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Challenges in Recruiting Independent Board Members

Challenges in Recruiting Independent Board Members. Andrea Redmond Russell Reynolds Associates. March 10, 2003. R USSELL R EYNOLDS A SSOCIATES. Current Situation. Regulatory changes Investor confidence in corporate governance is severely eroded and public disdain widespread

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Challenges in Recruiting Independent Board Members

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  1. Challenges in Recruiting Independent Board Members Andrea Redmond Russell Reynolds Associates March 10, 2003 RUSSELL REYNOLDS ASSOCIATES

  2. Current Situation • Regulatory changes • Investor confidence in corporate governance is severely eroded and public disdain widespread • Economic challenges • General climate of uncertainty RUSSELL REYNOLDS ASSOCIATES

  3. The Changing Role of the Director • Time commitment is significantly rising • Complexity of the role is increasing • Greater shift from approving strategic and operational development to contributing to it • Director liability appears to be increasing • Honor/appeal of being a director is decreasing • Intolerance for inactive directors • Greater public scrutiny RUSSELL REYNOLDS ASSOCIATES

  4. The New Board Candidate • The traditional CEO • Financial experts • Turn-around or crisis management experience • International experience • Strategy expertise • Track record of operational excellence • Women & Minorities • OUT – professional directors, CMO, CTO, “new economy” CEO RUSSELL REYNOLDS ASSOCIATES

  5. Client Concerns • Analytical approach to director recruitment required • Candidates must have impeccable ethics • Candidates must have not only the time to for the directorship, but also a passion & enthusiasm for the role RUSSELL REYNOLDS ASSOCIATES

  6. Hurdles to Recruitment • Time restrictions • Limited CEO quality • Operating performance issues • Rising scrutiny of D&O insurance RUSSELL REYNOLDS ASSOCIATES

  7. Recruiting Strategies • Broaden the pool • Target senior operating officers such as presidents of global business units • Do not overlook the CEO of a smaller company • He/she could have come from a much larger business • He/she may have an impeccable track record • Be open to considering success wherever it is found • Look at women and minorities • Do not chase the obvious candidates along with everyone else RUSSELL REYNOLDS ASSOCIATES

  8. Recruiting Strategies • Directors are recruited most successfully when both the CEO and the Nominating Committee commit focused and prioritized attention to the search • Demonstrate the importance of the company’s governance to prospective directors through action • Do not let the search languish between board meetings RUSSELL REYNOLDS ASSOCIATES

  9. Comments on Other Trends • Director compensation • Lead Directors • Separate Chairman & CEO • Director evaluation • Audit Committee advisor • CEO succession planning • Executive compensation RUSSELL REYNOLDS ASSOCIATES

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