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Term Limits: A Positive or Negative?

Term limits for board directors, or a lack thereof, is one of the most controversial topics of conversation in the nonprofit/voluntary sector. Each new organization must decide at the outset, when writing their bylaws, whether or not to include a cap on the number of consecutive terms a board director can serve. In an effort to learn more about the perceived pros and cons of term limits, I searched out books, articles and other resources on the subject in the Volunteer Alberta Resource Centre. Right away I found an article entitled “Term Limits: Pro or Con” in the May 2012 edition of The Journal of the Institute of Corporate Directors. In the article, Deepak Shukla, Corporate Director and Board Trustee with Healthcare of Ontario Pension Plan, makes the case for term limits; and David Dominy, Chairman of 3D Capital Inc., makes the case against having term limits. Both made great points in support of their arguments.

One of Shukla’s primary arguments in favour of term limits for boards is that it ensures there is a continuous supply of fresh blood. This school of thought suggests organizations are best served by having a constantly evolving board of directors, with staggered terms to ensure that there is a healthy balance of fresh perspective and experience. Dominy, on the other hand, insists that organizations should focus on recruiting, and retaining, the best and the brightest, rather than forcing perfectly capable board members to step down. The key question to consider is, “which approach is best for my organization?”

According to Shukla, having unlimited consecutive terms can often result in ‘group think’ – a situation where a board ceases being a true democracy. Both sides of the issue provided examples of boards that do not have term limits for their board directors; Shukla cited Research In Motion (RIM) as an organization with a board that has no term limits and has seen a negative impact as a result. Yet, Dominy is quick to point out that some of the most successful corporations in Canada, such as BMO, RBC, BCE and Shaw, have no board term limits. While these examples are for-profit enterprises, instead of nonprofit/voluntary organizations, it demonstrates that each organization has its own needs and that there is no one size fits all approach.

Having term limits in place can work as a safeguard to prevent board members from steering the organization down the wrong path, and, according to Shukla, there is no effective evaluation process for boards, as the most common form is a self-evaluation. However, Dominy suggests that term limits can put an organization in the undesirable position of having to replace a strong board member with a candidate from a less desirable talent pool.

Shukla and Dominy both want what is best for their respective organizations and, in the nonprofit/voluntary sector, the board must consider the organization and the stakeholders with every decision. The foundation of any nonprofit/voluntary organization are its bylaws, and whether or not to have term limits is one of the most important decisions founders must make for the future of their organization.

Now, my question to readers: what is most important to your organization: a fresh supply of independent thinkers or experienced board directors?

Tim Henderson

Office and Communications Coordinator

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