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Term Limits Gaining Popularity September 2020

Many progressive organizations have completed, or are in the process of redesigning their corporate governance structure. Chief among the many changes is the implementation of term limits for directors combined with a robust governance evaluation and succession plan. Several steps are involved in designing and implanting new policies to achieve this objective starting with the creation of a Corporate Governance Committee to lead the process.

1. Development of a Skill-sets Matrix.
What sound business and financial set of collective skills are necessary within the policymaker group to understand, professionally interpret, and address the current and future policy directives that can assure the longer term financial health and stability of the organization? Develop a list of the skill-sets as the template for building a well-rounded policymaker group.

2. Comparative assessment.
Who among the individuals that currently comprise the board have any of these desired skill-sets? Furthermore, are there any duplications, obvious vacuums, inexperience, or emerging skills in leading edge practices that a board does not currently have and which are deemed imperative to intelligently lead current and future policy discussions? Information Technology (IT), Artificial Intelligence (AI) and Social Media (SM) are just a few of the rapidly developing dynamics that are challenging all organizations regardless of your industry.

3. How to initiate the change process.
What are the barriers to change? Staggered terms (1 year; 2 years; 3 years) typically allow for annual board member elections, however if the organization has not established term limits, repetitive re-election of current directors too often occurs regardless of their suitability, contribution, skill-sets, age, or other attributes. And too often the organization begins to trend in directions completely different in character and purpose to its competitive marketplace. Notwithstanding their interest in the organization, it is often time for some long-serving, non-contributing directors to gracefully resign.

4. Measurement helps to identify contribution.
Often, individual directors are unaware that they are failing to meet the regulatory and industry established standards of their elected duties, responsibilities and obligations. One method for building awareness is for the Corporate Governance Committee to implement a director evaluation program like Governance Pro which can be custom designed to identify contribution specifics and alert each director about where they are meeting, exceeding or falling short of expectations. In todays regulatory environment (i.e., Fintrac, Cintrac) directors of many organizations are required to undergo an annual examination of their knowledge and skills in implementing appropriate policies and practices. This is not optional; it is mandatory. Sometimes additional training in industry specific skill-sets can assist the director to improve his/her performance. In other instances, the director may conclude that he/she is unwilling or unprepared to invest his/her time and effort to comply with the ever changing regulatory requirements or to undertake necessary skill and knowledge upgrades.

5. Total organization commitment.
In most instances it is the Chairperson of the Board who must lead this change process. Engaging the full board in the important aspects of policymaker competence, board succession, and other related subjects make take several months to gain traction. However, to ignore this can ultimately impact the overall financial health and vitality of the organization. Good leadership builds a coalition around embracing the change process resulting in a positive and productive alternative.

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