Now that corporate boards are having to shoulder increasing responsibility due to regulatory changes and stakeholder concerns about issues ranging from climate change, cyber security, ESG, and rapidly advancing new technologies, it is becoming a bit more challenging to maintain the appropriate board composition while also paying attention to board refreshment. As companies deal with replacing directors due to age limits, tenure caps or the need for new skill sets, corporate board members may want to consider shifting retiring directors to a position as advisor or consultant. While this is not a new strategy, it is one that could yield solid results for the right organization.
J.B. Hunt Transport Services recently used this strategy during the recent appointment of a new CEO. Shelley Simpson, an executive at J.B. Hunt for nearly three decades, has been tapped to succeed John N. Roberts, III as CEO for the $20 billion transportation company. As part of its succession plan, the company will transition Roberts to the role of executive chairman of the board, while also moving two important and long-time board members, Kirk Thompson (the current executive chairman of the board) and Wayne Garrison to advisory roles as “Honorary Founding Directors.”
A report from Investing.com explains J.B. Hunt’s reasoning for the moves:
“The creation of the Honorary Founding Director positions for Thompson and Garrison aims to retain their extensive experience and insights … Their advisory roles will continue to provide valuable perspectives to the management and board.”
Companies should consider shifting long-time board members to advisory roles more often because the experience those individuals have dealing with challenging market conditions and crisis situations can’t always be replaced when adding new board members. There are other advantages to creating advisory roles for key long-serving executives:
Key institutional history and critical relationships can be preserved and passed on to others. Board members with 20 or 30 years of service will have seen how a company has grown over the years and can offer a unique perspective on how the company can avoid past mistakes. These executives will likely have built key relationships that could help settle disagreements with the largest shareholders, strengthen negotiations with regulators, or facilitate alliances between company executives and industry leaders in the future. Letting this type of insider intelligence walk out the door could prove costly.
Retiring directors can be a great source of mentorship for executives targeted for advancement. Having seasoned corporate directors act as mentors for future executives and directors of your company just makes sense. All companies must create a succession plan that is in the best interest of the company and investors. Establishing a process that requires interaction between retired directors in advisory roles and executives targeted for senior positions in the company should strengthen the effectiveness of any succession plan.
Advisory positions can be an incentive for current directors to make regular significant contributions to the board. Some boards have had problems keeping directors engaged and productive over the years. Advisory or consultant roles could inspire greater productivity from director during their tenure on the board.
