Til Death Do Us Part: the Long Tenured Directors Puzzle

In Russell 3,000 twenty four percent of independent directors have Continuously served in the same firm for fifteen years or more, in contrast with the guidelines recommending a maximum tenure between nine and twelve years. Are such lengthy terms beneficial to the companies? Based on a sample of S&P 1500 over the period 1998-2012, we show strong positive effects on Tobin's Q if a company has one director on the board who served 20 years or more. Long tenure allows directors to acquire more information generating benefits in terms of better performance, even if the cost of information acquisition is high. Superior information translates into higher returns through insider purchases and sales. Also, long tenured directors contributes to protect the firm and other board members by significantly reducing the risk of corporate scandals. Our results can be relevant to the ongoing debate on capping tenure for independent directors, since one rule may not fit all.