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It
will not come as a surprise to most that have tracked
the ongoing progress of corporate reform over the past
year, the fact that public company board turnover has
doubled in the same twelve month period. The
perception of increased time, mandated expertise and
personal risk has made the decision easy for some
directors to decrease the number of boards they sit on
or simply get out of the "director business"
altogether. This reality has created a flurry of
activity among nominating committees on boards as well
as for the executive search firms who service them.
The
calculated strategy that goes into the selection of
new directors is a distant cousin to the strategy
utilized in the past. Boards are looking for new
members with energy, drive, tremendous intelligence
and domain expertise in areas the company may want to
penetrate in the future. Certain committee
prerequisites make it necessary to identify
individuals with a specific professional skill-set.
Make
note, this short list of director
"absolutes" is consistent with most all
public company board nominating committees:
Public
Company Board Experience- During this period of
board scrutiny, existing directors are looking to add
other seasoned directors that have served on public
boards in the past. While not-for-profit boards and
private company boards are excellent experience, these
days it is often not enough to earn consideration as a
candidate.
Availability
of Time- Informal surveys estimate the time
commitment of a board member will double to over 200
hours per year, starting this year. Certain committee
members, most notably those on the audit committee,
will undoubtedly need to dedicate many more hours to
fulfill their responsibilities. Company boards are
almost universally asking their senior executives to
reduce their obligations to outside boards, making the
hunt for financial talent intense. Thus, not
surprisingly, the individuals in greatest demand for
corporate-board duty are former audit partners and
retired CFOs.
Check
the Ego at the Door- The productivity of a board
is often stymied by the egos of some of its board
members. The majority of boards are made up of
prominent business people and academics that have
accomplished a great deal in their respective careers.
Added attention is being given today to a director
candidate's reputation and productivity in the boards
they have served on in the past.
Corporate
Governance Education- Many law firms and
consulting firms are conducting extensive corporate
governance conferences that bring individuals up to
date on all of the latest reform taking place. It is
certainly looked at positively that a director
candidate has invested the time to become educated on
what is an extremely complex series of reform items.
Risk-
After all of the due diligence is completed on a
company and its board, the D&O coverage is
examined by outside legal counsel, and all the
questions have been answered, can a director candidate
be assured that his or her risk has been mitigated?
Absolutely not! There will undoubtedly remain risk
when taking on the role as a director of a public
company board. The company should do everything in its
power to minimize the personal exposure to its
officers and directors. There exist new protection
vehicles that a director candidate may want to
investigate. At the end of the day, the individual
must be willing and able to step up, do the job to the
best of their ability, and know that a certain level
of risk will exist with the role.
It
is yet to be seen what net results will come out of
the sweeping corporate reforms brought into effect in
2002 and into 2003. William Allen, Director of the New
York University of Law and Business states, "We
have to be realistic about what conscientious
businesspeople can do working on a part-time
basis." We have seen certain practices developed
in the selection strategy to give a board the best
opportunity to bring in those individuals that will
perform at the highest level. The talent pool is deep,
the interest level mixed. Those boards that are most
proactive with their strategy will certainly walk away
with the winners.
Chris
Bull can be reached at Bull@mbsearch.net |
