Guerdon Associates and Glass Lewis hosted their 19^th annual Remuneration and Governance Forum on 18 of March 2025.

This article summarises the highlights and key takeaways of the panel discussion on the benefits, or otherwise, of board directors having ‘battle scars’.

‘Battle scars’ for directors refers to those who have endured matters of crisis, or the board on which they were a member went through matters subjected to investor, proxy advisor and market criticism.

Panellists were asked to comment on directors with a squeaky-clean track record. One panel member asserted that it is simply not possible to have a squeaky-clean record because the role of a director is to deal with company issues as they arise. Directors who have never experienced difficult times will not necessarily have the experience to deal with a crisis when it does arise. This sentiment was echoed by other panellists, who indicated that an effective director is one who has some battle scars.

The panel considered the context of a crisis, and what can be learned about the director from the way in which it was dealt with. It was agreed this would provide critical insight when recruiting a director. How the director managed the crisis, the accountability shown, and importantly, the lessons gained and how they can be leveraged? If the director has become too risk-averse in response to crises, effective responses to future difficult decisions cannot be assured.

A general theme from the panel discussion was that tough decisions, handling crises, and close market scrutiny are simply part of the job description. Failure is often collateral to taking on risk as a board member, but it is part of the job. Therefore, experience that includes decisions from which valuable lessons were gained is highly desirable.

The board needs to discern when a director’s crisis experience is valuable, and when it might lead to overly cautious decision-making out of self-preservation, potentially compromising the company’s best interests.

The discussion also considered the extent to which investors might vote against individual directors for corporate performance issues – nodding to their ‘battle scars’. The response was that issues at a company are not typically caused by one individual but a string of collective decision-making. While individual accountability is important from a governance perspective, it is not appropriate to separate an individual director from the board as a whole. On the other hand, institutional investors have a tendency to vote against directors when they feel they have not been listened to. (Based on voting analyses, this tends to be the RemCo chair and board chair – see HERE). When the board fails to address investors’ concerns, voting against a director can be a means of holding the board to account.

Annual director elections were discussed as a proposal that could reshape how board accountability is exercised (see HERE for our article on ACSI’s 2024 governance guidelines which recommend voluntary annual director elections). Consensus among directors on the panel was that it is unnecessary. It was difficult to gauge what issue annual elections will fix that the current regime does not already address. The proposition was reframed to question whether director elections in the current system receive the level of consideration they warrant. THat is, as corporate strategy and objectives change, the question should be is the person the best fit for the strategy going forward.

Another question was whether media shapes accountability in high profile cases. While it was acknowledged that the media plays a role, institutional investors should be able to cut through the noise and determine the issues. Whatever the noise may be, investors should be able to see through it and determine what is in the best interests of their clients’ investment. Media can be helpful because it alerts the directors to what may not be apparent through board papers – for example, if it is a consumer matter, then it will quickly become a reputational issue. The panel agreed that directors need to be aware of media attention but not necessarily get consumed by it.

Institutional investors are more likely to be focused on the quality and the performance of the board rather than what the media might be saying.

Directors value institutional investors that take an interest in the issue and have a discussion with the affected people to get their version of the truth rather than relying on media reporting. A constructive suggestion from one panellist was to find more ways for investors and directors to interact like they do at AGMs.

For our article covering the first panel discussion on incentives or ‘skin-in-the-game’, see HERE. For Glass Lewis’ seasonal review of proxy voting trends, see HERE.

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