There is a widely repeated claim in governance circles that nine years is the point at which a director's tenure compromises their independence. It is worth correcting this directly, because the actual history of that number in Australia is more instructive than the myth. The ASX Corporate Governance Council genuinely proposed a fixed nine-year rule in a 2013 consultation draft. It never adopted it. Following strong opposition, the Council removed the fixed period entirely and replaced it with a flexible standard, that a director may raise independence concerns if they have served for a period long enough that their independence may have been compromised, assessed case by case rather than against a hard number.
What the live debate actually looks like
This is not a settled question, and pretending otherwise does associations a disservice. The Australian Prudential Regulation Authority has proposed a firm 10-year term cap specifically for directors of banks, insurers and superannuation funds, a genuinely different and more heavily regulated sector. Separately, a former major bank chair has publicly argued Australian boards should normalise terms of six years or less. Academic research on the other side of the argument, including analysis of long-serving non-executive directors across the financial sector, has found that directors with tenures between nine and seventeen years often continued to make sustained, valuable contributions, attending meetings more consistently and serving on more committees than shorter-tenured peers. Separate data from Egan Associates found that only a small minority of independent non-executive directors in practice serve beyond twelve years at all, suggesting the entrenchment concern, while real in principle, is less common in practice than the debate around it implies.
The honest conclusion is that no single number is correct, and any governance advisor who tells you nine years, or six, or ten, is settled science is overstating a genuinely contested and still-evolving debate.
Why associations should set a limit anyway
None of this contested evidence is a reason for associations to avoid setting term limits. It is a reason to set them deliberately, understanding what the limit is actually protecting against, rather than importing a number because it sounded authoritative elsewhere. For an association board, and particularly for the chair role specifically, the case for a limit rests less on independence in the listed-company sense, since most association directors are not assessed against shareholder independence tests at all, and more on the succession and bench strength arguments already covered earlier in this quarter. A chair without a term limit structurally discourages the deliberate successor development discussed previously, since there is never a fixed point forcing the conversation.
A chair-specific case for a tighter limit than general directors
It is worth treating the chair role differently from general director tenure, consistent with how the ASX Corporate Governance Council's own commentary distinguishes the chair, noting boards are often well served by a mix of longer and shorter-tenured directors, while separately recognising the chair role carries disproportionate influence over board culture and agenda control. A general director serving a long tenure brings continuity. A chair serving an unlimited tenure concentrates influence over how the entire board operates, who gets heard, and what gets prioritised, for as long as they hold the role. This is precisely why many associations that otherwise avoid term limits for general directors still specifically cap the chair role, commonly at two or three terms.
- Set a specific, defensible limit for the chair role, distinct from general director term limits, reflecting the office's disproportionate influence over board culture rather than a generic independence concern.
- Where you do set general director term limits, treat the number itself as a genuine board decision grounded in your organisation's succession needs, not an imported industry number.
- Pair any term limit with the staggering structure discussed earlier in this quarter, since a term limit without staggered timing can simply recreate the cliff-edge turnover problem at a fixed, predictable interval.
- Build the limit into the constitution itself, consistent with the drafting discipline covered in the Foundations quarter, since a term limit that lives only in informal practice is easily set aside under pressure to retain a popular incumbent.
A term limit is not a verdict on any individual director's continued value. It is a structural commitment your board makes to itself, before any specific person's popularity or reluctance to step down is on the table, that renewal will happen on schedule rather than by exception.
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Until next week,
Annie