Boards looking beyond traditional experience for new director appointments

Jul 29, 2021
Directors from non-traditional backgrounds now account for almost 20 percent of all appointments, according to Diligent

The number of newly appointed directors with traditional backgrounds has fallen from 59.4 percent in 2019 to 56 percent in 2021, according to a new report from Diligent.

Traditional backgrounds mean people coming into the director role with experience as a CEO, CFO or COO. Diligent looked at board director appointments at companies in the US, the UK and Australia.

The largest fall in new directors coming from traditional backgrounds is in Australia, where there has been a 17 percentage-point drop. In the US, the drop is less stark – 61.1 percent in 2019, compared with 58 percent in 2021.

The report addresses the rise of new directors in companies coming from a non-traditional background such as technology, marketing, sales, legal, human resources and ESG. Focusing on all three countries, new directors with non-traditional backgrounds have increased from 13 percent in 2019 to 18.9 percent in 2021.

Women lead as newly appointed directors

Appointments of female board directors from a non-traditional background also increased between 2019 and 2021. The report highlights that the majority of directors appointed from a non-traditional background are female, except in sales and legal.

Women represent 84 percent of all new board appointees with ESG experience – a 20 percentage-point increase on 2016. Women also represent the majority of new board appointees from a technology and HR background, Diligent’s study finds.

The report notes that directors from traditional backgrounds are twice as likely to be male as female.

‘The global pressures on companies to increase the gender and ethnic diversity of their boards has, perhaps unintentionally, had an impact on director skillset diversity,’ write the authors of the report.

‘Because so few women and ethnic minorities have held roles as CEOs, CFOs or COOs of major listed companies, as companies recruit and appoint women and ethnic minorities to their boards, they are also onboarding directors from non-traditional professional backgrounds.’

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