Term Paper: Nonprofit Board Term Limits

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[. . .] When the hospital goes through a board review process, members who are not productive may be asked not to stand for reelection. (Biggs, 2001)." Thus the problem is not that board members can potentially serve too long, rather it is the board review process that must be accountable. If the hospital review performs its job of reviewing the board's performance effectively then the term limit argument essentially becomes irrelevant. The board members should be monitored a judged based on their performance rather than the total time that they have served on the board.

Another example is provided by credit union consultant George Towle. Mr. Towle proposed this scenario, "if your credit union grew from $200 million to $600 million dollars during a specific time frame, ask, if our board weren't here would the credit union be as successful? (Alden, 2004)" That is, if you board is currently performing at a world-class level, why would you consider making any arbitrary changes to its member composition. While there are many cases in which having mandatory term limits in place may certainly have advantages, there are many other cases, such as the case of a high-performance board, where such term limits can be counter-productive. Furthermore, with a constantly changing board, the members do not have a level of continuity that must develop before a high-performing board could potentially develop (Carter, 2011). This is a serious argument against continually staggering the boards composition and never giving it a chance to develop its potential as a group.

In some of the larger credit unions another challenge emerges. For example, at Pennsylvania State Employees Credit Union (PSECU) which holds over $2.8 billion dollars in assets, learning all of the facets of the organization and its operations is a long and tedious affair. "Our credit union is a large, complex organization…It takes a while for board members to learn and understand what's going on. We don't want to lose that institutional knowledge and perspective by having forced turnover," explains R. Brian Whilbur, board chair (Molvig, 2007). The point he makes is definitely relevant in his situation. In some industries, the organization and the environment maybe so complex that a decade may not be enough time to fully understand the nuances of operations and how they impact various internal and external factors. Thus with a mandatory term limit, it is possible that a board member could be forced to resign before reaching their full development in regards to their position. Furthermore, their replacement would likely have to begin all over with respects to the learning curve which could be detrimental to the board and the organization (Richert, 2008).

The Purpose of Term Limits

Although designated term limits have been argued to have many advantages, some cases have been mentioned in which these term limits could be deemed as ineffective or even counterproductive. However, the usage of term limits was developed with very specific objectives in mind. Therefore, it could potentially be possible to achieve the same objectives in which dedicated term limits were intended to address through other mechanisms or a combination of different methods. Therefore, by defining the goals in which term limits are intended to achieve, this opens up the possibility of finding different routes to achieving these objectives without having to sacrifice the possibility of eliminating a board member who is competent and capable of filling their position.

One of the goals that are inherent in the implementation of restricted term limits is to restrict the possibility of someone overstaying their usefulness. When individuals have served in a position for so long, they could become so familiar with others in the organization and so entrenched in their role that reelecting them becomes routine rather than a consideration of whether or not they are the most qualified to serve in their board position. Furthermore, long tenure can be bad for boards because it allows directors to develop strong friendships with management, friendships that impair effective oversight (Alexander & Koppes, 2003). However, despite the disadvantages that can occur though long tenures, the length of tenure in which it becomes "too" long varies widely on the industry, the individual, the environment, as well as a host of other factors. Therefore, a predetermined tenure could never include all of the variances that might occur in the specific situation.

Another primary objective for the establishment of term limitations is the opportunity to eliminate unproductive board members. Many of the advantages listed in this analysis contained some component of this objective. It seems to be all too common that an unproductive member remains on the board longer than they should do to political reasons or other limitations to replacing the member. However, establishing mandatory term limits remove both excellent and unproductive board members alike without performance consideration. Therefore, while this could mitigate the problem of unproductive board members in some circumstances while removing a high-performance member in others.

As a consequence of the negative consequence that can occur under certain circumstances with respect to imposed tenure limits, many researchers have proposed alternative approaches to trying to achieve the same objectives. One such proposal is a periodic resignation which could force an unproductive member to enter a submission of resignation (Alexander & Koppes, 2003). The resignation would be decided by a secret ballot which would be cast by the other board members. The frequency of these votes could be determined a specific time intervals or after a certain event has taken place such as an instance of poor judgment or performance. When compared to mandatory term limits, this system could have many advantages in regards to keeping highly productive members on board for an extended period. However, the productivity of the members would also be a subjective interpretation from the other board members which could be subjected to various forms bias.

Another idea is to have renewable term limits as opposed to mandatory limitations in tenure. This alternative is already becoming increasingly common in both the private sector and the non-profit industry because it tackles multiple objectives. This system entails setting term limits that are renewable. At each interval in the term limit their will be a vote for the candidate to renew their position. Furthermore, these term limits are often capped at two or three consecutive terms. Then, once the board member takes a term off or a "stand down" period, they can reapply to serve again (Peregrine & McDermott, 2011). This ensures that the board has the opportunity to replace a member at regular intervals that candidates can resign at regular intervals, and that long tenures are much more difficult for individuals to maintain without justification.


This analysis has examined many different advantages and disadvantages that are associated with the establishment of term limits for non-profit organizations. Examples of advantages include keeping fresh and motivated members, avoiding overly long tenures, promoting diversity, gaining new perspectives, recruiting, and even fund raising opportunities. The majority of the disadvantages are associated with forcing experienced and productive board members prematurely and sometimes during their very peak of productivity. This can be extremely detrimental in complex environments that require years of training and experience to understand the organization and the external environment in which it operates.

Furthermore, some alternative systems were also introduced that intend to meet many of the objectives in which the term limits might be implemented without having a valuable member leave without any other justification other than the term limit. Therefore an entire range of possibilities exist to guide the corporate governance rules and regulations. It is the contention of the author after thoroughly studying the debate, that there is no right answer. The effectiveness of the corporate governance strategy is dependent on factors such as the particular industry, the culture of the organization, the composition of the board, and a wide variety of other factors. Thus it is difficult to make any generalizations about the effectiveness of mandatory term limits. That being said, some of the emerging systems seem to be promising and future research will need to be conducted to determine if these systems address the issues in which they are designed to or if other more serious issues emerge instead.

Works Cited

AGB. (2010). Term Limits. Retrieved from Association of Governing Boards:


Alden, S. (2004). Boards. Credit Union Magazine, 53-56.

Alexander, M., & Koppes, R. (2003). Confronting Long Tenure and Nonperformance

on Corporate Boards: An Alternative to Term Limits. The Corporate Governance Advisor, 13-21.

Biggs, E. (2001). Terminating Board Term Limits. Above Board, 21-23.

BoardSource. (N.d.). What are the advantages and disadvantages of term limits?

Retrieved from Board Source:


Carter, C. (2011, June 20). Advantages and Disadvantages of Term Limits. Retrieved from Charity Lawyer: http://charitylawyerblog.com/2011/06/20/advantages-and-disadvantages-of-term-limits/

Gifford, G. (2012, March 9). Nonprofit board term limits -- pro and cons. Retrieved from The Butterfly Effect: http://www.ceffect.com/blog/better-boards/nonprofit-board-term-limits-pro-and-cons/

Molvig, D. (2007). Board Term Limits? Credit Union Magazine, 32-36.

Moyers, R. (2011, January 18). Five Reasons Board Leaders Should Have Term

Limits. Retrieved from… [END OF PREVIEW]

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Nonprofit Board Term Limits.  (2012, December 12).  Retrieved July 22, 2019, from https://www.essaytown.com/subjects/paper/nonprofit-board-term-limits/8019232

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