Slash nine-year terms, end gender box-ticking: Livingstone

“Every seat around a board table counts, so it may be appropriate to balance corporate memory and diversity with continuing ability to contribute and comparison against the changing needs demanded by the organisation’s strategic context,” she told the summit.

“There may be individuals that would be great directors but do not wish to commit to nine years, nor be seen to let the organisation down by leaving after three or four years.”

Listed company directors in Australia are usually re-elected every three years by shareholders and a cycle of three terms or nine years is seen as typical, but there is no requirement for directors to stand down.

‘Time to evolve’

The ASX Corporate Governance Principles – currently under review – ask directors to explain if they remain independent after they have been on a board for nine years.

Ms Livingstone said that 40 years ago it was not uncommon for directors to be on a board for 15 to 20 years, and two decades ago tenure limits of nine to 12 years became widespread.

“Directors generally do, and expect to, serve for their full tenure,” she said. “It’s now time to evolve our thinking again.”

Ms Livingstone said shorter tenures would be “more reflective of the rate of change in the external environment” and enable a greater range of skills, experience and thinking styles to come through.

Susan Forrester, chair of Jumbo Interactive and non-executive director of Data#3, said she had encountered directors who refuse to leave. She warned that because it was not the norm, directors risked their reputation if they left before nine years.

“Reducing the rigid expectation of three by three years would attract a new cohort of professionals experienced in technology, behavioural science, marketing and human capital,” she said.

“To avoid negative assumptions from proxy advisers ... future directors may signpost their intentions to serve a shorter term on their appointment.”

Zip Co chairwoman and leading non-executive director Diane Smith-Gander said she had been advocating for shorter minimum terms for directors for years in a bid to improve diversity of thought and expertise on boards.

“I’ve had real-life experience of a new director coming in to an established board with great impact. Paul Basatt changed the DNA of the Wesfarmers board towards digital literacy really quickly,” she said.

Every company is different

Seek co-founder Mr Bassat said: “For a range of reasons six years was the right term for me. As a general proposition, I am not a supporter of term limits.”

AICD chief executive Mark Rigotti said the idea had merit, but every company was different. “I think six years could be right, but it’s not a rigid rule. It will depend on the context, and we wouldn’t want to see hard and fast rules.”

There are no female chairs of a top 20 ASX company, and just 12 female chairs of an ASX 100 company.

But Ms Livingstone said a board needed to focus on diversity beyond the usual box-ticking metrics such as gender and instead aim for a range of thinking styles if they wanted to maximise their company’s performance.

“Gender diversity is a very necessary but not sufficient condition,” she said. “There’s an important distinction between difference and diversity – you may have a gender-balanced board without enough diversity of thinking.

“You may have a range of experience around the table but poor ability [among] those directors to contribute to the specific needs of the organisation.

“We risk too much ticking of the box and not enough thought around that question of diversity on boards.”

Ms Livingstone said diversity may come from gender, age and qualifications, but there also needed to be a range of individual thinking and interpersonal styles. Shorter tenure periods might encourage this.

She pointed to the appointment of Professor Genevieve Bell, a cultural anthropologist, technologist and futurist, to the CBA board. “We had decided as a board we were looking for what people then called a non-traditional director,” she said.

Business Council of Australia president Geoff Culbert last week pushed the idea at The Australian Financial Review Business Summit of four-year terms for federal parliament to “break out of the jail of short-term thinking” in politics.