Good Governance – Board Member Selection Criteria

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

Board member selection is one of the most important aspects of ensuring a continued high level of professional governance and leadership by a Board of Directors. Boards with established Nominating and Governance Committees should delegate to these committees the duty to screen and select candidates to present to the full Board as seats on the Board become open. The committees should also prepare and periodically review skills sets and attempt to identify the future skills sets the board will need to carry the company into the future.

When delegating the duty to identify and select new candidates for the board of directors, the Nominating Committee’s scope of work is defined by certain criteria to be met by all candidates for Board membership. The Board can also provide a set of criteria that only a certain percentage of candidates have to meet. This two-tier system of established criteria can assist the committee in selecting candidates based upon the needs of the board for certain expertise or skills. Annually, the Nominating Committee or the Governance Committee should review the established criteria for candidate selection and compare the criteria to the Succession Committee’s strategic plan. Any suggested changes should reflect the current and the anticipated future operating environment of the Board.

An important part of the duty of the selecting candidates for a Board position is identifying the skills the Board anticipates needing to provide oversight, direction and leadership for the company. Boards need diverse talents to overcome the obstacles a fast-paced and demanding business environment inevitably will put in front of a Board. Boards often make the mistake of placing too much emphasis on industry-specific skills when selecting a new Board member at the expense of broadening the skills sets on the Board. Boards must have industry-specific knowledge, but one ideas often come from outside an industry and are adapted to fit the industry’s needs. Successful Boards maintain a balance of Board members who are industry experts and Board members with successful business backgrounds outside the industry. A two or even three-tier criteria system can provide the selection committee with guidance and flexibility in nominating new, appropriate candidates meeting the strategic needs of the Board.

The Chairman of the Nominating committee leads most Board member searches. The Chairman assumes the responsibilities of recommending to the committee the selection of a search firm and working with the search firm to develop specific skills the committee is looking for in a new Board member. Other responsibilities the Chairman assumes include:

• Soliciting nominations from other members of the existing Board
• Reviewing and presenting any self-nominated candidates to the selection committee for possible interviews
• Working with the search firm within the parameters of the selection committee
• Carrying out any other delegated responsibilities deemed appropriate by the Nominating Committee

The Nominating Committee should establish a schedule for the Chairman and the search firm. The Chairman should collect the needed information from the search firm and call meetings at appropriate times. An assessment of each candidate’s credentials should be conducted to decide which candidates best meet the needs of the Board. The Committee should then schedule interviews with the selected candidates.

The interviews should include a business and social setting. Committee members should engage the candidates in wide-ranging discussions and gauge the candidate’s demeanor as well as the candidate’s knowledge. The Committee members should place as much emphasis on how the candidate interacts with other Board members as on the candidate’s credentials.

Board succession planning is a critical part of establishing and maintaining good governance. Many companies take an entirely too casual approach to the process. The stronger the board the better able it will be to protect and extend shareholder value. A well organized and managed resourcing and succession plan will go a long way to increasing that ability.

If you want to talk about your board and the challenges which it is facing, send me an e-mail and we will arrange a time to talk.

© Dr. Earl R. Smith II

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Related Articles:

• Board Diversity – A Subtle Challenge
• Successful Board Assessment Models
• Good Governance – The Chairman’s Role
• The Succession Committee – Selecting Leadership for the Future
• Leadership Development – Good Board Governance
• Succession Committee Imperatives

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