News reports of the retirement of Al Gore and James Bell from the Apple board of directors are a reminder that corporate boards may need to pay greater attention to board refreshment to avoid major upheavals in board chemistry and overall company leadership.
The simultaneous loss of two longtime influential members of any board could have a negative impact on a company’s future. Apple will be losing the institutional insight and industry experience of former U.S. Vice President Al Gore and James Bell, the former CEO of Boeing Co. The two have served on the Apple board for significant periods of time – Gore has served since 2003 and Bell since 2015. Both are 75 years old and are stepping down from their board seats due to the company’s policy that directors cannot stand for re-election after reaching the age of 75. Replacing what Gore and Bell have contributed to helping Apple climb to becoming one of the most valuable companies in the world should not be taken for granted.
The Importance of a Board Succession Plan
Trying to replace two key directors could potentially destabilize any corporate board, but Apple may soon have even more board positions to fill. Ronald Sugar, a third Apple board member, is 76 years old but has received an exemption from having to retire because of “the significant recent transitions in board composition and the value of retaining directors who have developed deep insights into the company during their tenure.” How long will that exemption stay in place? Additionally, Arthur Levinson, Apple’s Chairman, turns 75 next year and will be subject to the retirement policy as well.
This dilemma is no doubt being sorted out by the remaining Apple board members, but it has raised created an element of risk for the company that shareholders will likely begin monitoring more closely. The company’s first step to addressing the problem was nominating Wanda Austin, 69, the former CEO of the Aerospace Corp., to be named to the Apple board. However, Apple has more work to do perhaps your board does as well.
• Identify potential board members early. Does your board have an ongoing process of identifying potential board members of all ages and backgrounds? Waiting until directors reach retirement age to start a search is not a good option. Boards could consider creating a committee that has an “informal” process of asking current directors for potential candidates and then meeting those candidates in different social and business settings to determine if their temperament, knowledge, experience, and personality may be a good fit for the board. Having a list of top candidates to succeed board members when they retire could cut down the time to name new nominees when the time comes.
• Create a profile of what the future board composition might need to be. The skill set on your current board may not fit what will be needed in the next decade to keep the company ahead of competitors. Board succession requires taking a hard look at what strengths the current board has as well as taking an honest look at potential weaknesses. Many boards have a “blind spot” in experience, skills and/or perspectives that could be helpful in jumpstarting innovation or identifying potential future risks. Boards might consider spending some time forecasting what will be needed in the future.
• Collaborate with shareholders when appropriate. Sometimes a company’s largest shareholders have insights into a company that can be extremely helpful. With the right engagement, shareholders can help identify risks in a company’s approach and maybe even suggest viable solutions. In some cases, (although rare) shareholders may even suggest board candidates that can help the company increase revenue without initiating a proxy fight.