Boards are under pressure to become more diverse, but diversity is often measured at a particular moment rather than over time. Missing is any attempt to determine whether the board is renewing itself. In a new paper, we study board renewal—or “refreshment”—not as a slogan or as director turnover, but as a measurable change in board composition.
A board may look diverse today but may have been largely unchanged for years. Another board may still look less diverse on standard measures but may be actively moving away from its old structure. These are different governance situations. Our paper asks how to measure that difference and whether it matters for board monitoring.
What Board Refreshment Means
We develop a Board Refreshment Index based on seven director characteristics: gender, nationality, age, interlocks, insider or outsider status, education level, and financial expertise. For each characteristic, we examine whether a director addition or departure changes the board relative to what it looked like before.
Not every board change is a refreshment. Replacing one director with another who has similar characteristics may be turnover, but it does not necessarily change the board. If a board is heavily male, adding a woman changes its prior concentration and counts as refreshment. If a board already has several women and replaces one female director with another, it may maintain its diversity level without becoming more refreshed. The same logic applies to expertise. Adding a financial expert to a board that previously lacked any is different from adding one to a board already dominated by financial experts.
The index does not ask whether a board is good or bad. It treats refreshment as an ongoing governance process rather than a one-time diversity count.
Why the Measure Matters
Empirical research needs a measure before it can test whether refreshment actually matters, or whether it is simply a loose term applied to any board change.
Our index separates three ideas that are often mixed together. Diversity describes composition. Turnover describes replacement. Refreshment describes whether replacement changes the board relative to its own past.
It also makes refreshment broader than age or tenure alone, since it spans all seven characteristics at once. That matters because boards do not become better monitors because of one characteristic alone. What matters is the mix of people, experience, independence, and expertise around the table.
What We find
We study S&P 1500 firms from 2006 to 2021, using data on 1,480 companies, 2,621 CEOs, and more than 18,000 directors.
The first question is which boards refresh. We find that boards with older and longer-tenured directors are more likely to refresh. This is consistent with the idea that boards facing greater pressure to renew, whether internally or externally, are more likely to make changes.
Better-governed boards and more diverse boards are also more likely to refresh, which argues against the simplest tokenism explanation. If firms were only adding a few directors to satisfy a target and then stopping, already-diverse boards would have little reason to keep refreshing. Instead, stronger boards appear more willing to keep changing.
We also find that boards with longer-serving CEOs are less likely to refresh. This does not prove that long-serving CEOs block change, but it is consistent with a governance concern: As CEOs become more established, boards may become less likely to alter their own composition.
Institutional ownership is also negatively related to refreshment. One possible explanation is substitution: Where large shareholders already monitor the firm closely, the board may face less pressure to renew itself. Board refreshment, in other words, looks like one governance mechanism among several, not a stand-alone cure for weak oversight.
The Governance Payoff
We then ask whether refreshment is associated with stronger monitoring. We focus on two central board responsibilities: CEO replacement and CEO compensation.
Our results suggest that board refreshment is associated with stronger CEO turnover-performance sensitivity. In simpler terms, refreshed boards are more likely to replace the CEO after weak performance.
We also find that refreshment is associated with stronger pay-for-performance sensitivity. CEO wealth becomes more closely tied to stock price performance, and the difference is not trivial: It corresponds to tens of thousands of dollars in additional pay sensitivity for a board that has refreshed more than a typical peer. At the same time, refreshment is positively related to pay-for-risk sensitivity. This balance matters. Compensation should reward performance, but it should also give managers incentives to take appropriate risks rather than avoid valuable long-term projects.
Taken together, the results suggest that refreshed boards do not just look different. They appear to monitor differently. They are associated with stronger CEO dismissal discipline after poor performance and with stronger CEO pay structures that better connect performance and risk.
What Investors and Boards Should Ask
Investors and nomination committees should ask not only what a board looks like today, but whether it has actually changed relative to its own history. A board with strong diversity numbers may still be stale if its composition has not moved in years, just as a board with recent director turnover may not be truly refreshed if each appointment preserves the prior profile.
For boards, the message is not to change for the sake of change. Continuity and firm-specific knowledge have value. The point is that boards should be able to explain whether their composition still fits the firm’s monitoring needs, and whether recent appointments add something meaningfully new.
This also has implications for disclosure. Proxy statements already provide detailed information about individual directors, including their backgrounds, experience, and qualifications. What they usually do not show clearly is how the board has evolved. Companies could make this more visible by explaining what capabilities, expertise, or perspectives recent appointments added relative to the previous board, and how those changes respond to the firm’s current governance and oversight needs. This would allow investors to distinguish between ordinary director turnover and genuine board renewal. A refreshment measure can help make that evolution visible.
Board diversity tells us who is in the room. Board refreshment tells us whether the room is being renewed. Our evidence suggests that this difference matters for how boards monitor CEOs and design executive pay.
Bilal Al Dah is an assistant professor of accounting at Kean University, Mustafa A. Dah is an associate professor of finance at the Lebanese American University, and Melissa B. Frye is an associate professor of finance at the University of Central Florida. This post is based on their article, “Board Refreshment: Like a Breath of Fresh Air,” published in the British Journal of Management and available here.