Til Death Do Us Part: the Long Tenured Directors Puzzle

Twenty four percent of independent directors in Russel 3,000 have continuously served in the same …rm for …fteen years or more. Are such lengthy terms bene…cial to the companies?. On a sample of S&P 1500 over the period 1998-2012 we show strong positive e¤ects on Tobin’s Q if a company has one director on the board who served 20 years or more. Long tenured directors protect the …rm and other board members by signi…cantly reducing the risk of corporate scandals. Extended tenures allow directors to acquire more information generating better performance also when the cost of information acquisition is high. Superior information translates in higher returns by long tenured directors from insiders purchases and sales. Our results have important implications on the ongoing debate on setting tenure limits for outside directors and suggest that a single rule applying to all independent directors may not be optimal.