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The Challenge of Recruiting and Retaining Board Members in the New Century
In the wake of Sarbanes-Oxley and the various corporate governance issues that companies of all sizes have faced in recent years, it has become more challenging than ever to attract and retain world-class Board members into an organization.
This is particularly true in the case of publicly-held companies, where the level of responsibility and accountability for understanding where businesses are in their lifecycle is at its peak.
Until fairly recently, Board members were not automatically held responsible or accountable for their participation and could show up for meetings without necessarily preparing. But expectations have changed dramatically. Today there is a strong push for Board members to understand all the moving parts within a business. Board members must stay apprised of variables ranging from executive compensation and financial analysis, to competitive issues, market intelligence and technology. This level of involvement requires a major commitment of time and energy – one that fewer and fewer executives are prepare to commit.
Most executives join - and remain on - Boards for intellectual stimulation and involvement in thought leadership. They enjoy the company of smart and talented people, as well as the opportunity to provide insight and add value to a management team. But the higher degree of exposure and risk has had a huge impact on the challenge of getting people to step up for Board positions. Here are a few of the most significant trends that we have noticed:
Increased scrutiny from Board candidates – Executives are undertaking an unprecedented level of due diligence when evaluating Board opportunities. Now, more than ever, potential Board directors are wary of being associated with a wrong governance decision or corporate misstep through their boardroom involvement. As a result, before accepting an invitation to join a Board, prospects want to understand all aspects of the business - from its performance, business model, reputation, management team, financials, risk factors, and strategic plan, to the culture, integrity, culture and composition of the Board itself. As a result, it has become more difficult than ever to close on qualified Board candidacies.
Greater pressure on directors to focus – In years past, many executives sat on six or seven Boards. But today, most companies don’t want Board members to serve on more than two, and frequently stipulate in their Board Governance manifestos that members must not only secure approval to sit on additional Boards, but also decline opportunities in boardrooms that meet more than four or five times a year. Such restrictions have greatly reduced the pool of available candidates for Board positions.
Growing Board member attrition - In recent years, as Board members scrutinize more carefully the many variables discussed above, we are seeing more of them opt out after a couple of years if they don’t feel that the Board’s views are consistent with their own, or that the team and/or organization are of the quality or level of competence required to deal with the issues they face. Many high-caliber people simply don’t want to risk their reputations for involvement in organizations and/or teams in which they don’t have complete confidence.
Trends such as these have conspired to make the challenge of recruiting and retaining quality Board members significantly more complex. They have also increased the need to look beyond a Board’s immediate network of contacts for sources of additional candidates, and to enlist the expertise and support of third parties to identify, attract and recruit the right talent.
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Welcome to the Summer 2007 edition of Inside/Outside – a quarterly publication providing insights into human capital challenges experienced at the highest organizational levels, as well as news about our growing firm. The choice of name for our publication reflects Nosal Partners’ integrated approach to solving leadership challenges – Executive Leadership Solutions™ services and our multidisciplinary methodology which enables us to support clients both from the “inside” through executive development support, as well as from the “outside” through executive search and interim executive solutions.
