Always set term limits for captive board members, advises panel
Term limits for board members are always important, according to Derick White, managing director of corporate governance and regulation at Strategic Risk Solutions.
Speaking at the VCIA conference on a panel looking at captive boards, White said: “It takes a few years to really learn a company, but boards also need to be kept fresh.”
Margaret Nekic, president at Inspirien, pointed out that losing experienced board members who understand the business, and replacing them with relatively green members who would take a few years to develop an intimate knowledge of the business, could be a problem. But this risk can be mitigated by staggering the terms of members, so that they expire at different times, she said.
Some veteran board members may be popular, but also ineffective, noted White, and term limits allows them to be moved on even if nobody wants to fire them.
He suggested a period of time close to ten years was probably optimal. “I think once a board member has served three or four three-year terms they have probably served long enough,” said White.