As publisher of Directors & Boards, the question I am most frequently asked is “How can I get on a board?” The second most frequently asked question is “What makes for a great board?” In his President’s Letter for the March 2022 edition of our sister publication, Private Company Director, my son, Bill, answers the former question. This column will address the latter.

 

Board governance is a service. Directors do not merely sit on boards; they serve on them. They serve the demands of the shareholders who elect them, as well as the needs of their other stakeholders. Our nation depends on corporate boards to help create good jobs, deliver valued goods and services, and provide sustainable growth. Boards provide the corporate governance and the management oversight necessary not only for the company’s success but also for the nation’s prosperity and the planet’s survival. Who can be entrusted with such responsibilities?

  

Since its inception in 1976, Directors & Boards has presented perspectives on board composition. Back then, boards were composed mostly of older white men, many of whom were insiders, typically including not just the CEO but also his top lieutenants, notably the CFO and COO. Today, the preponderance of public company boards includes only one insider — the CEO — who often is not the chair. These boards consist largely of independent directors who are increasingly diverse in terms of gender, race and ethnicity.

 

To ensure good governance, a board needs directors with the necessary experience, skill sets and personal attributes. Like a good musical score, a board must be carefully composed. What should nominating/governance committees look for when searching and assessing board candidates?

 

Does the candidate have experience in making decisions that come before a board? In particular, have they participated in decisions regarding strategy, acquisitions, executive compensation, risk assessment and CEO succession? For example, have they participated in a search for a CEO, whether for a public company, a private firm or a not-for-profit? Participation in board-level decision-making provides evidence of pertinent experience and requisite perspective.

 

Does the candidate have the relevant talents, skills and background in terms of industry experience, technical knowledge and functional expertise? For example, directors with cyber, HR and digital credentials are often very valuable. For many boards, STEM background and international work experience are important.

 

Does the candidate have impeccable character? Honesty and integrity are absolute requirements. Directors sometimes find themselves “sharing a foxhole” where they must trust their fellow directors implicitly. There should never be any doubt about the content of a director’s character.

 

Is the candidate willing to stand up and be heard? Boards make collective decisions and thus require a degree of collaboration and collegiality. However, too often, directors “go along to get along.” Each director has both the right and the duty to speak freely and candidly. Without hesitation or limitation, they should be willing to ask probing questions and demand thorough responses. 

 

Does the candidate have ample time for board service? Each directorship requires a significant time commitment, averaging about 200 hours per year. Although COVID demonstrated that directors can participate effectively through virtual meetings, they cannot just phone it in. Directors need to show up.

 

Is the candidate up to date on issues rising to the top of the board agenda, such as ESG? Board service has increasingly become a profession, and its professionalization has been advanced by continuing education programs provided by universities, associations and trade publications. “Professional directors” have brought needed talent, experience and diversity to boards.

 

Is the candidate alert and savvy about emerging societal and political issues? In today’s hypercharged activist environment, directors face heightened scrutiny from employees, customers, regulators and shareholders. They need to have the courage to take positions in support of their stakeholders.

  

Has the candidate had board experience? As Bill points out in his President’s Letter for Private Company Director, the best way to get on a board is to already be serving on one. And the corollary is also true: being on a board provides the best training. Board service affords a unique perspective on top-level decision-making, especially on the requisite boundary between board oversight and management prerogative.

  

These eight criteria can help make for a great board. Though demanding and taxing, board service can be extremely interesting, highly enlightening and very fulfilling. It is both an honor and a privilege. For those of you on boards, we at Directors & Boards thank you for your service.