Corporate board directors play a vital role in overseeing the direction and success of the companies they govern. Directors provide strategic oversight, foster accountability, and ensure the company operates in the best interests of both shareholders and stakeholders. With an ever-increasing range of strategic decisions that a board must oversee, selecting appropriately qualified individuals to serve as directors is critical to today’s corporate boards. In fact, board composition can significantly influence the degree to which company performance meets or exceeds shareholder expectations.
The selection process for board directors has evolved significantly in recent decades, particularly in response to mounting pressures from institutional investors. During the early 1990s, institutional investors expressed concern that many active CEOs had become far more enamored with outside board service than was appropriate – some serving on as many as six outside boards – in effect, diverting as much as a third of their time and attention away from the companies they were entrusted to lead. Soon after, CEOs began reducing their board commitments. To fill the resulting vacancies, boards often elected executives of lesser experience and accomplishment, which diminished governance capacity. To mitigate the issue and ensure that governance and performance standards were not compromised, some boards began electing executives they considered strong candidates for CEO succession. Today, independence and diversity of professional experience have become critical factors in director selection.
In recent years, many executives, upon reaching C-Suite, are encouraged to gain board experience as the final “polishing” of their leadership skills (i.e., representing the interests of shareholders of another corporate entity). This transition often provides an opportunity for new challenges and experiences that leverage the extensive skills and business acumen acquired over decades of professional service. As executives are considered for board opportunities, they must demonstrate a blend of hard and soft skills, as well as a keen understanding of the sensitive role directors play in the boardroom. If you are evaluating whether to take the next step in your career and seek a board opportunity, here are important attributes you will need to have in order to be an effective director.
Key Attribute 1: Communication Skills
Top-notch communication skills are essential for any effective executive, but the communication skills of a corporate director often require a more nuanced and collaborative approach than required of management. Successful directors are not only thoughtful and articulate but also possess the ability to listen actively. They prioritize listening over speaking, carefully considering information before contributing to discussions. They engage in dialogue to advance the conversation; rather, than dominate it, remaining objective and focused on strategic priorities. By not rushing to conclusions, they create a collaborative environment where diverse perspectives can thrive.
Key Attribute 2: Relevant Professional Experience and Knowledge
A foundational requirement for becoming a corporate director is relevant experience. Typically, aspiring directors should have served as a CEO, CEO successor, or in a high-ranking position that reports directly to the CEO of a public company or a larger enterprise. The size of the organization one has managed will likely dictate what type of directorship is appropriate; a general rule of thumb is that the company you currently work for should be at least twice the size—in terms of market capitalization or revenue—of the company whose board you wish to join. This ensures that potential directors bring the necessary experience and perspective to the boardroom discussions.
Key Attribute 3: High Integrity and Honesty
With governance becoming a key focus among investors, integrity and honesty are non-negotiable traits for effective board members. Relative to these attributes, strong governance skills encompass the ability to make ethical decisions, demonstrate transparency, and uphold the principles of accountability. Directors must possess the emotional intelligence to discuss and weigh complex ethical dilemmas and ensure that the company operates with a commitment to its core values, particularly in an era where ESG factors are increasingly important to investors.
The Selection Process
The process for recruiting and selecting candidates for a board position generally weighs both qualitative and quantitative assessment. The first hurdle to clear is simply an evaluation of a candidate’s resume – without the requisite experience, candidates may be ruled out at the outset. After that initial screening, though, the recruitment process tends to strike a balance between personal assessment and data-driven evaluation.
Recruitment efforts must ensure that potential directors are not only a cultural fit, but also possess the necessary skills and experience that a board may be missing. Thorough evaluations – considering both qualitative and quantitative data – are essential for identifying candidates who will add the most value to the board. While quantitative measures are a non-negotiable part of the recruitment process, as far as qualitative measures are concerned, the in-depth interview soon reveals whether the candidate has the requisite qualities to be a valuable board director.
If you believe you may have what it takes to contribute meaningfully in a board director role, connect with colleagues who may serve on boards or a director at your own company, or consider retaining a firm like JamesDruryPartners that specializes in proactively selecting boards for the most highly qualified executives. You may be surprised by the board-aligned qualities you possess, and the gaps you may need to fill before qualifying to assume the responsibilities of a board director.
Written by James Drury III.
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