January 28, 2015

Beyond Term Limits: Using Performance Management to Guide Board Renewal

Page Image
The debate over board renewal is moving into sharper focus. New public company disclosure requirements demand greater transparency on such things as term limits and other renewal mechanisms, and some large investors are sending the implicit message that companies must renew the board or they will seek to do it instead. The ICD agrees that the composition and renewal of the board are vital processes that demand rigour and analysis and are best undertaken by the board pro-actively. In this paper we seek to provide a framework for boards to build a renewal process that increases accountability and achieves the right mix of skills and experience to create long-term effectiveness. 

To that end, we propose that boards across the for-profit, not-for-profit and Crown sectors build their renewal processes around the concept of performance management, including effective board evaluations set within a performance culture.

In other words, boards should review themselves the way they do their management teams. This means instituting regular and substantive evaluations of board composition and board member performance, and following through when necessary by having “tough conversations” with underperforming members or directors whose skills do not align with the organization’s strategy. This will help create a culture of accountability, and foster high performing boards.

Read the full position paper
Share This