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Their tenure as directors was nothing short of spectacular: Blythe McGarvie and two fellow directors had joined the board when the company went public in 2001, providing guidance and oversight that helped turn an accounting-firm spinoff into a nearly $80 billion category giant. Indeed, the three had much to celebrate in their 16-year association with Accenture.
But earlier this year, without any pressure from activist groups or mandatory term limits, the three opted not to stand for reelection. So why leave when the party is still going strong?
“The best leaders replace themselves,” says McGarvie. “I think it’s good corporate governance to always ask, ‘Do we need new skills? If so, which ones?’ Succession planning has to be done thoroughly and deeply, not only for management but for the boards.”
A board directorship at a major firm may be one of the world’s greatest gigs. Such positions offer prestige, a chance to work with fascinating colleagues, the abilities to steer a big firm and travel, and access to a generous expense account. On top of that, the jobs require only a couple months’ worth of work and pay (about $275,000 a year, on average). It isn’t surprising that few directors walk away on their own.
But while it’s still a rare occurrence, some directors are wondering whether they should. Some board members are deciding they don’t want to stick around to go through another big strategic shift. At the same time, activist shareholders are demanding major changes, and internal evaluations may show that existing directors may not have the skills or experience the company needs to succeed in an ever-changing environment. Traditionally, very few directors take it upon themselves to aid in refreshing the board.
The process for removing directors is unstructured. Only 65 percent of boards have a process for removing ineffective directors, according to a Stanford University study. As a result, board turnover is painfully slow. Another study found that there’s an element of ego that slows turnover—a cultural perception that exiting a board position is a sign of failure.
Sometimes it takes a board evaluation to prod change. “It’s rare that people say, ‘ I don’t have the skills the board needs now,’ but sometimes evaluations do spur people to think,” says Joe Griesedieck, vice chairman of Korn Ferry and managing director of Global Board and CEO Services. More than 80 percent of directors say that a skills-gap analysis of the full board is a useful tool in driving effective board composition, according to the National Association of Corporate Directors.
In her case, McGarvie’s expertise in building brands is why Accenture recruited her. The company is now among the most recognized consulting brands on earth. She continues her board work for one private and two public company boards. “I’m looking for my next board, where I can bring my cumulative experience to bear on another organization.”
At the same time, firms are recognizing a need to bring women, people of color and younger board members who can offer new skill sets and different perspectives on issues. Fred G. Steingraber, chairman and CEO emeritus of A.T. Kearney, serves on multiple boards, and one of his private firm boards recently realized that it needed some fresh blood since all the current members are around the same age.
“Nobody wants to admit that they’re ready to go off the board or give up the seat that they have,” he says. “They’ve enjoyed it. They’re seeing the success that has been achieved in the last couple of years.”
Steingraber saw the obvious solution: “I took it upon myself to say I would be the first one to go off the board.” Now he is advocating for the next step, to develop a policy on terms and age limits to mitigate the risk of repeating this problem of succession planning for boards.