Opinion
Good news: Corporate board recruitment is turning strategic
Summary
- Governance failures, tighter confict-of-interest rules, court decisions, rising director liability and increasing investor activism have shifted the focus towards finely targeted board recruitment. Interviews for these roles have seen a sea change.
Board appointments have long been dictated by promoters and top executives, with allies handpicked who echo rather than challenge them. This is apparent in India’s public sector companies. Family-run businesses have also been known for it. At startups, boards are typically composed of a small group of founders and funders. This structure, while not without its challenges, is understandable.
In contrast, large-cap corporations receive much more attention for the composition of their boards. Traditionally, these included bankers, company promoters, top officers, retired bureaucrats and high-profile figures. Many are chosen more for their connections in high places than their strategic skills.
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However, governance failures, tighter conflict-of-interest rules, court decisions, rising director liability and increasing investor activism have shifted the corporate focus towards finely targeted board recruitment. Corporate boards in developed economies are identifying the specific skills and expertise they need and seeking out individuals who possess those qualities.
Broadly, today’s boards need leaders with an ability to see around corners. Friends of promoters or buddies of current board members must make way for independent board members, whose role includes representing the interests of minority shareholders.
The skills in demand for board members include digital technology prowess. Despite setbacks to diversity, equity and inclusion (DEI) in the US, it remains a guiding principle, just as board discussions inevitably touch on environmental, social and governance (ESG) issues, regardless of trends in America. So ESG expertise is valued too.
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As boards become more strategic in their recruiting efforts, the interview process is also evolving. Here are some ways this process is changing:
End of the single board interview: The traditional single session is being replaced by a series of dispersed one-on-one interviews conducted online. This approach allows different board members to assess different aspects of a candidate’s suitability.
Tighter vetting of qualifications: The days of simply waving through a candidate based on the CEO’s preference are over. Vetting is becoming more rigorous, with a focus on skills, experience and any potential disqualifiers. Diversity remains a concern worldwide, driven by regulatory mandates as well as investor pressure.
Ability to attend physical board meetings: While virtual board meetings have become more common since 2020, a growing push to return to physical boardrooms is evident. The increasing demands on board members’ time mean that their ability to meet these commitments could be a key factor in the selection process.
New interview questions: Board candidates can expect to be asked about their involvement in DEI initiatives and advocacy of change within companies on ESG. Candidates who dismiss DEI and ESG as beyond their purview may find themselves passed over for board roles.
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Beyond professional skills, today’s boards must also scrutinize the backgrounds of their prospective members more thoroughly than ever before. The hot-button concerns are similar to those in the case of executive hires. Brushes with the law count. Has this nominee been involved in personal or business bankruptcy? What is the candidate’s lawsuit history, both as a plaintiff and defendant? How about personal violations of law, such as domestic violence, sexual offences, drunk driving or drug abuse?
A major part of due diligence is verifying career and academic claims. Inflated credentials are surprisingly common, with short academic courses dressed up as degrees and exaggerated job titles. When discrepancies arise, boards must assess their severity and implications. But background checks go deeper now, scrutinizing a candidate’s digital footprint. Social media posts, questionable affiliations or past controversies can come back to haunt the candidate.
Companies with reputations for ethical standards cannot afford board members with compromised integrity. This also applies to public sector organizations that deploy public funds. Legal firms and intelligence operatives conduct exhaustive investigations. Private investigators are sometimes tasked with accessing records.
However, internal politics can still play a role. Private equity-backed candidates often assume their firm’s own vetting is sufficient, but this assumption is wearing thin as it’s a good practice for governance committees to ensure independent verification.
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As board expectations rise, executive search firms specializing in governance, diversity and cybersecurity could become key players in recruitment.
Ultimately, the boardroom is no longer a sanctuary of unchecked power. The era of casual appointments is over in most countries around the world, and this trend will have to strengthen in India too. Today, appropriate board composition is a matter of corporate survival. A single misstep in selecting a director can turn a company’s reputation into a liability. As a senior board member remarked recently, “A boardroom filled with yes-men—and it’s mostly men—is just a corporate echo chamber. Real governance starts when independent minds replace obedient nods."
The authors are, respectively, a global board advisor, coach and publisher; and Fortune-500 advisor, startup investor and co-founder of the Medici Institute for Innovation. X: @MuneerMuh.
