What are the Barriers to Board Refreshment?

Board refreshment continues to be hotly debated. But discussions about what it means, and how boards do it, vary considerably. Governance experts generally agree it involves the potential for complacency and a lack of director independence. As noted by Institutional Shareholder Services, “While shareholders, directors, and other market constituents vary as to the reasons for their refreshment concerns, they typically include snail-paced board turnover, sky-rocketing tenures, stagnant skill sets and deficient diversity,”

Correcting this is a tall order no doubt; understanding the barriers to it is a good first step. Turnover is slow, tenure limits are still rare, skills need updating and new perspectives are often unwelcome. So, how do we practice board refreshment, not board replacement (just replacing ‘like with like’) when an opening comes along?

Term limits and mandatory retirement ages are a good place to start. Only 5.6 percent of S&P 500 companies reported having a term limit policy last year. Mandatory retirement age policies are more popular; however, there is evidence of retirement ages climbing. These are relatively easy to create and implement but the results of these efforts may take some time to see on a board.

Even when new directors are elected to the board, they often come with similar skill sets – primarily CEO and/or financial experience. Despite mounting pressure, regulation and social movements like #MeToo and #BlackLivesMatter, boards still struggle to appoint women and minorities with different skills and experiences. There are some notable changes here – out of the 425 vacant or newly created board seats in the Fortune 500 last year, that were filled, 28% of seats went to Black directors. On S&P 500 firms, with 456 vacancies, the number of Black directors tripled and the number of Latino directors doubled last year. Yet, this still leaves some 70-80% of these companies with while, male directors.

Part of the challenge here is that most large cap firms and S&P 500 firms, as well as FTSE 100 and FTSE 250 firms, use executive search firms to find new directors. Many more still, across all capitalizations, use personal networks – very often those of the CEO. In fact, personal networks have been identified as one of the most frequent and reliable sources for directors. While the CEOs network is likely large and influential, involving themselves in the search process runs counter to hiring independent directors, a regulatory mandate. Likewise, the NYSE and the Nasdaq require a listed-company board to affirm each director’s independence – which must be disclosed publicly.

Director independence should be the focal point of board refreshment, along with alleviating any of these barriers to it. Fortunately, there are many organizations that can help in this effort. For example, the 30 Percent Coalition, the Latin Directors Association, the Boston Club, Board Options Inc., Women Corporate Directors and the Executive Leadership Council, all provide access to qualified board directors.


  1. Denise Kuprionis on June 18, 2021 at 10:48 am

    Well said. I agree, board refreshment does not mean bringing on new directors when it is simply replacing ‘like with like.’ However, one point might be added – board refreshment also includes encouraging continuing director education in its many forms.

Leave a Comment