As noted in this Reuters article, a recent PwC and The Conference Board survey found that:
- 93% of senior executives want to replace at least one board member.
- 78% said two or more board members should be replaced.
- 32% reported directors intervened in day-to-day decisions – including trying to influence mid-level hiring or pushing for specific suppliers – double the 16% who reported this last year.
- Those who said their boards are doing a good or excellent job rose to 35% from 30% last year.
- Respondents were most worried about directors’ performance being diminished by their advanced age, with 56% citing that, while 47% worried members served on too many boards. Only 32% believe their boards have the right skills and expertise.
So the question arises: Just because a CEO doesn’t want a particular director, can the CEO remove that director at any time without cause?
The answer is “highly unlikely.” You’ll have to look at the laws of the state in which your company is incorporated – and consult your charter and bylaws too. Absent special contractual rights, a CEO looking to remove a director would have to put their activist hat on and run a proxy contest at the annual meeting or, if permitted by the charter/bylaws, seek to remove and replace the director at a special meeting. It would be highly unusual for a CEO to go down either of these paths.
So a CEO who wishes a director gone will have to provide their views and hope that the board’s corporate governance/nominating committee seeks to replace that particular director when it refreshes the board as part of the board evaluation process…
Authored by
Broc Romanek