With the pressure to digitize and the spotlight firmly on diversity, companies are finding more reasons to freshen up their board composition. It’s not just large institutional investors like BlackRock and State Street promising to withhold votes from non-diverse boards, but mandated laws in California are requiring large institutional investors like BlackRock and State Street promising to withhold votes from non-diverse boards
Kapila Anand has seen this shift as a director at Extended Stay America, Omega Healthcare Investors, Elanco Animal Health, and through her work with WomenCorporateDirectors. Anand will talk about trends in board composition at Building Better Boards: Committee Series in Chicago on September 10-11 on the Governance Track during a panel titled, “In Search of Greatness: Getting Board Composition Right.”
We caught up with Anand ahead of this session. Below are excerpts from this conversation.
When it comes to board composition what do boards tend to miss the mark on?
Board nomination processes have worked for years based primarily on word of mouth. A new director decision is so important to the board culture that finding a personal recommendation around a director’s style has been an important element of preserving board effectiveness. Today it is important to introduce relevant digital or other skills like cyber skills that align with a company’s strategy forcing boards to look beyond traditional sourcing and tap into first time directors. Skill matrices should consider diverse skills, thought process, age, retired vs. active directors and that requires tweaking the traditional nominating process.
What are some tactics to improve a board evaluation and succession planning process?
I had the opportunity to lead a 25+ diverse nominating and governance peer exchange on behalf of the WomenCorporateDirectors and our group believed that periodic third party assessments of individual directors were the best way to add teeth to an evaluation process as long as it was acted upon and individuals were coached on how to address skills gaps and other director’s feedback on their effectiveness.
What are some ways to refresh a board without getting overly personal?
I think a good lead director can coach directors who don’t align well with a company’s strategy. I also think tenure limits help the process. Some boards are also expanding boards to allow for a dilution of old school skills with more current skill sets.
What is your advice for boards struggling with board composition?
I think there is an advantage to periodically refreshing skill matrices to align with a company’s strategy and building a pipeline of qualified candidates ready to tap when needed. My experience is that finding relevant skills to address the current or anticipated state of business disruption requires being intentional and also considering first time directors.