The Board Wants You Removed. But Why?

The assessments of the other directors all suggested the same thing, even if their reasons differed: They wanted a director removed. But it didn’t happen.

A new survey of corporate directors suggests that frustration over the performance of certain board members is mounting. Indeed, according to the survey, 55% of corporate directors feel that at least one member of the board should be removed, a record high. Of those, 41% cited directors who didn't contribute meaningfully to board discussions, and another one-fifth specified directors who negatively affected board dynamics. “Not contributing meaningfully to discussions could mean a director has slowed down,” says Charles Elson, founding director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “Or it could mean that the other directors just don’t like what they are saying.”

To be sure, it’s in the nature of boards to have disagreements, especially as pressure from investor activists mounts. The problem, say experts, is that while directors don’t hesitate to point fingers in anonymous surveys, they’re still reluctant to have tough conversations in person with underperforming—or disagreeable—members, with one-quarter of them citing “collegiality” as the top reason for not taking action. Other factors preventing boards from removing underperforming directors include awkwardness and a member’s approaching retirement. 

Fabrizio Ferri, a University of Miami professor specializing in corporate-governance issues, says these discussions are complicated: Directors are peers who want to maintain relationships. “Directors can work with each other for years,” says Ferri. “They spend a lot of time recruiting each other and socializing with each other, so they have a broader interest in staying connected.” But that’s not only doing the firm a disservice—it could also have serious business ramifications, says Torrey Foster, a vice chairman in the consumer and board and CEO services practices at Korn Ferry. “Board service is not a friendship game,” he says. “It’s about representing the best interests of shareholders.”

Boards are taking steps to address directors’ concerns, albeit indirectly. Nearly 90% of S&P 500 boards require directors to stand for election annually; those who don’t receive a majority of shareholder votes are required to resign. Other mechanisms are designed to hasten turnover, including age and term limits and changes in a director’s employment status. 

Nearly all boards—99%, to be exact—now conduct annual evaluations. But fewer than half of those boards conduct individual director assessments, and only a quarter use an independent third party to carry them out. Dennis Carey, vice chairman and co-leader of board services at Korn Ferry, says independent board assessments can help address director performance objectively. Similarly, instead of thinking in terms of who should be replaced, Carey tells his clients to list the two or three directors the board can’t do without. “It’s easier to have a conversation about replacement when you’ve done the strategic thinking around skills and experience needed on the board,” he says. 

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