelers and Sysco have adopted tenure or term-limit policies designed to cap board service and curb overly long tenure on the board. In addition, directors are signaling a willingness to discuss term-limit policies after years of pressure from institutional investors over low board turnover and the dearth of directors with relevant technology skills.
PwC’s annual corporate director’s survey revealed that 61% of more than 800 directors surveyed reported that term limits were at least “somewhat effective” in promoting board turnover. PwC predicts that if more high-performing, high-governance-rated boards adopt term limits or tenure policies, other boards will follow.
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