ISS Got this One Right

Mark Lonergan, February 15th, 2017

Like a lot of peo­ple here in Sil­i­con Val­ley, I am not a big fan of ISS — the com­pa­ny that over­sees the scor­ing of pub­licly-trad­ed com­pa­nies for major insti­tu­tion­al investors. 

How­ev­er, ISS issued guide­lines around board tenure last year that strike me as absolute­ly cor­rect. They insist that a 10-year lim­it should be placed on sit­ting pub­lic com­pa­ny board direc­tors in order to meet their stan­dards of good gov­er­nance. ISS argues that direc­tors who serve longer than 10 years become out-of-touch with the mar­kets they once under­stood, and after ten years they should be con­sid­ered cap­tive direc­tors’ eas­i­ly swayed by exec­u­tive management.

There are three important reasons to refresh your public company board of Directors.

  • New Ideas from Cur­rent Oper­at­ing Exec­u­tives
    Many long serv­ing direc­tors have long since left the oper­at­ing roles which once made them a valu­able source of up-to-date knowl­edge of mar­kets and tech­nol­o­gy. New board mem­bers can be used to test assump­tions made by senior man­age­ment based on their cur­rent knowl­edge of the exter­nal fac­tors that affect a company.
  • Diver­si­ty of Thought
    It’s about more than gen­der or even race. A diverse set of new direc­tors can look with fresh eyes on the strate­gic plans of your com­pa­ny, reflect­ing more close­ly your mar­kets and your employees.
  • A New Char­ter
    Com­pa­nies evolve over time. Plans and mar­kets change dra­mat­i­cal­ly. New board direc­tors can reflect where your com­pa­ny is going, and not where it’s been in the past.

It is a chal­lenge to approach a long serv­ing direc­tor and tell him/​her it is time to step aside, but the ISS guide­lines will make that con­ver­sa­tion a bit eas­i­er to start.

Mark Lonergan

Founder & Managing Partner, Lonergan Partners

Specialties: Board & CEO placements


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