Looking at Board Succession Through a Global Lens
High-performing boards know that maintaining a pipeline for director candidates is an ongoing responsibility. And as companies increasingly become more global—whether in their markets, manufacturing or supply chain—board composition should keep pace.
Globalization is already happening in executive suites. It’s interesting to note that foreign-born executives are now at the helm of some of the largest companies in America: Indian-born Indra Nooyi at PepsiCo, Indian-born Satya Nadella at Microsoft, Swedish-born Jonas Prising at ManpowerGroup and French-born Alain Monié at Ingram Micro, to name a few. In fact, both Prising and Monié have worked on several continents and are fluent in multiple languages, experiences that were extolled in their appointments as CEOs.
While directors assess the global capability of management contenders, they themselves are being scrutinized. Shareholders, proxy advisers, regulators and activists alike are looking at directors’ backgrounds and experience as never before. Are they truly independent? Have they served on the board too long? Does the mix of director skill sets create a board equipped to deal with today’s new, more complex, and ever-evolving business challenges? Is their experience a good match for the strategic direction of the company?
After strategy and risk, talent development is the third most important responsibility for both management and the board. Lots of attention is paid to CEO and C-suite succession, but the retention and development of savvy board members deserves a slot on the agenda, too. No board wants to be caught unaware. Contingency planning for director succession should be a regular item on the board agenda.
The just-released 2015-2016 NACD Public Company Governance Survey from the National Association of Corporate Directors found that boards are using a longer time horizon for identifying and recruiting potential new board candidates. Specifically, 2015 data shows a drop in the percentage of boards that have a time frame for recruitment of only “one year or less.” In addition, the percentage of those boards looking three or more years into the future has risen.
While directors assess the global capability of management contenders, they themselves are being scrutinized.
On some of the boards I serve, there are annual peer reviews by fellow directors. Assessment of the effectiveness of committees also occurs annually. In addition to evaluations, other common levers to promote turnover and bring fresh perspectives into the boardroom include age and tenure limits. While these methods can be controversial, some boards write them into their bylaws specifically to ensure regular discussion on what can be a delicate issue.
Skills Matrix Details Director Backgrounds
Developing a skills matrix that details each director’s background allows assessments to be made quickly on where there may be gaps now or in the future. Finance, marketing, IT, human resources and diversity are some of the items on that matrix, along with cross-cultural comfort and global savvy, a category that has risen in importance in recent years.
When assessing director qualifications, nominating committees and recruiters alike are focusing on international experience as never before. The desire to seek out executives with international experience reflects the increased globalization of public companies.
The top five qualifications sought in director candidates, according to the NACD survey, are in this order: industry experience, leadership, strategy development and finance. International experience ranks fifth (in earlier surveys, international experience didn’t merit a mention). Fourteen percent of the survey respondents considered international experience one of the top two most desirable types of experience for a director candidate to have.
Directors should not be caught off guard. Like CEO succession, director success demands a global mindset today. Proactive, high-functioning boards plan for new directors with as much rigor as they would in seeking the next company leader. The time for building a global director pipeline is now.