During an insurgency campaign at Eastern (EML) last year, activist investor Jim Mitarotonda liked to point to the 27-year average board tenure for directors at the industrial and security products company.
One director, David Robinson, had been on Eastern's board for 25 years. That came to an end after he was essentially ousted by one of the activist candidates introduced by Mitarotonda and his Barington Capital in a successful proxy fight for the fund that resulted in two new dissident director candidates coming onto the five-person board.
Research firm GMI noted in its analysis report prior to the Barington contest that while it recognizes the benefit of experience, "it becomes increasingly challenging to act independently with such extensive service." GMI added that "long-tenured directors can often form relationships that may compromise their independence and therefore hinder their ability to provide effective oversight."
Separately, insurgent fund Red Mountain Capital Partners made the average board tenure of four of iRobot's (IRBT) eight directors a linchpin for the fund's campaign and upcoming director-election proxy fight at the maker of the Roomba robotic vacuum cleaner.
Specifically, Red Mountain noted in its campaign to replace iRobot's board and management that four incumbent directors have been on the company's board between 12 and 23 years, predating its 2005 IPO. And while one of those directors is the company's founder, the others emerged from private equity backers that have essentially liquidated most of their ownership.
Andrea Geisser, 72, was a representative of Fenway Partners, one of the original private equity investors in iRobot and has been on the board for about 12 years. Two other directors, Ronald Chwang, president of ID Ventures America, and George McNamee, a former managing partner at FA Technology Ventures, have both been on the board for about 17 years.
Meanwhile, SpringOwl Asset Management managing director Eric Jackson is having some initial success with his campaign to have media giant Viacom (VIAB) replace its management and board. Part of his campaign focuses on Viacom's "absentee" chairman, founder Sumner Redstone, who controls the majority of voting power through a holding company. But it also concentrated on some of the company's overtenured directors, including William Schwartz, 82, who has been a member of Viacom or a predecessor media company since 1987 and is considered "independent" for stock exchange listing rule requirements, a red flag from a governance perspective.
A Viacom spokesman said its board pays great attention to its governance and responsibilities to shareholders, noting that every independent director meets Nasdaq's guidelines.
"If you have been on there more than 12 years, you're a member of the club and you are friendly with Sumner," Jackson said. "There is obviously a lot of trust. I think an independent director should be standing up for minority shareholders especially at this kind of controlled company."