Companies Are Appointing More First-Time Directors
Nearly half of Fortune 500 board seats went to first-time directors in 2021.
First-time directors are gaining in prominence, according to Board Monitor US 2022, a publication from executive search firm Heidrick & Struggles. In fact, the report found that 43% of seats filled by Fortune 500 boards in 2021 went to individuals who were serving on their first board.
Laryssa Topolnytsky, a partner with Heidrick & Struggles, says the record-level of first-time appointees is indicative of a business landscape that is willing to shift its definition of what makes an effective board and who makes an ideal board member.
“Effective governance benefits from a broad range of voices and experiences. Boards are broadening their criteria and looking for a wider range of experiences, such as sustainability and cybersecurity,” says Topolnytsky.
The report shows some progress in the area of diversity: 45% of new Fortune 500 directors are women, up from 41% in 2020. However, Topolnytsky says “there is still work to be done,” because just 26% of the new directors are Black, down from 28% in 2020. Asian or Asian American directors, who constituted only 9% of new directors, continue to be underrepresented. Hispanic or Latinx board members received an even smaller slice of the pie, coming in at just 6%.
Cybersecurity and sustainability are growing as areas of expertise for directors, with 17% of the directors appointed to Fortune 500 companies in 2021 boasting cybersecurity experience, compared with 8% in 2020. The demand for ESG expertise resulted in the number of appointees versed in sustainability more than doubling, from 6% in 2020 to 14% in 2021. Other valuable areas of expertise include strategic HR and financial risk and compliance.
There was a time when, if you served on the board of a technology company, chances are most of your fellow directors would be technology specialists. However, boards are now increasingly selecting directors with varying areas of interest who can work strategically to address timely issues.
Says Topolnytsky, “Sustainability expertise is growing from a nice-to-have to a core business pillar, especially with increasing scrutiny of company pledges, pressure from stakeholders to establish and meet sustainability goals, and a growing regulatory regime.” Along with sustainability, Topolnytsky notes that the prevalence of HR expertise is growing, with boards seeking to solidify strategies on CEO succession planning, talent optimization and culture-shaping activities.
Topolnytsky believes that quickly building relationships and establishing credibility is key to ensure success as a first-time board director. She recommends setting up one-on-one meetings with as many fellow board members as possible, using the low-stakes environment to share stories and discover common interests.
“First-time appointees and new directors need to be proactive in cultivating strong relationships with everyone at the table, and they should build the foundation early. It will help establish trust and credibility and build allies who can aid in supporting the new board member’s work, so they have a stronger voice and presence in the boardroom.”
While it’s vital that a new board member rapidly acclimate to existing board dynamics, the responsibility for that integration falls not only on the board member, but also on the board chair. The new director and the board chair should have a plan for navigating and leveraging board dynamics prior to day one, ensuring an inclusive environment and a high-performance team of directors.
“It’s important to foster a social dynamic that everyone at the table feels comfortable with,” says Topolnytsky. “Board chairs should be thoughtful and deliberate about how they onboard and socialize incoming directors. They can serve as role models by setting a culture that facilitates dialogue between the new member and existing members.”