Nearly 20% of directors poised for board exit.

• Position: BOARD REPORT

Investors' increasing focus on board composition includes attention to whether boards are continuing to refresh and recruit new directors in line with the company's changing strategic goals and risk profile. But the challenges of effective board succession planning can go beyond finding new directors whose skill sets, diversity, character, and availability match the board's needs--they may also include asking longstanding directors to leave the board when appropriate, while protecting directors' collegiality and relationships.

Based on what the EY Center for Board Matters is hearing from investors and directors, optimal practices for aiding board renewal include robust performance evaluations (including following through on key takeaways), assessments that map director qualifications against a board skills matrix, and creating a board culture where directors do not expect to serve until retirement. Director retirement and tenure policies are also among the tools available to boards to ease transitions. Such policies can help depersonalize the process of asking directors to leave the board.

Fortune 100 board retirement-age policies: Nearly all Fortune 100 companies have board retirement-age policies in place, with most companies setting the retirement age at 72. Four of these companies have upped their retirement age since last year; none have lowered it.

Even when retirement-age policies are in place, some boards may choose to waive them in cases where they feel doing so is warranted. Indeed, nearly half of the Fortune 100 companies that have board retirement-age policies make explicit that the policy may be waived under certain circumstances. Still, it is rare for directors to serve on the board past the set retirement age. Only 2% of Fortune 100 directors are serving on boards past a designated retirement age. In half of those cases, the companies explain in the proxy statement the board's reasoning for reappointing those directors. Around 8% of Fortune 100 directors are age 72 or older.

Fortune 100 board tenure policies: Tenure policies are rare among Fortune 100 companies. Only four companies have them: one uses a term limit of 12 years: one uses 15 years; one uses 18 years; and one uses 20 years. Even when board tenure policies are in place, companies may waive them. In fact most of the companies that do set term limits make clear that the board may make exceptions. Only two Fortune 100 directors are serving on boards past a designated...