Assessing and providing advice
Respondents were asked to rate their board’s approach to refreshment using a scale of one to five where one is ‘very poor’ and five is ‘excellent’. Overall, they give an average response of 3.8, with 51 percent rating their board’s approach as ‘good’ and 20 percent as ‘excellent’. Just 8 percent rate their board’s refreshment efforts as ‘poor’ or ‘very poor’.
The average scores given by respondents improve with cap size. The average rating given by those at small-cap firms is 3.4, compared with 3.9 at both mid-caps and large caps and 4.1 at mega-caps.
On average, respondents in North America give a slightly higher rating (3.9) than their counterparts in Europe (3.7).
Just over half (54 percent) of respondents don’t see a need for their board to improve its approach to refreshment, with 46 percent saying they would like it to do better.
In line with their average ratings of the board’s refreshment approach, 57 percent of respondents at small caps would like to see an improvement, compared with 45 percent of those at mid-caps, 42 percent of those at large caps and just 37 percent of those at mega-cap companies.
Respondents were also asked to specify what improvements they would like to see in their board’s approach to refreshment. Their comments include:
‘Use a third party to identify and vet a strong pool of director candidates rather than relying on personal contacts’
‘Should be an ongoing process not a ‘when someone is retiring’ issue’
‘Based on ESG rating scores, the firm does not rate very highly on gender diversity and length of tenure. The board should be expanded to allow more people in with various backgrounds and skillsets and also to fix the gender imbalance (currently only one female director)’
‘The board has new directors reflecting the qualifications it sought, but there are some who have served on the board for more than 15 years’
‘Ongoing consideration and ranking of needs identified by the board and also of the qualifications of potential candidates’
‘Through maintaining a pipeline of suitable candidates taking into account the skills matrix and evolving requirements’
‘Diversification of candidates, including diversification of skillsets’
‘Skills diversity’
‘Seriously consider different aspects of diversity and board tenure’
‘I’d like to see us have an annual review of skills and qualifications – such as a review of the job description – as well as maintaining a list of potential candidates that we keep refreshed on a regular basis’
‘Less reliance on personal connections. Let's cast the net wider’
‘We could use a fresh look at our framework and calendar of tasks for the year’
‘Sticking to refreshment goals’
‘Increased pipeline with ongoing review of existing directors to encourage long-tenured and elderly directors to resign. Pipeline right now is really ad hoc and no one wants to address the ‘pale, male and stale’ issue head on’
‘More diverse pipeline’
‘Making adjustments to governing bylaws that consider and cap the time of service for directors’
‘Moving away from traditional directors with CFO and CEO experience to directors with IT/cyber-security experience, directors with same-industry experience and directors with HR experience’
‘Despite the use of board recruiters, the pool of qualified diverse candidates still seems to be small. In recent experience, we have seen a need to share more about the process itself with the rest of the board in addition to the candidate summaries’
‘Change to tenure policy’
‘Create tenure limits’
‘Be more open to adding board members who can add value to the company’
‘More focus on constant assessment of diversity’
‘I would like to see more emphasis on cyber and ESG skills’
‘Succession planning’
‘It would be good to normalize the expectation that a director can serve for 10-15 years and then step down to allow for regular refreshment. Said otherwise, remove any stigma attached to stepping down before reaching the mandatory retirement age. In addition, open conversations about chair succession [and] committee rotation are healthy and should be encouraged’
‘Make the tough decisions to refresh, even if that includes saying goodbye to long-term, contributing directors’
‘More time to identify prospects’
‘Focus more on executive recruitment than recruiting based on personal relations’
‘More consideration of future skills requirements’
‘More candid discussions with specific timelines for long-serving directors to retire from the board’
‘More focus on specific performance of individual board directors’
‘Use of executive search instead of reliance on personal connections’
