Rethinking Board Composition

The second session of the Forum focused on board composition and diversity. Facilitated by the team at Deloitte, the session explored the current and emerging views on issues of board composition, skills, and diversity.

By far the largest impediment to remaking boards, according to the group, is the low turnover currently seen. Participants observed that boards are not aggressive enough to move out underperforming directors to allow room for the directors who can advise on tomorrow’s problems, as opposed to yesterday’s.

Participants also observed that too often, boards fall back on skills matrices and other processes at the expense of identifying the right individuals. This has led to a narrow definition of diversity and, many agreed, results in a lack of progress on that front.

When recruiting

Don’t start with the “skills matrix”, but start with values, social skills, and business judgment, and then look at skills. This can help make sure that you find the “right person” for the board seat and helps address the crutch of looking for former CEOs, for example, or going back to the same small pool of candidates.
Understand that while a “good fit” is important, boards have to get comfortable being uncomfortable. New thinking is needed in the board room.

In order to move boards to a new and productive state, the group made the following suggestions:

The board chair must step up into a true leadership role and drive change.
Board evaluations have to be real and have consequences. Otherwise, why do them?
Board agendas must be managed to allow for real discussion and debate on complex items. It is the chair’s responsibility to make sure this occurs.
The chair needs to think through how they best engage and extract value from each of the directors. Engendering “emotional ownership” by the directors is critical to the success of the board and, ultimately, the company.
Board composition must be an ongoing exercise with constant re-evaluation. Creativity and entrepreneurship are two critical skills/mindsets that must be brought to the board.

The participants felt that board composition, as a general matter, has become to formulaic, to the point where tools initially intended to help foster necessary change are now used to hinder it. The broad consensus of the group is that, led by a strong chair, board composition must be driven from within and guided by the company’s strategy.

Deloitte provided the following materials to participants:

The meeting summary is available for download here.