The Chair Who Stayed Too Long
A listed logistics company has a nine-member board: the chair, the CEO, two other executives, and five non-executives. The chair has held the role for eleven years and previously served as CEO for six years before that. Three of the five non-executives were appointed during the chair's tenure and describe him privately as a mentor. The nomination committee is chaired by the chair himself. Board papers are circulated four working days before meetings and average 180 pages; two non-executives have missed a third of meetings in the past year, citing workload. The company's governance statement says the board "complies with the relevant governance code," and the code in this jurisdiction recommends that the chair be independent on appointment and that a majority of the board be independent. The annual general meeting is in five months, and a proxy adviser has signalled concerns about board composition.
1. Evaluate the independence position of the board and explain why the chair's history matters beyond his own classification.
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On the facts, the board does not have a majority of independent directors. The CEO and two other executives are clearly not independent. The chair is not independent on appointment: he was previously CEO for six years, which creates exactly the familiarity and insider perspective the independence criterion is designed to exclude. That leaves four potentially independent non-executives out of nine - well short of a majority.
The chair's history matters for reasons beyond his own label. First, the nomination committee is chaired by him, so the person whose independence is in question controls the process for appointing and reappraising directors. Second, three non-executives were appointed during his tenure and regard him as a mentor; mentorship is valuable but it creates loyalty that can suppress challenge in the boardroom. Third, an eleven-year tenure plus a prior CEO role means there is no director around the table who has known the company only in its current form.
The governance statement's claim of compliance is therefore difficult to sustain on an honest reading. The proxy adviser's concern is not a technicality; it goes to whether the board can hold management to account when management includes the CEO and the chair is a former CEO.
2. The chair proposes to resolve the proxy adviser's concern by adding two new independent non-executives before the AGM. Assess whether this fixes the problem.
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Adding two independents would bring the count to six independents out of eleven - a numerical majority. It does not fix the underlying problem, for three reasons.
The chair remains non-independent. The code recommends independence on appointment, and a former CEO of six years cannot meet that test. A numerical majority does not cure a non-independent chair, and the proxy adviser will say so.
The nomination process is still controlled by the chair. New directors selected through a process chaired by the person whose position is contested will be viewed as aligned with him, whatever their formal credentials. The nomination committee's composition needs to change, with an independent non-executive chairing it, before any appointments are made.
The engagement problem is untouched. Two directors missing a third of meetings and 180-page papers arriving four days ahead of time are symptoms of a board that cannot do its job properly. Adding two more directors to a board that already struggles to prepare will make things worse, not better.
A more credible response combines: separating the chair and nomination committee roles; a disclosed plan and timetable for chair succession, with an independent chair appointed; a reduction in paper length and earlier circulation; and a frank conversation with the two absent directors about capacity. Announcing appointments without the structural changes would look like cosmetic compliance and is likely to attract more proxy opposition, not less.