Study: Nearly 20% of Directors are Set for Board Exit
Ernst & Young recently released a report centering around retirement and tenure policies across Fortune 100 and S&P 1500 boards for directors who are approaching retirement.
Some of the key takeaways from EY’s Center for Board Matters’ Focus on Board Retirement and Tenure Policies are:
- Nearly 20% of directors set for board exit: Among the Fortune 100 companies with retirement policies, 19% of directorships are held by individuals within five years of reaching the board’s designated retirement age. Nearly all Fortune 100 companies have board retirement policies in place, with most companies setting the retirement age at 72.
- S&P 500 and 1500 directors follow similar exit pattern: 18% of S&P 500 directorships are held by individuals who are 68 or older and have served on the board for 10 years or more, while 19% of S&P 1500 directorships fall within this range. While not aprecise measurement, the data reflects that the estimated portion of directors nearing retirement is significant, and greater than it was five years ago.
- Fortune 100 board tenure policies are rare: 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. As with retirement policies, board tenure policies are not binding, and 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 term limit — in one case the director is the chair and CEO of the company, and in the other case the director is the board chair.
The report helps identify the portion of directors approaching retirement, based on average retirement-age policies and tenures — and finds opportunity for boards to focus on strategic director succession planning now.
Other findings in the report stressed the importance of performance evaluations, assessments that map director qualifications against a board skills matrix, and creating a board culture where directors do not expect to serve until retirement.