All Corporate Boards Should Have Director Term Limits: Mandated limits on service time are the only way to guarantee new perspectives and fresh ideas.

• Author: Hayes, Bill
• Position: ENDNOTE

In this issue of Directors & Boards, we have sought to supply "Big Ideas for Corporate Governance": fresh perspectives that can help you think about the work of boards in new, previously unforeseen ways. Of course, new ideas are not just valuable on the page. They have a tangible, intrinsic value when offered at the board table as well. Such is the reason that boards should always be on the lookout for prospective members who can bring expertise and experience to bear for a company's benefit.

As the business landscape continues to evolve, boards need experts in the areas of cybersecurity, human resources, sustainability and an endless array of other topics. At the same time, boards grow unwieldy and ineffective when they expand beyond 10 to 12 members. Taken in combination, these two realities create an unmistakable truth (or, at least, a thought that I believe to be true): All public company boards should include term limits for their directors.

To ensure that I am approaching this idea with fairness, I will start by acknowledging that there are some drawbacks to the idea of universal board term limits. First, a mandated board term limit would result in a loss of many valuable directors, individuals whose institutional knowledge is of great currency to the companies they serve. It would also result in nom/gov committees having to spend an increased amount of time on activities like identification, recruitment and orientation of would-be and new board members. Finally, it would require boards and board chairs to devote extra time, perhaps on a more regimented basis, to building and maintaining board chemistry and cohesion.

In a 2015 piece for Harvard Law School Forum on Corporate Governance, Robert Pozen, a senior lecturer at MIT Sloan School of Management and a non-resident senior fellow at the Brookings Institution, argued that board term limits were unnecessary because of turnover in the executive ranks and the value brought by experienced directors.

However, in a time when technological advancement increases by the day, when employees are asking more and more of their employers and are willing to act on their discontent, and when the SEC is displaying an eager willingness to weigh in on topics that used to be the sole province of lawmakers, it has become important for boards to ensure that fresh perspectives on emerging topics are constantly available from their membership. In other words, the pros of term limits far outweigh the...