71. Term (definition)

NOTE: if you’re new to Ground-Up Governance, or are finding anything a bit strange or confusing, you might want to START HERE.

“Term” is a term that refers to the amount of time that a director gets appointed or elected to a board. It can make sense for directors to have indefinite terms, which means you don’t have to go through the process of electing or appointing them over and over, and they will serve until they decide to leave or get fired.

It can make sense for directors to have pretty short terms (e.g. one year) to make sure the board regularly engages in the process of considering which, if any, directors should come back next year.

On the other hand, lots of boards have terms of multiple years – three years is pretty common – so that they can stagger when board members are up for re-election or re-appointment, meaning not everybody is up for re-election at the same time.

In some parts of the world, shareholders of public companies have a strong preference for one-year terms so that they have the opportunity to elect, or not elect, directors every year. Consider, for instance, if one of the directors is really bad at their job. The shareholders might want to be able to get rid of them as soon and easily as possible. Three years is a long time to have to live with a crappy director! And firing directors in the middle of their term can be really hard for a lot of reasons that Ground-Up Governance won’t cover unless we get 101+ emails asking us to do so.

In the meantime, if you think about it some director characteristics will always be relevant and useful to the Reallie Steilish board:

• Coolness

• Kindness

• Steilishness

• Funkiness

• Pun-friendliness

And the usefulness of other characteristics will come and go, even if they might be *super* useful at some point:

• Top hat affinity

• Nuclear hat technology aptitude (solar hat technology is growing rapidly)

• Knowing the Gangnam Style dance

So no matter how long you decide your board term should be, there could be a trade-off between stability (i.e. being able to hang on to the directors you want) and stagnation (i.e. having to hang on to the directors you don’t want).