Stable Boards with Some New Blood – Long Tenures with Short Terms
Director tenures at fast-growth software companies range from zero to 24 years. All of the North American companies studied have at least one board member that was assigned within the last five years. Drilling down further, four of those companies have assigned a new board member in the last three years. While there are some changes in these boards, there is not much new blood coming in. Perhaps getting it right the first time and then adjusting is their motto.
There are definitely advantages to letting the team gel and work together. A lot of companies are evaluating the effectiveness of their boards and making changes to drive more growth and profitability.
Only one company has had the same director seated for 24 years – Lawson Software. But this is the founder of the company and is therefore not surprising. Both CyberSource and Open Text have also allowed at least one board member to remain seated at the table for 15 years and Omniture for 11 years.
The board terms in the companies are as follows:
- Open Text (CAN) 1 year
- Tech Mahindra (India) N/A
- Avocent (USA) 3 years
- StepStone (UK) 2 years
- Lawson Software (USA) 1 year
- Sonata Software (India) N/A
- Omniture (USA) 3 years
- Synchronoss Tech (USA) 3 years
- Opsware (USA) 3 years
- CyberSource (USA) 1 year
Given the short terms, it is surprising that there is so little movement in the board seats at these companies. Perhaps board evaluations need to take a front and center role in these organizations. Some boards may indeed be “A” teams. However, being in the top performing categories may also hide a lot of sins and not allow time for action.
By comparison, the 2008 Silicon Valley Board Index shows that most boards (62 percent) have one-year terms for board directors. Only 2 percent have two-year terms, and 36 percent have three-year terms. One-year terms have become more common in the past several years; 56 percent of Silicon Valley boards had one-year terms in 2003. The average term length is 1.8 years, nearly the same as in 2007.