This study examines the impact of director tenure diversity on board effectiveness. We find that tenure‐diverse boards exhibit significantly higher CEO performance‐turnover sensitivity and that firms with tenure‐diverse audit committees are less likely to experience accounting restatements. Furthermore, we document that tenure‐diverse compensation committees also award less excess compensation and are less likely to overcompensate. Even though tenure‐diverse boards seem to exhibit superior monitoring performance, there is limited evidence that their firms exhibit superior financial performance. The findings suggest that recent calls for board renewal, to the extent that it would increase tenure diversity rather than just decrease average board tenure, may help enhance board monitoring.

We examine professional directors—board members with no employment outside of serving as independent directors. We find that boards with a higher percentage of professional directors engage in more acquisitions, experience lower acquisition announcement returns, and exhibit lower performance‐turnover sensitivity and lower financial performance. We also examine the returns surrounding the appointment‐announcement dates of professional directors and find that firms experience significantly lower cumulative abnormal returns upon the appointment announcement of professional directors as compared to nonprofessional directors. The negative returns are primarily experienced by firms that face greater agency issues, suggesting that the market does not value professional directors for stricter monitoring. Overall, our findings do not lend support for calls to professionalize corporate boards.