Only 38% of company boards of directors have high levels of director quality and positive social dynamics, according to a survey by Gartner, which surveyed 92 general counsel (GC) to provide GC with unique benchmarking information about the corporate governance practices of their peers, both public and private.
“General counsel spend a significant amount of time and energy on director onboarding, education, and evaluation while giving comparatively less attention to sourcing and recruiting,” says James Crocker, director, Research for the Gartner Legal & Compliance practice. “These efforts seek to strengthen overall director quality, but research indicates there is room for improvement for many organisations.
“Effective boards hold executives to account and make positive contributions to corporate governance, strategy, and risk management. Yet half of GC report that their board of directors is not fully effective based on these criteria.”
The survey revealed that the single biggest factor in improving board effectiveness is increasing director quality and social dynamics, leading to a 53% rise in board effectiveness. However, Gartner experts scored GC on a director quality and social dynamics index and found that 62% do not meet the criteria.
The most impactful director lifecycle activity is sourcing and recruiting, which can improve director quality and social dynamics by 42%.
“GC looking to improve their board’s sourcing and recruiting efforts should work with the nominating committee chair to improve the quality of director nominations,” says Crocker. “Additionally, they should create and maintain a portfolio of potential director candidates.”
To improve nominee quality, Gartner recommends GC focus on:
• Work with the CEO and CHRO to identify future director skills needs – Simply backfilling the skills of directors as they depart will create skills gaps as organisation strategy evolves and economic and regulatory conditions continue to change. Candidates in the portfolio should have skills that align with changes required by the organisation’s strategy for the foreseeable future.
• Work with the CHRO and board chair to educate the board on the need for diverse perspectives – Directors are likely to nominate successors like themselves which has the effect of entrenching biases and blindspots already present in the current board makeup.
• Work with the CHRO to expand the talent pools for candidates – Without intentionally looking beyond the organisation’s typical recruiting pools, executives will likely be limited to the same kinds of candidates that are already on the board which may hinder their ability to fill skills gaps. For instance, a candidate who has little to no experience serving on a board, but also has a strong cybersecurity background, could be a strong candidate that might slip through the cracks if executives place stringent requirements on previous board experience.
“A well-crafted portfolio will help maximise the quality of directors the organisation considers as openings arise,” says Crocker. “This in turn will help improve the board’s ability to guide the organisation through disruptions and evolving economic circumstances.”