Professionals recommend continuing discussion about the board’s needs
Nominating and governance committees should take a flexible approach and always be on the lookout as they seek new blood for the board, professionals advise.
Douglas Chia, executive director of the Conference Board’s governance center, told delegates at last week’s Society for Corporate Governance national conference that board recruitment needs to be a continual process. Members of the nominating and governance committee should be in talks with qualified potential new directors, while being conscious that, although the time may not be right for them to join the board, things can change, Chia said. For example, a person may have an existing conflict of interest that makes him/her unsuitable as a candidate now, but that conflict may be removed at a later date.
Fellow panelist Annell Bay, independent director on the boards of Apache Corporation, Hunting and Verisk Analytics, agreed. There should be a continuing discussion with the whole board about what it needs and what it is looking for in candidates, she added.
A starting point for such discussions is to look at what the company’s current and future challenges are, such as whether it is looking to expand globally, Chia said. From that point, boards should look at what relevant experience they need potential new directors to have – more so than simply looking at their skill set – he told attendees at the San Francisco event.
Boards should ‘use the variety of resources out there’ and experiment with them when looking for new directors, Chia said. For example, some believe executive search firms to be of little value but try them to see whether they can help. Simply networking is not sufficient, he added.
Bay said she uses both recruitment firms and networking. Boards don’t want one specific item when looking for a new director, she said, adding that they therefore look at the experience matrix among existing members and match that against the risks the company faces to see where there are gaps to fill.
The counterpoint to recruitment in regards to board refreshment is removing existing directors. Chia said boards should have a policy and a discussion with incoming directors to let them know they will serve a limited term of between 10 and 15 years. This manages their expectations and makes it easier to maintain a level of rotation, he said.
Sidley Austin partner Holly Gregory, also on the panel, suggested a different approach. She agreed that directors should be advised when they join the board about expectations for turnover. But rather than setting a term limit in terms of years, ‘[e]ach director needs to be George Washington and understand that [he or she] may need to leave at any time,’ she advised.
The company’s needs will change over time so it may subsequently need new directors with different skills, Gregory said, adding that annual votes on maintaining members of the board should therefore be given greater thought.