The calls are getting louder for long-time directors to give up their long-held board seats.

If you listen closely, you can hear the cries echoing across Corporate America: “You've served long enough,” they say. “You've not kept pace with what's happening in the industry, the geopolitical environment, technology, international dynamics, or the demands of younger generations of consumers. You're also keeping women and other minorities from making needed contributions. So, get out!”

Yes, we hear the demands, which to some governance observers have considerable merit. Let's look at some telling statistics about the graying of the boardroom. According to studies highlighted in a recent issue of Directors & Boards:

In the last five years the number of new directors has declined by 12 percent, and in the last 10 years it has dropped by 27 percent.

The average age of independent directors in 2002 was 60.1 years, while in 2012 it was 62.6.

The number of directors age 64 and older 10 years ago was 14 percent, but by 2102 had climbed to more than 38 percent.

Analyses show that Coca-Cola, for example, had 9 of 17 directors age 70 or more when they were re-elected in 2012 and the average age of the board was 67, before two of its octogenarian directors announced they were retiring this past spring.

Governance guru Paul Lapides said the composition of Coke's board doesn't reflect the need to “serve a larger market of young people” and suggested that Coke reinstate a mandatory retirement age for directors.

Several experienced business leaders have joined the chorus arguing that boards need to be refreshed. Former ATT Broadband CEO Leo Hindery Jr.  even went as far as to say that numerous “zombie directors” are hanging around, overstaying any reasonable period of sustained stewardship. We see many shareholder activists and others who believe that boards comprised entirely or mostly of white, aging males need to be revamped.

The only way that makes sense is to ensure board composition is right for the company's current and forward environment and circumstances. That means retaining those directors who are equipped and ready to continue to add value.

Still, not everyone thinks the graying of the boardroom is a bad thing, and plenty of governance experts oppose one-size-fits-all age requirements. One observer, Hoffer Kaback, notes that with experience comes more knowledge about business, corporate board dynamics, human relations, emotional intelligence, marketing, life, and the way the real world works. He suggests that, “a more sophisticated and refined knowledge of these matters [is] a good and desirable thing for a corporate director to have.”  Kaback sites Paul Volker and Felix Rohatyn, who at 86 and 85 years, respectively, are still going strong and active in the business world. What we need, he says, are wisdom and judgment, which come with experience. And as CalSTRS' Anne Sheehan says, she'd love to have Warren Buffett, age 82, on any board. 

Some boards feel they've solved the problem of aging directors and the need for new ideas with mandatory limits on service. Term limits, which preclude a director from serving more than, say, 10 or 15 years, are one option, though only 4 percent of boards have adopted them. Much more prevalent are age ceilings, often age 72, which are reportedly in place for 73 percent of S&P 500 companies.

Many governance observers and shareholder groups have put forth recommendations related to the issues surrounding aging boards. Among them are: new regulations allowing shareholders to nominate their own candidates who would automatically be included on the ballot, more activism from institutional investors to hold directors accountable, and increasing the size of the boards to add younger members and spread governance responsibilities.

Behind Closed Doors

These and other suggestions might be useful, but there's one action boards can take that has the greatest benefit to enhance board composition and identify board members who might have lost a step—an effective board and director-assessment process.                                                                                              

Note the word “effective.” While almost all Fortune 500 companies conduct annual board evaluations—a requirement of New York Stock Exchange rules—for some it's really a matter of just going through the motions. Experience shows that using a written survey questionnaire or simply discussing performance around the board table is not particularly productive. Frankly, while directors willingly and openly discuss company issues put on the table, many are hesitant to bring up sensitive matters about the board's performance in an open discussion. Assessments of individual directors' performance are much less prevalent, and directors are even less willing to put concerns in writing or bring them up in a group setting.

Having worked with boards on their evaluation process, it's exceeding clear that one approach provides significantly better results than any other: private interviews conducted by an outside specialist. This process centers on an experienced governance consultant interviewing each director to obtain candid input about the board and individual directors' performance. Topics and issues are based on an interview guide, which has been reviewed and refined in advance with the independent chairman or lead director and other board leadership. The interviews are conducted privately and anonymously. Results related to the board as a whole are compiled, and then presented to and discussed with the board, which then develops an action plan to drive needed or desired improvements.

While its principle purpose is to enhance board performance going forward, another objective of the evaluation process is to identify areas where individual directors can make greater contributions. Evaluation results pertaining to individual directors are provided to the independent chair or lead director, who may consider them with the nominating and governance committee chair or other board leaders, and then discuss them privately with the relevant individual directors.

The reality is that based on discussions in the boardroom and with individual directors over time, board leaders usually already have a good sense of which directors are adding value, and which are not. But that gut feeling often is insufficient to enable board leaders to feel comfortable counseling a director, let along asking him or her to resign. With information gained from a thorough interview-based assessment process, however, there's a sound basis on which to act—first to improve performance, and then if necessary, to move an ineffective director out of a board seat.

There's no doubt that in today's rapidly changing world, with new technologies, markets, competitive environments, and risks, many corporate boards of directors need new blood. At the same time, experience shows that boards become less effective when long-serving directors who are knowledgeable, capable, and forward-thinking must leave pursuant to some arbitrary age or term limit. Those blunt instruments may make the life of an independent chair or lead director easier in terms of not having to make the tough decisions, but they are counterproductive in the long term. Lost are savvy, insightful, business leaders who have been through the wars and learned critical lessons, know what strategic planning and implementation is all about, recognize traits needed in a CEO and can effectively measure performance, are adept at identifying major risks, and have a stabilizing presence when crises or other challenges arise.  

The only way that makes sense is to ensure board composition is right for the company's current and forward environment and circumstances. That means retaining those directors who are equipped and ready to continue to add value, moving out those who aren't, and bringing on new board members with the right skills, knowledge, and other attributes to provide complementary needs resulting in the right board composition for the times. The company, the board, individual directors, and shareholders deserve nothing less.