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TWO CONTENTIOUS RECOMMENDATIONS

Directors accepted all of the recommendations initially except for two, which were: (1) that the three longest-serving directors (28, 24, and 23 years, respectively) resign, and (2) that a woman be selected for directorship and serve on the compensation committee in particular.

As far as the three longest-serving directors resigning was concerned, one director (28-year tenure) had, during the data collection phase, invited the author to his estate in Boston prior to the final report to tell the author how important the board was to him, and how he should be allowed to continue to serve so long as he is able. The author indicated politely that regulators are moving toward term limits of nine or 10 years to guard against entrenchment and compromising of independence over time. The author said that one of his recommendations was not only that he and two other directors should resign, but also that term limits be in place at 15 years for all incumbent directors and nine years for all new directors.

Recommending a Woman to Serve on the Board

The second issue was more contentious and surfaced at the board meeting itself. It was the author's recommendation that a woman be added to the board.

One director remarked, "Dr. Leblanc, you want us to put a lady on the board?" (Emphasis in original remark.) Another director remarked, "Perhaps we can have a lady in a wheelchair who is a lesbian." Many of the directors laughed at this comment.

The author indicated that evidence existed that CEO turnover is more sensitive to stock return performance in firms with a greater proportion of women; that women are more likely to join committees that perform monitoring-performing tasks; and that male directors have fewer attendance problems, the greater the number of women on the board.[1] The author also indicated that the regulator had agreed to all of his recommendations, including this one, and that there was a need for the skill set of compensation and information technology literacy on the board, given prior concerns and the transformation of the industry.

  • [1] R. B. Adams and D. Ferreira, "Women in the Boardroom and Their Impact on Governance and Performance," Journal of Financial Economics 94 (2009): 291-309.
 
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