Given today’s rapidly changing corporate environment that is fraught with risks, regulations and high demands from investors, the board’s job is more challenging than ever. To ensure the highest level of performance, boards must assess their own board health, effectiveness and balance. Also, if you are an executive who seeks a seat in the boardroom, you also need to take a hard look at a board before joining it. This means ensuring a board has the right composition, offers good governance, and takes full accountability for protecting the organization against a multitude of risks, including cyber breaches. The board must do the right things, including meeting regularly, communicating proactively, ensuring a balanced relationship with the CEO, creating robust succession and compensation plans, and taking responsibility for self-evaluation. Finally, make sure a board has a healthy, collaborative culture which enables them to align themselves effectively with investor and CEO interests.
While the above guidelines for assessment work for all types of boards, dynamics vary between private, private equity and public boards regarding the independence of members and how they go about board recruitment. Given the need for reporting, developing messaging to shareholders, good governance and the overall higher level of scrutiny, public companies’ boards tend to include the most outsiders. With the increase in activist investors moving into the boardroom, however, this composition is changing. Private family-owned company boards are on the other end of the spectrum; they consist mostly of family members or those with very close ties to the family. The remaining private companies include a mix of insiders and outsiders. Finally, private equity firms tend to fill the boards of their portfolio companies with their managing directors and operating partners. When a particular expertise is missing, however, they sometimes make exceptions and bring in an independent director.
Besides the varying dynamics discussed above, if you are an executive who seeks a board seat, it is essential to understand the timing of board recruitment. Since they recruit on regular schedules that ensure candidates have been selected in time for election dates, public companies are most predictable. Private equity companies, on the other hand, recruit at a moment’s notice and are unpredictable in the mix of insiders versus outsiders represented on boards. As a result, private equity portfolio company board recruitment is harder to predict. We do know, however, that private equity firms tend to recruit from their networks. So, it is best for candidates to get in touch with private equity groups’ outside counsel and other advisors and service providers, thus becoming part of the firm’s trusted network and ensuring their name is top of mind when a seat opens. Because private companies can be unpredictable as well, candidates seeking board positions with them should stay on top of the news, looking for trigger events, such as mergers, acquisitions and divestitures that can open the doors to new directors. When the time is right, they should reach out. Whatever type of board interests you, understand your value proposition, establish a strategy to gain a boardroom seat and execute it with persistence.
Given the highly specific needs of boards to meet today’s demands, it is challenging for companies to recruit the right director. So too is it difficult for an executive to find the ideal board seat. Meanwhile, the most common search methodology used today, retained executive search, is not rising to the challenge. With the executive search model candidates have little clout; their calls go unanswered and months pass by with no results. At the same time, hiring companies pay high fees and potentially miss out on skilled candidates who are not on the radar and often face an incomplete search.
Fortunately, there is a tried and true model that works for candidates and companies alike. It is the Executive Agent who helps candidates develop their value proposition, brand it, create a search strategy and locate target organizations. The agent does the hard work, finding the right-fit opportunities, ensuring greater exposure and often cutting the search time in half. Also, because Executive Agents maintain a pool of elite executives who want to advance their careers, hiring companies would be wise to jumpstart their search success by using their services. After all, there is no charge to the hiring organization.