This year has presented many corporate boards with multiple challenges that required major adjustments. Whether developing an AI strategy, adjusting to tariffs, determining how digital currencies could affect company growth or mapping out a leadership succession plan, the end of the year marks a time when boards can determine if their current corporate governance policies can navigate the ever-changing economic realities while meeting their future needs.
Carver Bancorp recently launched a “board modernization initiative” that board chair Lewis P. Jones III said, “demonstrates the Board’s commitment to implementing proven governance practices aligned with leading companies and making the necessary decisions to compete more effectively in a dynamic and demanding marketplace.”
Many companies that have seen sluggish growth over the last few years or have experienced a significant fiscal falloff due to changing market conditions might be candidates for a corporate governance review similar to what Carver is implementing. As of November 12, according to data from Slickcharts, 67 S&P 500 companies had lost 20 percent or more of their stock value this year. Although Carver is a very small community bank, its proposed changes provide an outline that could be adopted by any company that wants to boost its financial performance and improve the trust between itself and its shareholders. According to the press release, Carver’s board modernization initiative includes:
- Board refresh: 75 percent of directors will transition within the next 12 quarters, subject to any required regulatory approvals
- Skills-based recruitment: Implementation of an enhanced comprehensive director skills matrix for board recruitment, reviewed and updated annually
- Performance management: Annual individual director assessments and full board evaluations; directors subject to enhanced re-evaluation at each term end
- Equity-aligned compensation: 50 percent reduction in cash compensation with the addition of an equity retainer; elimination of per-meeting fees
The company’s modernization effort will also feature board tenure and age limits. Starting in April 2026, directors will be limited to a maximum of 15-years of board service, with service ending at age 75, pending shareholder approval.
While most companies may already have aspects of what Carver is implementing, it is always a good exercise to determine how effective current governance policies are in safeguarding the best interests of shareholders while improving board performance. Board refreshment, revamping compensation plans and director and board assessments are among the best practices boards should revisit annually. As chairman Jones acknowledged, “I want to recognize our current board members who have embraced the needed fundamental transformation required at this time not just to compete, but to establish the foundation for long-term, sustainable profitability.”
Here are some additional considerations for boards looking to implement year-end governance changes:
Buy-in from all board members is essential. While this might seem basic, no attempt at real change can happen if board members are at odds. The realization that some directors may need to retire or be replaced will need to be handled respectfully. Determining executive compensation levels will also require board unanimity, as shareholders might push back on pay without performance.
Changes should happen swiftly. Changes must happen fast so that shareholders know that any new policies are real and will be enforced. Slow walking change may imply that you are not serious about making the proposed adjustments.
Engaging with large shareholders could be valuable. As always, discussions with major shareholders may provide helpful information that could guide any proposed governance changes. Working with shareholders will improve trust and may be helpful if any proposals need shareholder approval.
