---
title: "Decade-long tenures: how stale boardrooms undermine shareholder value and invite dissent"
description: "US companies face increasing pressure from investors over long-serving board members. Fresh perspectives are crucial for better performance."
type: "NewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "BOARDROOM KRYPTONITE"
author: "Reuters"
author_url: "https://www.dailymaverick.co.za/author/reuters/"
canonical_url: "https://www.dailymaverick.co.za/article/2025-02-19-decade-long-tenures-how-stale-boardrooms-undermine-shareholder-value-and-invite-dissent/"
published: "2025-02-19T00:09:18"
updated: "2025-02-19T00:09:22"
lang: "en-ZA"
word_count: 1023
---

# Decade-long tenures: how stale boardrooms undermine shareholder value and invite dissent

> US companies face increasing pressure from investors over long-serving board members. Fresh perspectives are crucial for better performance.

By Reuters · Published 19 February 2025, 02:09 SAST · Updated 19 February 2025, 02:09 SAST

## Key points
- In a corporate game where board members cling to their seats like stubborn barnacles, the U.S. is learning the hard way that a little turnover might just be the secret sauce to fend off activist investors and revive stagnant thinking—because when directors start resembling vintage wine, it’s usually time to pop the cork and invite some fresh ideas to the table.
- US companies continue to ignore warnings about long-serving board members, inviting scrutiny from activist investors.
- Two-thirds of activist campaigns from 2021 to late 2024 targeted firms with directors in place for over a decade.
- The average tenure of independent directors in the US is nearly eight years, significantly longer than in other countries, raising concerns about stagnation.
- Research shows that boards with shorter tenures make better investment decisions, highlighting the need for mandated turnover to refresh leadership.

## Content

By Jeffrey Goldfarb

It’s almost as if US companies want to attract the attention of headstrong investors. Despite years of warnings about the dangers of allowing board members to overstay their welcome, the habit persists and keeps inviting trouble. Placing a time limit on how long directors can serve would have many benefits. One of the biggest would be to ward off dissident shareholders, or at least force them to refresh their own tired thinking.

Although experience, continuity and historical knowledge are valuable attributes in the boardroom, U.S. companies tend to overdo it in a way that breeds stagnation and crony capitalism. It’s no wonder shareholders are increasingly zeroing in on the inertia. Two-thirds of activist investor campaigns between 2021 and late 2024 preyed on companies with at least three directors in their roles for a decade or more, according to law firm Skadden, Arps, Slate, Meagher & Flom, [citing,](https://www.skadden.com/insights/publications/2024/11/the-informed-board/how-long-is-too-long)data from investment bank Evercore. Ski slope operator Vail Resorts and casket maker Matthews International are two of the latest to come [under siege](https://c38f3580-b7de-4014-ba69-5a303368ebc7.usrfiles.com/ugd/c38f35_e2ed8d02246144cd8765614ebc650756.pdf), with tenure as a factor.

At Matthews, the stock price has tumbled by nearly half since mid-2023, inviting pushy investor Barington Capital to [note](https://barington.com/matthews) that the board’s collective tenure averaged more than 11 years, 60% longer than at the typical company in the Russell 3000 Index. The board [defended](https://www.matw.com/investors/news-events/press-releases/detail/259/matthews-international-responds-to-barington-capital-and)its composition, touting the addition of two new independent members over the past two years. Even so, proxy advisory firms Institutional Shareholder Services, Glass Lewis and Egan-Jones all [recommended](https://www.prnewswire.com/news-releases/leading-proxy-advisory-firm-glass-lewis-joins-iss-and-egan-jones-in-recommending-matthews-international-shareholders-vote-the-gold-proxy-card-for-all-of-barington-capitals-nominees-ana-amicarella-chan-galbato-and-james-mitaro-302372048.html)that investors support Barington’s three nominees at this week’s shareholder meeting.

Companies often push back, and there’s little evidence to suggest that management teams see a problem. Fewer than 10% of S&P 500 Index constituents impose a cap on director tenure, and most that do set it at a protracted 15 years or more, according to corporate governance research firm ESGAUGE. Retailer Target and networking gear maker Cisco Systems will only show a non-executive director the door after two decades.

Many companies insist they don’t need a binding rule to routinely bring in fresh faces, but lingerers persist. As of last year, nearly 1,300 sitting independent directors, accounting for more than a quarter of the total at S&P 500 members alone, had been around for more than a decade. About 13% of them racked up at least 15 years of service, making it hard to take an independent designation seriously.

![Image](https://www.dailymaverick.co.za/wp-content/uploads/2025/02/director-tenure-480x389.jpg)

Goldman Sachs alumnus John Thornton, for example, is the lead independent director at carmaker Ford Motor, where he has been on the board for nearly three decades. Former Blackstone President Tony James has racked up 36 years as a director at retail giant Costco, more than seven of them as chairman. And with 50 years at insurer W.R. Berkley, ex-investment banker Mark Shapiro is the longest-serving independent director at a company in the benchmark index, per ESGAUGE data.

More broadly, the United States held the ignominious second-place spot for longest-serving non-executive directors, among 17 countries [analysed,](https://www.spencerstuart.com/research-and-insight/boards-around-the-world?category=all-board-composition&topic=tenure&currency=all) by hiring consultancy Spencer Stuart. At almost eight years, the average US board member’s tenure lagged only that of Mexico and was nearly double the length of service in Britain, where a [governance code](https://media.frc.org.uk/documents/UK_Corporate_Governance_Code_2024_a2hmQmY.pdf) generally considers a director’s independence impaired after nine years. Hong Kong’s bourse operator also recently [enacted](https://www.hkex.com.hk/News/Regulatory-Announcements/2024/2412192news?sc_lang=en) rules that will ban boards from having independent non-executive directors who have served for more than nine years.

![Image](https://www.dailymaverick.co.za/wp-content/uploads/2025/02/US-non-execs-480x424.jpg)

There are sound financial reasons to avoid entrenched boardrooms, and the stale thinking they often beget. Companies generate their best returns when outside directors have an average tenure of eight to 10 years, before performance starts falling, according to a comprehensive study [published](https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=2755&context=soa_research) in 2018 by Singapore Management University. Boards with shorter tenure make better investment decisions that lead to higher valuations, while ones with longer tenure “are more likely to engage in value-destroying acquisitions,” researchers concluded.

One problem is that, because of the clubby nature of boards, directors are often reluctant to usher out colleagues lest they be ejected next. Privately, however, directors have never been less happy with their peers, based on consultancy PwC’s most recent annual [survey](https://www.pwc.com/us/en/services/governance-insights-center/library/assets/pwc-uncertainty-and-transformation-2024.pdf). Half the respondents said at least one member should be replaced and a quarter reckon it’s time for at least two to be ousted.

![Image](https://www.dailymaverick.co.za/wp-content/uploads/2025/02/peer-review-480x325.jpg)

Mandated turnover would limit contributions from some useful directors but probably push out far more timeworn ones. Market discipline has its limits, too. There just aren’t enough activist investors to go around, and many boards either hope to escape notice or find other reasons to overlook the evidence.

Performance can help insulate against external criticism. Warehouse builder Prologis implemented a 15-year maximum term in 2023, only to scrap it the following year after shareholders indicated they did not think it was necessary. The $110 billion company has a 75-year age limit on membership, as some other boards do, but five of its 11 directors, including the lead independent one, have served for at least nine years. With a roughly 175% total shareholder return over the past decade, outperforming major real estate investment trust yardsticks, Prologis could make the case that its board [evaluation](https://ir.prologis.com/financials/sec-filings/content/0001193125-24-081522/d550115ddef14a.htm#toc550115_9)process is not obviously hurting shareholders.

Sweeping rule changes also would be hard to enact. Individual US states hold power to regulate corporate governance, but that approach would create an awkward patchwork. American stock exchanges, too, could adopt standards. They’re probably hesitant to do so, however, after a federal court in December [struck down](https://www.whitecase.com/insight-alert/nasdaq-board-diversity-disclosure-rules-no-longer-effect-after-overturning-court)Nasdaq’s board diversity rules, saying the US Securities and Exchange Commission exceeded its authority by approving them.

This ultimately leaves the decision up to companies themselves. If they’re not persuaded by the benefits of steadily embracing new perspectives to complement ingrained ones, or that longer-tenured boards are linked to weaker financial performance, maybe they can appreciate the defensive value. By firmly capping service at a decade, companies would neutralize a powerful weapon in activist investors’ arsenals. By doing so, it would compel such agitators to find some new ammunition of their own. **DM**

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Editing by Peter Thal Larsen and Streisand Neto