Board Talent Getting Scarcer

(page 2 of 2)

Today's boards are small and require every director to pull his or her weight. A new, first-time director may slow down or weaken effectiveness.

Boards need seasoned executives in the room. This is one reason why more boards are raising the mandatory retirement age for directors—both in recognition that it is getting harder to recruit experienced directors and in hopes of retaining the good ones already in place. Two-thirds of the S&P 500 boards that specify a retirement age now set it at age 72 or older, up from 35% in 2002. And 11% now set their retirement age at 75 or older, up from just 1% five years ago.

How Effective Boards Operate

Boards are like any team. Directors have to find their roles and know how to work with other directors to achieve consensus. A well-functioning, mature board understands its advisory role and does not meddle in management decisions. It has a solid understanding of the company, the culture, the management team, and its dynamics. It fosters trusted relationships among directors that allow free and open discussion and harmonious action. It encourages strong communication among directors, and it has a high degree of self-confidence.

An effective board operates in the best long-term interests of a company, and offers a wealth of experience to the CEO and management team. It knows how to lead and has in place an independent chairman or strong lead director. While some of this can be learned through diligent study and director-education programs, much of it depends on experience gained in the boardroom.

There are some things boards can do to help first-time directors. New directors should receive an in-depth orientation in all aspects of the company upon appointment. Boards should assign new directors to committees where they can gain experience quickly. Some boards are assigning unofficial mentors. Lead directors or chairmen should go out of their way to ask new directors for their insights in relevant areas, to incorporate the newcomers into the team more rapidly. In regular self-evaluations, boards should ask how far along new directors are in the maturation process, how much farther they have to come and, specifically, what the next steps should be.

Boards need to recognize the challenges they face with inexperienced, first-time directors. It is not enough to assume they will catch up. There are too many issues facing boards, and too much pressure to assume that a laissez-faire approach is sufficient.

Julie Daum is practice leader for the North American Board Services Practice for Spencer Stuart, the leading executive search firm in the boardroom.