SpencerStuart
May 2019
In this era of rapid technological change and market disruption, boards have their work cut out to keep pace with what is happening in their own companies, let alone in the broader, converging business environment. To remain relevant – to be able to make a meaningful contribution to strategy and challenge management effectively – boards need to refresh themselves continually and seek out directors who can bring in much-needed knowledge and experience from the front line.
One of the board’s most important tasks is to identify potential new directors and assess their suitability for the role. This task is made all the more difficult by the fact that an increasing number of high-quality candidates have not served on a main board before. Many nominating committees are nervous about appointing executives who lack boardroom experience, and with good reason – board appointments involve a long-term commitment and mistakes can be painful and costly, disrupting the equilibrium of the board and damaging the reputations of those concerned.
That said, a growing number of first-time directors are being appointed to boards. According to research published in the Spencer Stuart Board Index, 33 percent of S&P 500 appointments and 32 percent of FTSE 150 appointments in 2018 were new directors serving on their first corporate boards.
Many of these directors bring knowledge in fields such as cybersecurity, AI, machine learning and industry 4.0 technologies; others have firsthand experience in digital transformation, organizational design, customer insight or social communication. The demand for such cutting-edge expertise is likely to rise, which means more first-time directors finding their way into the boardroom in the coming years.
To reduce the risks, and to help them make the very best appointment decisions, nominating committees need a robust framework for assessing not just the suitability of a candidate’s expertise, or whether they will mesh with other directors, but most importantly how well they will adapt to the role of non-executive director itself.
Fortunately, lack of experience is not the barrier to service on a board that it once was. For any board role it is essential to delve into a candidate’s character and temperament, as well as his or her background.
Spencer Stuart recommend that boards assess prospective first-time directors against five key attributes: interpersonal skills; intellectual approach; integrity; independent mindedness; and inclination to engage. Candidates strong in these five areas are most likely to be capable of contributing as all-around directors, in addition to the specific knowledge, skill or set of experiences that makes them interesting to boards.
Read the full report below.
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