Wish lists and target selection
A key element of board refreshment is spotting suitable targets that fit the needs of the board and will help it fulfill its duties effectively.
The most commonly cited means of identifying potential director recruits is the use of personal connection, mentioned by 78 percent of all respondents. The next-most common route is an executive search firm (66 percent of respondents) followed by industry groups (30 percent) and media mentions (7 percent).
Sixty-two percent of those at small caps say their board uses an executive search firm, compared with 68 percent of those at mid-caps, 70 percent of those at mega-caps and 77 percent of those at large-cap firms. The percentage of respondents pointing to the use of personal connections is broadly similar between the cap sizes, ranging from 77 percent at large caps to 82 percent at mid-caps. More than a third (36 percent) of those at mid-caps turn to industry groups.
Eighty percent of respondents in Europe say their board uses an executive search firm to identify potential director candidates, compared with 66 percent of those in North America. Conversely, 67 percent of those in Europe say the board uses personal connections, less than the 81 percent in North America who say the same.
Boards face growing pressure – from governments, investors and other stakeholders – to increase diversity among their members, in terms of both directors’ identity and their experience. When asked which factors their board includes in its considerations when recruiting new directors, the most common answer is gender (mentioned by 87 percent of respondents), followed by relevant experience from an industry other than the company’s (80 percent), race/ethnicity (75 percent), ESG skills and experience (60 percent) and cyber-security skills and experience (54 percent). Soft skills and age are each mentioned by half the respondents.
Gender is mentioned by all respondents at mid-cap companies. This compares with 93 percent of those at large-cap companies, 80 percent of those at small caps and 74 percent of those at mega-caps.
Sixty-three percent of those at small caps and 67 percent of those at mega-caps say race/ethnicity is taken into consideration, compared with 86 percent of those at both mid-caps and large caps. ESG skills and experience are mentioned by 45 percent of respondents at small-cap companies and 59 percent of those at large-cap companies, compared with 70 percent of those at mega-caps and 77 percent of those at mid-caps.
Respondents in North America mention race/ethnicity (86 percent), age (55 percent) and sexual orientation (33 percent) more frequently than their peers in Europe (66 percent, 28 percent and 17 percent, respectively).
More than three quarters (76 percent) of those in Europe mention ESG skills and experience, compared with 57 percent of those in North America. Almost three fifths (59 percent) of those in North America say cyber-security skills and experience are taken into consideration, compared with 38 percent of those in Europe.
It’s always good to be prepared. Overall, slightly more than half (54 percent) of respondents say their board has a pipeline of potential director candidates, while 46 percent say their board does not.
Large companies are more likely to have a plan in place: 70 percent of respondents at mega-caps say their board has a pipeline, a figure that drops to 63 percent among those at large caps, 48 percent at small caps and 42 percent at mid-cap firms.
Fifty-eight percent of respondents in North America say their board has a pipeline, while 48 percent of those in Europe say the same.
