Many corporate boards faced multiple challenges this year that required significant adjustments. Whether it's developing an AI strategy, adjusting to tariffs, determining how digital currencies will impact a company's growth, or developing a leadership succession plan, the year-end is a time when boards can determine whether their current corporate governance policies can survive changing economic realities while meeting future needs.
Carver Bancorp recently launched a Board Modernization Initiative, which Chairman of the Board Lewis P. Jones III said “demonstrates the Board's commitment to implementing proven governance practices aligned with leading companies and making the decisions necessary to more effectively compete in a dynamic and demanding marketplace.”
Many companies that have experienced slow growth over the past few years or significant financial deterioration due to changes in market conditions may be subject to corporate governance reviews similar to the one Carver is conducting. As of Nov. 12, 67 S&P 500 companies have lost more than 20% of their stock value this year, according to Slickcharts data. Although Carver is a very small community bank, its proposed changes provide an outline that any company looking to improve its financial performance and improve trust between itself and its shareholders can adopt. According to a press release, Carver's board modernization efforts include:
- Refreshing the board: 75% of board members expected to change within the next 12 quarters, subject to necessary regulatory approvals
- Skills-based recruitment: Introducing an enhanced comprehensive director skills matrix for board recruitment to be reviewed and updated annually
- Performance management: Annual individual director evaluation and overall board evaluation. Directors subject to enhanced re-evaluation at the end of each fiscal year
- Stock-linked compensation: Additional stock reserves reduce cash compensation by 50%. Elimination of per-meeting fees
The company's modernization efforts will also include tenure and age limits for the board of directors. From April 2026, directors' terms of office will be limited to a maximum of 15 years, with their terms ending at age 75, subject to shareholder approval.
While most companies may already have aspects of what Carver has in place, it is always a good exercise to determine how effective current governance policies are in protecting shareholder best interests while improving board performance. Refreshing the board, renovating the compensation plan, and evaluating directors and the board are among the best practices that boards should review annually. As Chairman Jones acknowledged, “I would like to recognize our current board members for embracing the fundamental changes that are needed at this time, not just to compete, but to establish a foundation for long-term, sustainable profitability.”
Here are some additional considerations for boards considering implementing year-end governance changes:
The approval of all directors is essential. This may seem basic, but you can't attempt real change if board members are at odds. The recognition that some directors will need to step down or be replaced should be treated with respect. Determining executive compensation levels also requires unanimity from the board of directors, as shareholders may reject compensation if there is no performance.
Change should happen quickly. Changes must be made quickly so that shareholders know the new policy is genuine and will be enforced. If your gait changes slowly, it may mean you're not serious about making the suggested adjustments.
Engagement with major shareholders may be valuable. As always, discussions with major shareholders can provide useful information to guide proposed governance changes. Working with shareholders increases trust and can be helpful if a proposal requires shareholder approval.
