Replacing Board Directors

Replacing Board Directors

When we talk and write about corporate governance we tend to concentrate on the attitudes and behaviours which directors need to display in order to create a robust corporate governance framework. But there is one area which is seldom mentioned but which can make a measurable difference to the overall strength of the board; knowing when it is time for board members to move on.

It’s a topic which the Silicon Valley Director’s Exchange recently referred to as ‘the elephant in the room’; ensuring that board succession planning continues to provide the right mix of leadership experience and skills not only to drive growth today but also to meet future challenges. In truth, this is probably one of the most difficult challenges facing boards.  It’s one thing to quietly suggest that it may be time for an individual to move on when that person is in ill health or has been creating friction across the board; it’s quite another thing to recognise that an individual’s contributions aren’t as relevant as they once were thanks to a change in market conditions.

But if boards are to continue to provide the right mix of relevant experience to drive the organisation forward then they have to recognise that directorships cannot be seen as a lifelong commitment. Who watches the watchers is a phrase which is perhaps apt in this instance. As investors, customers, employees and interested third parties look to the board to oversee the organisation, they also expect strong boards to oversee themselves and to remain relevant.

When directors come up for re-election by rotation, that re-election should not simply be seen as a tick box exercise. Rather it should be seen as an opportunity to review whether the individual’s experience and qualities are still relevant to strong governorship. But even when elections are not in the offing, if there are significant changes to the organisation or to the business sector then it may be time to check that the board can continue to offer a broad range of relevant experience. Mergers and acquisitions fall into this category, but so do areas such as changes in technology or in legislation, the decision to open new markets or a significant change in customer demographic.

No one likes to think that they are irreplaceable but the best directors know and understand that their prime duty is to the organisation and that sometimes they can serve the organisation best by stepping down.

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