Steering a large company successfully is no mean feat. As companies grow more complex in an increasingly turbulent business environment, so too do the responsibilities of their board members. While they aren’t involved in day-to-day operations, non-executive directors hold the highest decision-making authority within a company. Collectively, the board is responsible for a company’s strategy, compliance and asking tough questions of its management team. However, these roles also often come with significant status, prestige and influence that is particularly notable on the boards of publicly listed companies. There is typically no shortage of people willing to fill them, and existing board members are often reluctant to leave, with some staying on company boards for decades.
According to a report in the Australian Financial Review, among the boards of Australia’s 300 largest publicly listed companies, 33 non-executive directors have held their position for more than 20 years. Companies can determine their own rules regarding director tenure, as there are currently no specific term limits under Australian Securities Exchange (ASX) guidelines or other regulations. This can hinder board renewal, a vital process for a company’s health.
Now, the Australian Prudential Regulation Authority (APRA), which sets standards for the financial services industry, is leading calls for change. APRA Chair John Lonsdale has suggested that director terms should be capped at 10 years for banks, insurance companies, and super funds. This suggestion has sparked a renewed debate about the limits of tenure for board members. Is it time to implement such restrictions, or does longer tenure provide essential experience? Asking how long directors should be allowed to serve is akin to asking how long a piece of string should be—there are compelling arguments on both sides.
APRA’s proposal rests on the notion that, over time, directors' ability to think independently may diminish. The rationale for having independent directors is that they bring an objective viewpoint to a company’s strategic decision-making. Their role is to challenge management and ask tough questions that can lead to better governance and decision-making. However, critics argue that long tenures may lead to complacency and a reliance on the status quo. This can be compounded if there are shared tenures between board members and the chief executive or founder, which can undermine a director’s independence.
Recently, some of Australia’s largest super funds called on software giant WiseTech Global to appoint “genuinely independent” directors following a review that found co-founder Richard White misled the board about personal relationships. Despite this, the board took no action, leading to resignations by four independent board members, including the chair.
On the flip side, there are arguments supporting longer tenures based on the significant knowledge and experience that can accumulate over time. Non-executive directors are often part-time and typically attend infrequent meetings, which may limit their access to critical information necessary for them to perform their roles effectively. Time served on a board allows directors to gain valuable insights and an understanding of complex issues that face the firm. The pressing question is whether the knowledge contributed by long tenures outweighs the potential costs of decreased independence.
This isn’t the first time calls have been made to impose limits on company directors’ length of tenure in Australia. Back in 2013, the ASX Corporate Governance Council proposed that non-executive directors be deemed no longer independent after nine years of service. However, this proposal faced intense opposition, ultimately being watered down to allow boards to assess whether a director’s tenure has affected their independence.
Last year, former Commonwealth Bank chairwoman Catherine Livingstone reignited this debate at the Australian Institute of Company Directors’ annual summit, suggesting that corporate Australia normalize terms that are six years or less for non-executive directors. This ongoing discussion reflects a broader concern in corporate governance about the effectiveness of director boards as companies face mounting complexity in operations and greater public scrutiny.
Research analyzing the contributions of 37 non-executive directors within the financial services sector yields insights for both sides of the tenure argument. Observations and interviews revealed that directors’ contributions generally improve over time as they acquire confidence and deeper understanding of their firms. While excessive tenures, exceeding 25 years, may lead to diminished contributions—a phenomenon often referred to as “stale in the saddle”—those with tenures ranging from nine to 17 years often provide sustained and valuable input.
A significant finding is that successful long-serving directors typically hold positions on multiple boards. This suggests that contrary to common criticisms of directors being spread too thinly, their engagement across different contexts enhances their governance capabilities and effectiveness. An effective board is ultimately one where all members, regardless of tenure, contribute effectively to governance.
Instead of imposing rigid term limits, some governance experts advocate for regularly assessing the performance of all directors, not only the longer-serving ones. This approach could help ensure that everyone on the board maintains the skills, knowledge, and motivation necessary for their roles.
Turning now to the realm of corporate governance in South Korea, POSCO Holdings has also announced significant changes during its latest regular shareholders' meeting on March 20, 2025. The firm has raised the threshold for the re-election of its chairman to now require more than two-thirds approval from shareholders, an increase from the previous requirement of more than half. This shift signifies a notable effort to enhance governance transparency and accountability.
The term of the chairman at POSCO Holdings remains set at three years, and the company indicated that this decision to raise the bar for re-elections aims to strengthen perceptions of selection based on significant shareholder support rather than the status quo.
This shift is particularly timely as corporate governance practices continue to evolve amid a cumbersome international business landscape. In his address to shareholders, Chairman Jang In-hwa highlighted the necessity to navigate a challenging environment exacerbated by escalating global trade tensions and an unfavorable exchange rate. He emphasized, “We will focus all our capabilities on building a long-term growth structure,” indicating POSCO's commitment to sustainable practices.
During the shareholder meeting, new directors were appointed including Lee Joo-tae and Chun Sung-rae, while Kim Ki-soo was reappointed. The board’s diverse expertise aims to fortify POSCO Holdings’ strategic direction in a competitive sector. Additionally, dividends were set at 2,500 won per share for the end of last year, reflecting the company's robust operational strategy.
As discussions around board governance evolve globally, both APRA's proposed tenure limits and POSCO's re-election criteria mark significant steps toward enhancing corporate responsibility and responsiveness to shareholder sentiments. It continues to be essential for organizations to assess the alignment of their boards with long-term strategic goals while embracing a culture of accountability and transparency.
