Presented By Billy Dexter. Managing Partner. Heidrick. & Struggles. Topics. 1. The State of . the Board. Where Is . the Diversity?. What You Can Do/. and Should NOT Do. The Public Company Board Today. ID: 641139
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“Strategies for Diversifying Corporate and Non-Profit Boards”
Presented By Billy Dexter
The State of
What You Can Do/and Should NOT DoSlide3
The Public Company Board Today
Today’s Rapidly Evolving Corporate Governance Environment
SEC’s new regulations requiring:
Justification for director selection;
Analysis of director diversity based on corporate policies (but specifics are undefined)
“Proxy access” and “say on pay”
Continued impact of Sarbanes-OxleyThe result is an environment of uncertainty and challenge for boardsSlide5
[Key Findings of the Report]
The share of seats that went to women in 2016 fell by two percentage points, to 27.8%, ending a seven-year run of year-on-year gains.
In the past four years, the aggregate proportion of African-American, Hispanic, Asian, and Asian-American appointments averaged 20.1%, more than four percentage points higher than the 15.8% average for the period 2009–12.
In 2016, the percentage of Hispanic appointees, though still low compared with the US Hispanic population, reached the highest level recorded by the Board Monitor. Consumer companies led the way—almost 60% of Hispanic appointees went to boards in the consumer sector.Almost 41% of Asian and Asian-American appointees went to technology boards.About 33% of African-American appointees went to boards in the industrial sector.Slide6
Key findings of 2017 findings about board monitorSlide7
[Other Findings of the Report]
The total number of board seats fell slightly, from 4,698 in 2015 to 4,609.
Some 9% of board seats turned over in 2016, compared with 8.5% in 2015 and 6.8% in 2014.
Current and former CEOs and CFOs together accounted for almost 66% of director appointments in 2016, down from the eight-year high of 73% in 2015.Of the 421 board appointees in 2016, some 315, or almost 75%, had previous board experience.On average, appointees had substantial work experience in 1.5 distinct industries, as in 2015, but below the average of 2.2 distinct industry experiences in 2014.Slide8
77%- Personal networking/word of mouth
55.6%- Nominee identification by a board committee
51.1%- Search firm11.4%- Shareholder suggestion5.3%- Director database1.0%- Other
According to the 2015-2016 NACD Public Governance SurveyWhich Methods of Director Selection does your board typically use?Slide9
First time directorsSlide10
Distribution of new director appointments by industry 2016
Note: Numbers may not sum to 100%, because of rounding.Slide11
Where Is the Diversity?
Distribution of women appointed to fortune 500 boards by Industry 2016
Note: Numbers may not sum to 100%, because of rounding.Slide13
Progress toward gender parity continues to recedeSlide14
What Are the Impediments to Ethnic Diversity on Boards?
Strong focus by boards on CEO skill
set – a four year trend
Clear interest in board governance experience – reluctance to add someone who has not served on a public board
Functional skill sets continue to be only of limited interest (e.g. CHRO, CMO, GC,
CPO, etc.)Prevalence of ‘warm referrals’ e.g. candidates already known to a board memberSlide15
New board director appointments by ethnicity % 2009-16Slide16
What You Can Do and Should NOT Do to Position Yourself for a Board
Preparing for Corporate Board Service
Examine your motivations and your commitment level:
Do a rigorous self assessment and enlist other feedback – are you ready?
Consider Board Governance Training (Stanford, Wharton, Duke, etc.)
Create your “personal corporate brand.” Be clear on what you
have to offer
Proactively target companies of interest. If targeting a first
corporate board, start small - but target one with experienced directors
Build experience in Not For Profit boards. Select for your passion,
but pick for the company of other directorsSlide18
What Do Nominating Committees Seek in a New Director?
78Note: From 2013-2014 NACD Public Company Governance Survey.Top Criteria for Director RecruitmentLeadership Experience, especially leading a P&LSpecific Industry experienceFinancial expertise
Corporate Governance experience
International/Global experience, particularly Asia and emerging markets
Technology/ Big DataSlide19
Finding Talent – Where Do We Look?
Researching our Board data base
Networking with partners throughout our firm
Soliciting recommendations from executive and board placements and clientsStrategic Partnerships with Organizations such as: Executive Leadership Council National Association of Corporate DirectorsWomen Corporate DirectorsAttending industry events to meet talented executivesCorporate Board Member
ELC Networking EventsFortune Most Powerful Women’s EventsNACDOutstanding Director Exchange (ODX)Media - Articles and Top Executive ListingsResearching talent proactively from a targeted universe – top executives within a certain industry/ functionSlide20
The Ideal Board Member
Understands and practices governance versus management
Seeks out opportunities to learn and understand all aspects of the business
Provides objectivity, open-mindedness, and embraces diverse points of view; is a great listener
As a fiduciary, challenges business model, strategies, operations,
performance, leadership succession and related assumptions with
the fortitude to take an alternative position or constructively
raise issues as needed
Takes an active role in building a well-balanced board and supporting newcomers (mentoring formally or informally)
Is actively engaged and attends all board meetings in person as
well as committee meetings as required
Demonstrates a “team” orientation, but does what’s best
for the shareholders and the business
Brings personal integrity to the table and ensures board integritySlide21
Typical Board Search Process and Timeline
As we engage in a strategic relationship to bring new directors to a client, this is a typical process:
Board interviews to understand Board Gaps/Key Criteria
Further discussion with Client Management Team (Optional)
Develop and agree on CompetenciesWeeks 1-2Identify Qualified Executives via research, networking, referralsWeeks 2-5Contact and Evaluate InterestWeeks 4-8Interview and AssessWeeks 4-8Introduction to ClientWeeks 4-10
Referencing and Due Diligence
Board Approval and Director ElectionSlide22
Network, Network, Network!
Network, expressing specific interest and highlighting your value, with:
Your CEO and with his/her permission, your company’s board
Your colleagues and targeted contacts in your industry/function*NACD, ELC, WCD, Catalyst and other groups advocating for diversity*Lawyers and auditors, especially those in the ‘deal’ businessCurrent directors serving on for profit & non for profit boardsExecutive search firms*Ask for honest advice and feedback and help making connections.Slide23
What will I get from the experience?
What can I bring to this board?
What do I think of the CEO?What do I think of the board members?Am I passionate about the business?Slide24
What You Should NOT Do
rely on others to ‘sell’ your story – devote the time you would to a job search
Don’t assume that search firms are the answer – over 3/4s of boards rely to some extent on ‘warm referrals’ from their own networks and you need to be in that deal flowDon’t close your mind to opportunities – listen to every possibility – you never know what might be the right fitDon’t prepare a lengthy board bio – two pages is maximumDon’t expect that diversity alone is your ticket to a board seat – you MUST bring the right mix of experience and style to be considered Don’t be afraid to show your values and character! Board selection is largely about fit!Slide25
Board Diversity at Impasse!
Targeted Areas of Focus for African American Executives
Executive Leadership Council (ELC) members from 2011-2016 had 158 board placements among the membership in (Fortune 1000, PE, Mutual Funds, and large non-profits).
Develop skills that are of interest to Boards in Risk management, Cyber security, Technology/Social Media, Big Data, Enterprise Transformation, Strong Financial & Audit leadership, Global Experience, International/ Emerging Markets, etc.
What is your expertise you have to offer a board? What does your personal brand say about you?Your Network! What is your inside game strategyGet Board experience Non-profit. Be intentional!Slide27
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