Equilar recently hosted a webinar with Susan Angele, Senior Advisor, KPMG Board Leadership Center, Irene Chang Britt, a board member for Dunkin’ Brands and Tailored Brands, and Angela Brock-Kyle, a board member for Guggenheim/Rydex Funds and Infinity Property and Casualty, to share their strategies for effectively navigating transition in board composition.
The increased focus on board composition and refreshment has inspired companies to shift from a “traditional board” to a “visionary board.” Traditional boards are typically made up of current or former CEOs, who are often from similar industries and share similar mindsets and leadership styles. Conversely, a visionary board—as defined by a recent WomenCorporateDirectors Foundation and KPMG Board Leadership Center publication—consists of a diverse mixture of board members that come from different industries and backgrounds with the expectation of bringing new ways of thinking to the table.
At top level, the hallmarks of a visionary board are about “being future-focused and expansive in your thinking,” explained Angele. “Companies need visionary boards because of the challenges in the business environment.”
The external focus from investors on board composition is likely to have a major impact on boardroom diversity in coming years. In 2016, the percentage of new directors elected to S&P 500 boards was below 10%, though it increased from 8.7% in 2013 to 9.9% in 2016, noted a recent Equilar report, Board Composition and Recruiting Trends. The technology sector witnessed the largest portion of this growth, with new directors accounting for 15.1% of all directorships. This industry also witnessed the second-highest rate of new female directors at 29%.
“Many investors at forward-leaning large funds are using diversity as a proxy to force new thinking,” stated Britt. “In the current fast-changing marketplace, sometimes a past CEO isn’t actually the best choice.”
With a larger influx of new directors coming into the boardroom, it is important to have an onboarding plan with the materials and guidance that will ensure each new director is able to contribute and add value to board discussions. The goal should be to provide all incoming directors with valuable knowledge, not only about the company but also about managing on the board level, which will help them throughout their board careers. “It’s not only about learning about the company, but also to help directors joining their first board,” explained Brock-Kyle.
Each new director should be responsible for doing their own due diligence when joining a board. Reading materials, both internal and third-party, such as earnings releases, succession plans and survey results, will help give new board members a well-rounded picture of what the company is about.
“New directors should own the process. It’s your responsibility to dig in,” said Brock-Kyle. “Don’t be afraid to ask any questions, so that you can be the best director that you can possibly be.”
This article originally appeared in Equilar C-Suite magazine.