DealLawyers.com Blog

This Wachtell memo says that in an era of increased scrutiny of boards by activists & other investors, directors need to think more strategically about the role of board development and succession planning. Here’s the intro:

The intensifying spotlight turned on boards of directors and management teams by investors prompts a fresh look at how public companies approach board development, director succession planning and refreshment in advance of an activist attack, shareholder unrest or a crisis that results in heightened scrutiny.

As the New Paradigm of corporate governance takes hold, the major index fund asset managers, many actively managed funds and the two largest proxy advisory firms have each formally incorporated questions relating to board quality and practices into their direct engagements with companies, voting policies and how they evaluate a proxy contest to remove or replace existing board members and CEOs.

In addition, activist hedge funds will re-frame matters of corporate strategy and performance into referendums on board quality, questioning whether the board had the right skillsets and practices in place to oversee important business decisions.

The memo goes on to review specific practices relating to board development, diversity, managing tenure, onboarding, director education, board culture, investor engagement & other matters that may enhance the board’s strategic position in this environment.

– John Jenkins