Clone of Comcast Spinning Off MSNBC Was Inevitable.
By Kose John, Stefano Bonini, Luminita Enache, Mascia Ferrari, and David Gaddis Ross
Last year’s Silicon Valley Bank (SVB) default brought the topic of corporate board makeup and tenure to the fore. At SVB, five directors out of 12 had a tenure of less than three years, with three of them having served for less than 12 months at the time of the collapse. Seven directors had served 13 years or more, and no director had specific banking experience prior to the appointment of Thomas King just a few months before the default.
The implication is that a lack of industry- and firm-specific experience on the board can lead to catastrophic results, and that having a long-term director who is familiar with the firm and industry could forestall disaster. But it’s not that simple — long-serving directors can become complacent over time, or worse, cronies of the CEO.
Should companies keep independent directors around for a long time to build institutional experience, or rotate directors on and off the board frequently to avoid entrenchment? In 2021, we set out to answer this question in a large study of over 15 years of data on S&P 1500 firms. We found that the ideal board makeup is all about balance.
Read the full Harvard Business Review article.
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Kose John is the Charles William Gerstenberg Professor of Banking and Finance at NYU Stern.