THE BLOG
08/07/2013 03:45 pm ET Updated Oct 07, 2013

The '40-Year Club' Means It's Time for a Changing of the Guards!

I don't know of a business that doesn't need fresh thinking -- which typically comes from an infusion of fresh blood. How do you get an infusion of fresh thinking on a board when the directors have been serving for 10 years or longer? That's a private club -- not a team prepared to direct an organization in uncharted waters! If that describes your board, it's time for a changing of the guards.

A recent article in the Wall Street Journal titled "The 40-Year Club: America's Longest-Serving Directors" roused me. The article profiled "an unusual elite" -- outside directors with at least 40 years' tenure at a company.

Yes, "long-serving members often provide useful context about a company, its industry, and its past," as Joann Lublin wrote in the July 16 article. But does the need for historical context trump all other needs? As Lublin points out, long-serving board members take up seats that could be going to more diverse talent -- younger, less pale, less male, and candidly less stale. We know that the right diversity strategy often enhances team outcomes. Why starve your board of the same opportunity?

Another concern: Just how independent are the "independent directors" who have served 10 years or more (a number that researchers for the Wall Street Journal found has doubled in the last five years). My concern is, when those directors are paid on average close to $250,000 a year -- year after year -- are they really going to bring contrarian views to the table? Are they willing to risk that position to start tough conversations about strategy, competition, or value chain disruption?

Finally, the article reports that the pace of "blood transfusion" has slowed since the recession. To me, this is the biggest concern. Not only is corporate governance moving too slowly toward bringing on fresh thinking, progress has practically come to a halt. A recent study shows that "S&P 500 companies elected the smallest number of new directors during 2012 in a decade," Lublin reported.

No chance for diversity; worries about independent thought; little to no impetus to change. "Houston, we have a problem."

This would be a problem in even the smoothest economic waters. But that is not the sea we're on at the moment. In fact, disruptive innovation is taking aim at every business, from high-tech to commodity players. Develop a disruption of your own before it's too late, I say. Digital technologies are converging and drastically reshaping every industry. How likely is it that an enterprise with a "40-year club" -- or even a "10-year club" -- as its fiduciary stewards will support the CEO to come up with strategic responses that deliver competitive advantage in our technology-saturated world?

"Long-tenured outside board members worry they're less savvy about contemporary business practices," Lublin wrote, and that is exactly the point. The solution I recommend? Make way for digital directors.

Anywhere disruptive technologies are impacting business strategy -- and that's pretty much everywhere -- companies need board members with relevant expertise in disruptor companies and industries. This new breed of board members has social and mobile technologies in its DNA. These leaders have cut their teeth on data analytics, software-as-a-service, cloud computing. They've been part of initiatives that have driven fundamental change. They've worked in technology, or been part of the wave of transformation that has brought technology to other industries. They are native speakers of the language of chief technology or information officers.

Not only that, this new breed of directors bring with them a portfolio of relationships that are just as savvy about the leading edge. They bring not just their own fresh thinking but also that of a whole peer group. When key questions and options emerge for your organization, whom do you want at your table? A "40-year club" or a group of the most diverse, bright, informed, and connected minds available?

You'll need to open up some seats on your board and explicitly ask the nominating committee to identify new talent, so start thinking about term limits. Think about recruiting to fill those new vacancies using social channels. Charge your longtime board members with teaching the newcomers the historical context they lack -- and charge your new board members with sharing their deep knowledge of innovative disruptions. With these changes, you'll have a board you can truly trust with your enterprise's governance.

Nour Takeaways:

1. Your organization deserves the "idea transfusion" a more diverse board will bring.
2. If most of your board members have served 10-plus years, that's a strategic weakness amid disruptive innovation. Open up some seats for digital directors.
2. Recruit board members for diversity, intelligence, and technology experience. But don't keep them forever.

To see more insights from David Nour and the Nour Group, visit here