A blanket cap on board tenure would do more harm than good

GOOD board governance is essential - it is a decisive check against self-interested actions taken by managers that do not benefit the company. Due to their presumed independence relative to insiders, independent directors are generally perceived to be more effective in monitoring and controlling management, thus helping improve firm performance.

The Singapore Directorship Report 2016 shows that more than 64 per cent of corporate boards have at least one independent director (ID) who has served longer than nine years. Indeed, the growing ranks of long-serving directors occupying spots that otherwise might go to younger and fresher talent has sparked some controversy.

Activist investors, pundits, and regulators question whether an ID can continue to perform their role well if they were to stay too long on a board. A close-knit board is good for board performance, and increases trust and openness between board members and executive managers. But the worry is that long-serving directors may get too cosy with other board members and senior management and this could eventually compromise their ability to exercise judgement independently, or at the very least, muddy their ab…