How long should our management agreement run?

One year with automatic renewal is the most common structure and, for a Board changing companies, one year with an explicit renewal decision is usually the better one. It gives you a real look at performance before committing again, and it costs very little in price.

Longer terms buy something: firms will discount two- and three-year commitments, hold pricing flat across them, and sometimes waive onboarding. If you know the company well — a renewal with an incumbent you are happy with — that trade is often worth taking.

What makes a long term dangerous is not its length. It is a long term combined with a no-cause termination that is expensive or absent, an automatic renewal, and a fee schedule that can move. Any one of those alone is manageable. Together they are a Board with no exit.

The version most Boards should aim for: a defined initial term with no auto-renewal, no-cause termination on sixty days notice from either side after month six, pricing fixed for the initial term, and the fee schedule attached. Term length matters much less once those four are in place.