Improving board effectiveness with the use of term limits

Term limits are commonly used in not-for-profit organizations and can improve overall board effectiveness. However, if too short, can result in the loss of important institutional knowledge and expertise.

The September/October edition of the Director Journal’s column Directors’ Dilemma addresses the pitfalls of term limits and poses the question: “Our not-for-profit is reviewing term limits for our organization. What current practices should we be considering?”

Partner and co-lead of Torys’ Capital Markets practice Rima Ramchandani told Directors’ Dilemma that some continuity is critical to ensure the efficient operation of a board. However, a static board can lead to “groupthink” and a lack of robust and critical dialogue around the boardroom table.

Long-serving directors may grow too close to management to properly exercise oversight and term limits can improve board independence.

“Creating a growing base of board alumni who can acts as ambassadors for the organization can be particularly valuable in the not-for-profit sector,” she said.

Access the full Directors’ Dilemma column here.

You can read more about our Board Advisory and Governance work on our practice page.

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