Article Explores Ways to Gently Lead Directors to Exit
A recent posting on the Corporate Governance Forum blog delves into a difficult area for most boards and seeks to offer some solutions. The author, a lawyer from McDermott Will & Emery, notes there will be times when a director’s continued presence on the board becomes problematic, for reasons that may or may not be his own fault. The author, who acknowledges that this can be a delicate situation with legal implications, writes that boards need a mechanism to respectfully help the director voluntarily make an exit without disrupting board operations and suggests strategies, including:
- Early disclosure and agreement from entire board: The author encourages a board culture where directors agree from the beginning that they could be asked to leave at any moment. Directors would be required to disclose voluntarily to board leadership the occurrence of any situations that requires a board member to exit the board. “The board, through a special committee, would evaluate the circumstance in the context of its impact on the company and the effectiveness of its governance, and then render a decision as to whether the director should be required to resign from the board.”
- Director offboarding: This process seeks to achieve a structured separation from certain directors without prompting controversy or ill will, the author writes. “It is intended to allow the board to achieve necessary turnover more quickly and expansively than through term limits or mandatory retirement age, and more gently than through removal.”
Considering these strategies should begin with a conversation with independent counsel as implementing them may pose legal ramifications.