In a comment article published in today’s The Australian, corporate and M&A partner Jonathan Wenig argues that APRA’s proposal for hard term limits for non-executive directors runs the real risk of stripping boards of directors whose experience is vital to nuanced decision-making.
Jonathan contrasts the regulator’s blunt call for a default 10-year tenure limit with recent commentary from corporate heavyweight John Mullen highlighting directors’ essential value as a counterweight to management, Jonathan writes that “while on face value these positions might appear unrelated, they are in direct tension with each other because one is tethered to form, the other to substance.”
“APRA’s proposal is designed to promote an environment where boards continually evolve as they incorporate the new skills, experiences and innovative approaches to solving emerging challenges that come with appointment of new directors.
“Mullen, a seasoned voice in the boardroom, echoes a similar sentiment about the need for genuine board diversity, but his recent commentary embraces a salient caution that diversity should not be reduced to a mere box-ticking exercise.
“All of this underscores the fact that corporate boards are more than advisory bodies; they are custodians of a company’s institutional memory and strategic continuity. Long-serving directors often possess an intimate understanding of the company’s history, the evolution of its business model and the nuances of its stakeholder relationships – insights that can be crucial during periods of market turbulence or strategic realignment.”
Jonathan goes on to explore what might be the optimal path forward for corporate governance, suggesting that the framework might include an enhanced articulation of the features of long tenure that are consistent with corporate governance principles, as well as a rebalancing of the principles around independence.
The article was written with the assistance of lawyer Omer Samuni.
