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| Best Practices |
Diverse Approaches
Suzanne McGee
03/01/2005
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Increasingly, however, companies that restrict their quest for new directors to the traditional networks and insist on filling board seats with white males are finding that this strategy impedes the process of building a successful board. Certainly a board composed solely of white males might lead to negative newspaper headlines if civil rights groups attend annual meetings to ask why there are no women or ethnic minorities represented. But more pragmatically, good directors are becoming harder to find, and these communities appear to be the best source of boardroom talent available to be exploited.
TOP VIEW
While white males continue to hold the vast majority of corporate board seats, women and minorities are beginning to make significant strides upward. Companies are beginning to realize that as long as they insist on filling their board seats with white males, they not only risk the ire of special interest groups, but also place in jeopardy their firms’ future success. |
“Simply, there are more women and more minorities available for these positions because they have not historically been sought out by as many companies,” says Chuck King, head of the board recruiting practice at executive search firm Korn/Ferry. As more minority candidates acquire the senior-level business experience that qualifies them for board seats, King notes that the pool of typical candidates—white male CEOs—is drying up. The need for capable board members is rising as new regulations take effect, from Sarbanes-Oxley to New York Stock Exchange rules requiring a majority of directors to be completely independent, with no business ties to the companies on whose boards they sit. These fresh requirements, coupled with growing demands for board directors’ time (as meetings become more frequent) and the increased personal liability of board members, has left CEOs reexamining their board commitments. The result: While in 1994 a typical CEO sat on four outside boards, today he or she has an average of 1.6 outside board seats.Diverse Doyens
Directors are trying to ensure that not only are their ranks made up of those with the time, energy and expertise to contribute to discussions, but also that boards are lean enough to maximize effective communication. This equates to an ever-growing number of companies trying to tap into the pool of capable minority candidates. In 2004, says Julie Daum, head of the North American board recruiting practice at Spencer Stuart, nearly one-quarter of the 480 or so board seats at companies in the Standard & Poor’s 500 that opened up were filled by women, up from approximately 18 percent the previous year. (Minority candidates are more difficult to track because ethnic origin cannot always be determined by name alone, and companies do not always disclose a person’s ethnic background when announcing a board appointment). “It used to be that companies only wanted to recruit people they knew or who were part of their world,” Daum explains. “Now, instead of just filling one seat and saying, ‘OK, that’s done,’ boards are continually looking for diverse candidates.”
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