Peter Crow
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Is long service helpful or is it a hindrance?

18/7/2013

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An article that was published the Wall Street Journal this week—highlighting long service on corporate boards—has got me thinking. The author, Joann Lublin, provided a list of 28 directors who have served at least 40 years on a company board. That's right, on the same board. Gosh, that's seriously long service.

In the last 40 years, much has changed in the business world including at least one oil shock (1973); a major stock market crash (1987); the emergence of the Internet and on-line commerce (mid-90s); and, a global financial crisis (2007–08). Yet through all of this time, some 28 men have continued to serve as directors on the same board.

Is such long service helpful, or is it a hindrance? Superficially, we tend to applaud long service. It can be very helpful, particularly when difficult decisions need to be made. Long-serving directors are more likely to be able to draw on some prior experience—in terms of the situation, the decision made and the resultant outcomes—to help them make a more informed and appropriate decision this time around. However, things change, so experiences from years ago may not actually be that helpful in today's environment. Also, long serving directors can (and often do) become stale, and, as they do, their decision-making has a tendency to become more reserved.

It is my view that a mix of fresh blood (for innovation) and longer-serving directors (for experience and continuity) is crucial to effective decision-making. Nobody is indispensable, despite appearing to be so at certain times. Ten to twelve years service is a reasonable upper limit, beyond which the value of one's contribution falls away. I found myself getting stale after eight or so years on a board that I served on during the 2000s, despite the organisation consistently exploring new innovations and strategic options. Based on this experience, how directors can continue to be effective contributors for three or four decades is beyond my comprehension. While I don't support compulsory upper limits on service, perhaps it is time for Boards and shareholders to look at their recruitment and appointment policies—for the good of the organisation and its stakeholders.
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