In the high-stakes world of boardrooms, where decisions can make or break billion-dollar enterprises, the effectiveness of a board often hinges on one pivotal role: the Chair. From Fortune 10 giants to pre-IPO upstarts, a Chair’s ability to lead isn’t just about sitting at the head of the table, it’s about orchestrating the talent around it.
The best Chairs harness the unique skills of each board member, fostering a dynamic mix of decision-making and debate that leads to the best possible outcomes. While some individuals are naturally gifted in leading leaders, the most impactful board Chairs often develop their approach through relentless dedication, agility, accessibility, courage, humility, and integrity.
What Makes a Chair Exceptional?
Insights gathered from The Russell S. Reynolds Jr. Chair of the Year Award process reveal the traits that board members admire most in their Chairs:
Over the past few decades, we have seen the best boards have a “leader among leaders” as their Chair as well as stable of other capable and respected Directors who have the universal support to assume the Chair position if the time comes. In the end, the secret ingredient to Chair effectiveness isn’t just about who they are; it’s about how they lead, inspire, and elevate those around them. We are here to help boards make sure they get it right.
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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon and Chairman Emeritus, Russell S. Reynolds, Jr. Over the past 30 years, the firm has conducted thousands of projects for Boards and CEOs at public, private equity owned, and family-owned businesses across a range of industries including asset management, consumer markets and enterprises, financial services, healthcare, industrial, marketing and digital, and technology. To learn more about RSR Partners, click here.
In 2022, RSR Partners established the Russell S. Reynolds, Jr. Chair of the Year Award, which annually recognizes a Chair of a public company’s Board of Directors who successfully led the board through significant business or governance challenges. The award celebrates the legacy of one of the search industry’s greatest leaders and icons, Russ Reynolds, who has spent more than 50 years advising boards and CEOs on leadership.
In a striking rebound, the IPO landscape in the Americas has surged this year by over 20% compared to the same timeframe in 2023, with the proceeds from these offerings more than doubling due to the larger size of the deals[1]. This resurgence is led by the healthcare and technology sectors, particularly biotechnology, which alone launched nine deals raising a collective US$1.5 billion. Artificial intelligence (AI) continues to capture the market’s imagination, but investors are increasingly demanding tangible proof of its potential impact. Despite the looming challenges of global geopolitical tensions and the upcoming U.S. presidential election, the robust start to the market and growing investor confidence suggests a promising horizon for public listings, extending beyond large-cap entities to a broader spectrum of companies into 2024-2025.
Drawing on three decades of experience advising boards and CEOs through complex leadership challenges, we have observed the speed bumps investor-led boards face when transitioning to become more independent. A critical juncture often arrives when financial sponsors perceive a viable route to an IPO. The significance of a board’s capabilities and composition in maximizing a public listing cannot be overstated, yet one of the greatest barriers is often the reluctance of directors to relinquish their positions when it becomes clear that change is necessary. While some boards hesitantly skirt around these issues, the most successful ones embrace a proven pathway to prepare their governance structures for the public markets.
To navigate this transition and effectively prepare for a future IPO, chief executive officers and boards should consider three governance best practices:
1. Board Architecture
The axiom in real estate that “the taller the building, the stronger the foundation needs to be” equally applies to board structure. Recent shifts in corporate governance have redefined board construction to better weather potential challenges. In advance of any public listing, it is essential for boards to address these fundamental governance tenets.
2. Board Leadership
Determining the leadership structure of the board is perhaps the most critical decision post-architecture finalization, influencing the board’s capabilities, effectiveness, and culture:
3. Board Recruiting
The current environment for board recruitment is fiercely competitive, with a pressing need for directors who bring diversity of thought, background, and expertise. When adding additional independent directors to the board, we have found it is important to keep the following concepts forefront when building out the rest of the board.
By adhering to these best practices, companies who are on the path to an IPO can assemble a board that not only meets today’s challenges but also positions the company for sustained success in the public domain.
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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon and Chairman Emeritus, Russell S. Reynolds, Jr. Over the past 30 years, the firm has conducted thousands of projects for Boards and CEOs at public, private equity owned, and family-owned businesses across a range of industries including asset management, consumer markets and enterprises, financial services, healthcare, industrial, marketing and digital, and technology. To learn more about RSR Partners, click here.
[1] Data provided by EY Private.
When Russ Reynolds founded our firm back in 1994, he knew that “bigger isn’t always better.” And so, he purposely created a boutique firm with a truly collaborative and client first culture, and with a goal of providing our clients with “high touch” service and unbiased advice. We started out in the boardroom, focusing our efforts on recruiting directors. As would later be the case with all of our practices, senior members of our board practice would lead and execute every engagement and handle all candidate interface, assessments, references, and client interaction. Russ anticipated that staying small would prove to have a big and lasting positive impact on our clients and help preserve our client service culture as the firm evolved. He was right. For the past 30 years and still today, we have consistently achieved, and often exceeded, our clients’ recruiting objectives, and have successfully maintained long-lasting and meaningful relationships with them. While we have expanded our offerings to include executive search and a variety of advisory services, board recruiting continues to be at the core of what we do.
The demand for outstanding director talent is as high as ever. This is especially the case when considering corporate boards’ ongoing efforts to maintain the right mix of skills and experience and the right balance of gender and ethnic diversity in their ranks in order to enable them to stay ahead of an everchanging world in which their respective companies compete. Often, boards encounter supply and demand imbalances for certain types of candidates they seek. That’s why it is very important that the board recruiting firm can guarantee access to any and all relevant candidates without any exceptions. That is a promise that we have continued to keep with our clients since our firm’s founding. Given our firm’s size and structure, we purposely conduct a limited and distinct number of search assignments at any given time, and our engagement review and acceptance process ensures that at RSR Partners, there is no competition for candidates amongst our clients.
Our extensive candidate sourcing network continues to expand and advance. We utilize our own database, social networking tools, and other internet-based candidate search technologies (e.g., LinkedIn, BoardEx, etc.) that have leveled the playing field between boutiques and large firms when it comes to candidate identification. All partners from all practices are engaged as well for candidate ideas. As such, we have the ability to identify most any candidate who aligns well with a given profile.
The benefits associated with partnering with us to achieve our clients’ most important recruiting objectives are no better reflected than in the continued success we have had in achieving our clients’ diversity objectives. Since 2021, 86% of our board placements were either gender and/or ethnically diverse (it’s important to point out that diversity was one of a number of criteria each of these placements met).
As a small and agile team, we are also known for our thorough and rapid kick-starts to board recruiting assignments. We have always strived to complete our board searches within four to five months. There have been times when searches have taken longer than anticipated, but we have always completed our assignments and have amassed a 100% placed candidate “stick rate” along the way.
If I had to point to one step in the board search process that we have learned goes a long way toward ensuring a successful outcome, it would be to put a great deal of thought and effort at the beginning of the process into creating the candidate profile. This candidate profile development process should be a collaborative undertaking between the board and their search firm, and it can be completed in a short period of time. It starts with reviewing the director skills and experience matrix in the proxy and interviewing each member of the client’s Board, their Chairman, CEO and, depending on the nature of the search, certain members of the executive leadership team. Interviews focus on what skills and experience are needed in the next director and why, as well as the characteristics that make for a great cultural and chemistry fit on the board. Then, we undertake a comparison of what criteria the board currently possesses and identify gaps, which in turn, helps to refine the candidate profile. It is important to note that the matrix in proxies does not always provide an accurate picture of the degree to which skills and experience reside on the board (i.e., checking the box versus specifying the strength of a particular skill or experience each director indicates they possess using a 1,2 or 3 rating.) The interview process is therefore helpful on several fronts – it provides a deeper understanding of skills and experience that all the directors contribute, determines what the board is looking for in its next director, and creates alignment amongst the board members around the candidate profile.
Before finalizing the candidate profile, we typically review five to ten candidate ideas with our client to get their feedback and confirm we are in agreement. Sometimes adjustments are made after the client has the opportunity to see how the profile on paper materializes in viable candidates. The goal being to create a profile that is both on target and realistic. So, when clients commit to undertaking our candidate profile development process, it almost always leads to a more successful outcome.
As the leader of RSR’s Board Practice for almost two decades, I am proud of our track record in assisting a wide variety of clients – from start-ups and private companies to Fortune 50 corporations – in achieving their board recruiting objectives. We look forward to continuing to partner with existing and new clients and staying true to the principles that Russ established in the early days of our firm:
We continue to be a small firm with big results.
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Carter Burgess is head of the firm’s Board Recruiting practice and a senior member of the Board & CEO Services team. As practice leader, he focuses on director searches, the build-out of entire boards, comprehensive board composition analyses, multi-year succession planning strategies, and board performance assessments for companies in a broad array of industries.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity-backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare.
‘Tis the season for public companies to approach prospective director candidates about joining their boards at next year’s annual meetings. Over the past several years, companies have done a good job at identifying what board member capabilities they need to address the challenges they foresee ahead. The constructive tension and pressure from stakeholder capitalism has made sure boards prioritize diversifying their composition and expertise. But like sports teams that try to build a team around a collection of star talent, boards are only as strong as their culture.
From our 30 years of working with Fortune 10 to pre-IPO boards, their effectiveness is predicated on how—and how well—their board leaders lead. The best can harness the individual talents of their fellow directors to create the necessary decision-making aperture and constructive tension that allows for the best possible decisions. While admittedly there are individuals who have the unique and innate ability to lead other leaders, many of the most impactful board and committee chairs have developed their approach through hard work, agility, accessibility, courage, humility, and integrity.
As corporate boards continue to evaluate and add new directors, it is important for nominating committees to prioritize how candidates learn, adapt, and overcome as much as focusing on their past accomplishments. From our recent survey of public company directors, we highlight the best practices of great board leaders. We hope this will serve as a guidepost to build and enhance your own boardroom culture.
1. Establishing a Culture of Trust and Embracing Diversity of Viewpoints: The most impactful and revered board members can foster a board culture where trust and constructive discourse are paramount. This involves creating an environment where diverse opinions are valued and where challenging discussions can occur without fear of retribution. It’s about harnessing the collective wisdom of the board to make the best decisions possible. In today’s globalized business environment, embracing diversity of thought is not just a moral imperative but a strategic one.
2. Engaging Deeply in Strategy and Providing an ‘Outside View’: Successful boards are deeply engaged in various aspects such as strategy, digital integration, M&A, risk management, talent development, IT, and marketing. They contribute significantly by providing an ‘outside view’ to strategy and challenging the strategic alternatives presented by management. This requires directors to offer guidance and constructive feedback, ensuring that the company’s strategic direction benefits from diverse perspectives. This is only possible if board members are avid and continuous learners who can connect the lessons of the past with the current trends and issues facing companies today.
3. Objectivity and Big-Picture Mindset: A director must be objective and possess a big-picture mindset. It’s essential for board members to be future-ready and have the courage and decisiveness to make high-quality decisions on pressing strategic issues. A great director steers the board’s attention to these critical strategic issues and potential risks, balancing short-term and long-term perspectives.
The role of a director as a leader on the board is multi-dimensional and requires a blend of strategic insight, objective decision-making, courage, and the ability to foster a culture of trust and inclusivity. By embodying these qualities, directors can significantly contribute to the success and resilience of their organizations, steering them towards a sustainable and prosperous future. Boards looking to enhance their effectiveness would do well to cultivate these traits or prioritize them during the selection process, ensuring their directors are equipped to navigate the complex and ever-changing landscape of our business world.
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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity-backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
Annual Award Named After Russell S. Reynolds, Jr.
Greenwich, CT, June 8, 2023 – RSR Partners, a leading board and executive search firm, announced today that it has established the Russell S. Reynolds, Jr. Chair of the Year Award. The award will annually recognize the Chair of a public company’s Board of Directors that has successfully led the board through significant business or governance challenges. The award celebrates the legacy of Russell S. Reynolds, Jr. (“Russ”), who has spent more than 50 years advising boards and CEOs on leadership and governance.
“I am honored that this award will become an annual way of recognizing exceptional board leadership,” said Russ. “The real trick in selecting great board leaders is not only focusing on their experience and specific skill sets, but on whether they have the foresight, curiosity, character, and courage to lead.”
The winner of the award will be chosen by an independent committee comprised of renowned experts in the areas of strategy, finance, strategic communications, shareholder activism defense, investment management, human capital consulting, and corporate governance. The committee includes:
“Russ has observed how highly effective boards and CEOs operate during their most seminal moments,” stated Brett Stephens, Chief Executive Officer of RSR Partners. “There is no better way to honor Russ’ innate talent for identifying and evaluating leaders than with an award in his name that recognizes the incredible impact a Chair can have on an organization’s leadership and long-term success.”
Public company directors will be invited to submit their recommendations beginning June 8th. Any Chair of a board of directors at a U.S. public company with revenue or market cap greater than $1 billion may be nominated. The award winner will have successfully led the board and executive team through a significant business or corporate governance challenge. The inaugural winner will be announced in October at RSR Partners’ Annual Directors Dinner in New York City. Information about the award can be found at: www.chairoftheyearaward.com.
About Russell S. Reynolds, Jr.
Russell S. Reynolds, Jr. (“Russ”) is an American business executive, author, and founder of two of the search industry’s most prominent firms. Considered one of the pioneers of today’s executive search and board recruiting profession, Russ has counseled the boards and CEOs of many of the world’s leading companies over the past 50 years. In 1969, he founded Russell Reynolds Associates, which soon became one of the world’s leading international executive recruiting firms. Russ sold his interest in the firm in 1993. In 1994, Russ founded the Directorship Group (later named RSR Partners) where he served as Founder and Chairman until 2022.
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Contacts
Lindsay Griesmeyer
+1 (203) 618-7076
media@rsrpartners.com
A continual challenge we have helped our clients address over the years is how best to populate boards with diverse directors. In fact, 86% of all of our board placements over the past two years have either been gender or ethnically diverse. Data shows that diverse boards with the right combination of relevant skills and experience outperform more homogenous ones. As such, boards often overlay their diversity objectives on top of the more traditional objectives, such as requiring that the director possess the relevant skills, experiences, perspectives, and judgment needed to be successful. Achieving all these objectives simultaneously can often prove difficult and is a short-term solution that, if not managed correctly, can have a devasting impact on board performance in the long-term. Instead, identifying and cultivating relationships with potential candidates that may not be ready to join a board in the immediate term, but have the potential to serve in several years, can increase a board’s ability to achieve these objectives, ensure culture, and remain viable for many years to come. Yet, it requires discipline and a commitment to a strategic, long-term vision.
Varying Viewpoints on Diversity
As a starting place, it is helpful for directors to ascertain what they should take into account when considering how to add diversity to their ranks. A common request from boards is to find the “best candidate,” which often means the candidate that checks all the boxes at the same time – diversity and the specific skills and experiences needed – even if there is a paucity of that candidate type in their target companies and industries. Boards can broaden their definition of diversity by considering and understanding the culture and effectiveness of the current board. In addition, diversity should also reflect the board’s customers, employees, and communities. Best practice is for boards to consider what the “best candidate” is right now and also give significant thought to what the “best candidate” is in the future – for the board and the organization. Perhaps one of the criteria that seems critical right now can be postponed until another board seat becomes available. Lastly, some directors harbor concerns that they won’t have a place under a more DEI-focused paradigm, especially those with socially advantaged identities. This can create additional hurdles, however, exploring the data that demonstrates that diversity of identity leads to diversity of thought, and in turn leads to productive discussions and better outcomes, can help expand viewpoints on the importance of diversity in the boardroom.
Board Diversity and Results
According to ISS, there has been continued improvement in racial and ethnic board diversity. Approximately 86% of Russell 3000 Index companies, excluding the S&P 500, and 99% of S&P 500 companies have at least one racially/ethnically diverse board member. Additionally, nearly all industry sectors showed increased racial/ethnic board diversity year-over-year.
A new study from KPMG specifically referencing African Americans (AA) on boards states while they are still underrepresented in the boardrooms of public Fortune 1000 companies, there has been a significant increase in the proportion of these companies with at least one AA in the boardroom. Just over three-quarters (76%) of the companies studied had at least one AA director as of September 2022, compared to only 61% in 2020. However, it is still uncommon for public F1000 companies to have multiple AA directors; less than a quarter (22%) of these companies had more than one AA serving on their board. Larger companies are likely to have more AA directors than smaller companies. For the first time, all of the largest US public companies on the F100 list have at least one AA director. In fact, nearly one in ten (9%) of these companies have three or more AA on the board.
Age diversity is another factor to consider. In 2021, BoardReady released a report showing companies whose median director age was 55 or less had 10.1% YoY revenue growth compared to companies whose median director age was 65 or more which had -7.7% YoY revenue growth. That same report showed companies with over 30% of board seats held by women outperformed their less gender-diverse counterparts in 11 out of the top 15 S&P500 sectors. In addition, companies should look at geographic diversity as well as global experience.
2023 Diversity Voting Policies
ISS and Glass Lewis will generally recommend a vote against the nominating committee chair unless the following guidelines are met:
Universal Proxy Card
With the UPC, shareholders will have a greater say on the board’s composition as they can more readily compare the board’s nominees with the activist slate and focus on existing director performance, skills, experience, and diversity gaps. See this link to an RSR article on the UPC.
Succession Planning Process
There are multiple ways to address a lack of diversity in the boardroom, but all of them require continuous attention – a board should not stop seeking diversity once they have achieved their immediate “target.” Ideally, boards should seek to surpass the minimum requirement and help set the stage for the future, both within their own organization and to be a leader in the industry. Some possible approaches to improve boardroom diversity include:
How RSR Can Help with Director Searches
Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We continue to complete diversity assignments for a wide variety of companies, from small private family companies to Fortune 500s. Again, in 2021 and 2022, 86% of our board placements were either gender and/or ethnically diverse. We are proud to play a role in this important imperative, and excited for our clients who are making progress in diversity.
Our team leverages RSR Partners’ renowned experience in corporate governance with our industry and human capital consulting expertise to locate the best candidates. RSR Partners can assist your board with:
We would love to hear your perspective on the evolution of board diversity and assist you in achieving your board’s diversity goals.
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Greg Lau leads RSR’s Board Advisory practice, Carter Burgess leads the Board Recruiting practice, and Eric Douglas Keene is a Managing Director in the firm’s Board & CEO Services practice at RSR Partners.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
This article was originally published on LinkedIn here.
Over the past 30 years of working closely with public company boards and CEOs, we’ve had a front row seat on the debate of whether to keep the Chair and CEO roles separate or combine them. While shareholder proposals advocating the split are common (especially when CEO transition, underperformance, misalignment, or crisis occurs), US public companies have been allowed some freedom to choose what board leadership model works best for them. However, since 2020, we have seen a subtle but meaningful change in the power and influence of the Independent Chair that is different than the past several governance cycles.
The role of a public company CEO has become increasingly complex as societal issues now fall on management’s doorstep. In many cases, the role and responsibilities of the Independent Chair has increased to help the CEO and the board to confront the range of stakeholder concerns. However, much is predicated on the chemistry and dynamic between the CEO and Chair and whether this change is a positive and productive shift. Countless articles have been written about what makes an effective Independent Chair. But at the end of the day, the formal and nuanced definition of the Chair and CEO roles and relationship between them is at the core of success and failure.
It is not a stretch for the outside world to imagine that when a CEO is not able to also assume the role of Chair (as it is easier for them to control the agenda), they would want to have an outsized vote to help select who would become the new Chair. Depending upon how the board views the CEO, they will either amplify or minimize the CEOs voice on that decision. At the end of the day, all stakeholders should seek to have a dynamic whereby the Chair is an adviser, a coach and supporter of the CEO but also provides constructive tension and accountability that pushes the CEO and management team to deliver on their strategic plan. As a result, the Independent Chair needs strong situational awareness to understand when to use their influence vs. authority.
When digging into recent governance data on the 1000 most valuable US public companies, some statistics caught our attention this week:
During the business reset and inflection the past few years, half of the Independent Chairman positions turned over at the 1000 most valuable US public companies. As we saw firsthand with many of our clients, most of these boards had more than one potential Director who could serve as the new Chair. During previous cycles, it seemed more politically obvious who was the right person for the role. What has materially changed today is the amount of time and deliberation it takes to pick who should be Chair and the impact it will have on the CEO and its various stakeholders. ISS and Glass Lewis have recognized the value and new work requirements of the Independent Chair by counting it as 2 outside boards instead of 1 when considering over boarding. While I have more than a few differences of opinion with the proxy advisors. In this case, I feel they appropriately value their importance and responsibilities.
The impact a great Independent Chair has on the board, management, and the company is not entirely visible or understood by the viewing public. But during a company’s most challenging and seminal moments, you will get peek behind the curtain.
We anticipate in the coming months helping shine a brighter spotlight on those Independent Chairs who have helped their companies get one step closer to their aspirational goals. In the meantime, please don’t hesitate to reach out to our team if you want to share or acknowledge the impact your Chair has had on your organization.
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Brett Stephens is the CEO of RSR Partners and helps lead Board & CEO Services at RSR Partners.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
This article was originally published by Corporate Board Member.
What first-time candidates need to know about the board recruiting process.
Over the last year, corporations have made tremendous efforts to diversify the composition and enhance the capabilities of their boards. As board recruiting strategies evolved to identify diverse and qualified talent, an increasing number of executives were exposed to the board recruiting process for the first time. In fact, 35% of new directors in the S&P 500 and 25% of new directors in the Russell 3,000 were first-time directors.
Board search firms like ours are now often coaching executives through the recruiting process since so many are unaware of the plethora of machinations and nuances involved at each step. There are certain actions that should be taken by the candidate during each step of the board recruiting process, from the moment a prospective candidate is notified of a board’s interest, through the interview process, and when a formal invitation to join a board is extended. We have witnessed many missteps due to unfamiliarity with the process and mistaken assumptions, which can impact a candidate’s credibility.
We’ve compiled our best advice into this roadmap to help first-time candidates navigate the board recruiting process to increase chances of success. If you are an aspiring public company director and have never been recruited to a board, this roadmap is for you.
#1: The Success Profile
Companies in the Fortune 1,000 generally retain a board search firm when they need to add a new director to their board. The reasons for recruiting a new director can vary. There may be an upcoming retirement, an unforeseen departure, the need to add specific experience or expertise, or a need to increase diversity.
In our experience, the board has a clear understanding of what specific skills and experience gaps it needs to address most of the time. However, sometimes the search firm will work closely with the chairperson, CEO, lead director, and chair of the nominating and governance committee to facilitate stakeholder feedback meetings to gather input on the ideal success profile. In many instances, the CHRO and even the General Counsel can play an important role, providing input, guidance, and direction. A board typically puts together a search committee of these key stakeholders.
Once the board search committee has agreed on the ideal skill matrix and professional and personal characteristics of potential candidates, the search firm develops an initial list of potential candidate ideas. The list can be quite extensive. Over the course of several weeks, and sometimes months, the board and the search firm will narrow down and prioritize the top candidates. This initial number can range anywhere from two to fifteen individuals for each open board seat. The search firm will then be authorized to approach those select prioritized candidates regarding the specific board opportunity.
#2: Evaluating Potential Opportunities
When a search firm first reaches out to you about a specific board opportunity, you should be aware that the firm and the board have already conducted an extensive amount of research, due diligence, and third party referencing on your potential candidacy. Unlike the executive search process, the initial outreach is not a learning session about your career highlights and aspirations. Instead, the conversation is intended to provide you with as much context on the opportunity, the company, and the key constituents involved, to determine if you are interested in considering this specific opportunity.
If you are interested in the opportunity, you must first clarify whether you are allowed to sit on an outside company board. It’s critical that you know this information upfront. Unlike executive search, it is not necessary to keep a board opportunity confidential from your company. Oftentimes a company will have a policy on whether employees can serve on boards. A policy will also limit the type of company boards executives can sit on, especially if the board or if members of the board present a conflict of interest (for example, you will be barred from sitting on the board of a competitor and significant supplier). Most policies dictate that sitting executives are only allowed to sit on one board—so remember that if you agree to serve on a board, you may not be able to entertain another board opportunity until you rotate off or retire from your executive role. Many companies also have a process to have a board opportunity approved. We have also encountered situations when a company’s strategy has impeded a candidate’s ability to serve on a board. For example, if the company will be going through a restructuring or a merger, an executive who will play a significant role in the execution of the strategy may not be given approval to sit on an outside board for capacity and optical reasons.
Second, while this may seem premature, you will need to confirm whether the board meeting dates conflict with your company’s board meeting dates or other significant company meetings. While schedule conflicts are easy to determine, board candidates sometimes leave this step towards the end of the process which can lead to unexpected and unsuccessful outcomes. When evaluating any board opportunity, it is critical for you to do this step before moving forward.
If you pass these first two hurdles, you should then ask yourself the following questions:
If the answer to any of these questions is not in alignment with you pursuing this opportunity, you should let the search firm know within seven days. It is critical to be honest about these questions as early in the process as possible. We have seen candidates who are aware that the answer to one of these questions might pose a problem but continue to move forward with the process anyway. They mistakenly believe that exploring the opportunity will allow them to learn without commitment, enhance their candidacy for other opportunities, and extend their network and relationships. However, boards do not like being turned down during the final stages of the search process for any of the above reasons. Your candidacy likely has an impact on the board’s broader recruiting strategy, or they may have slowed down attempts to attract other candidates to spend time with you. Being disrespectful to the board’s time can have unintended consequences and can affect your personal brand in the marketplace.
If you decide to pursue the board opportunity and you are confident in your answers to the above questions, you should take the necessary time to review your company’s policy on serving on an outside board and perform as much due diligence as possible about the company, the CEO, and the board. This includes:
#3: Interviewing with the Board
Once you have agreed to move towards formal interviewing, and generally following an extensive discussion or interview with the search firm, you will be invited to an initial meeting with the designated board search committee lead. At this time, you should have received preliminary approval from your company to consider and potentially join this specific board. After your initial meeting, there will be immediate feedback from the board search committee to the search firm about your potential candidacy and fit.
We are often asked how boards evaluate prospective candidates. While each situation is unique, we have found there are three common themes that are addressed during the first few meetings:
Will you be able to successfully transition from being an executive to a board member? As there are many different types of leadership styles that can be effective as an executive, some can be obstacles when becoming an effective director. No matter your leadership and communication styles, you need to understand and demonstrate during your interview the skills and perspective needed to be an effective director versus an executive. As a board member, you are expected to provide guidance and advice; not to require the details that an operator of the company would need.
Will you be an effective listener? As a director, you will need to listen to the perspectives of your fellow board members and the management team, but also from all your stakeholders. The most effective directors are those who can distill complicated issues into profound brevity and can help unify others to make decisions together. You will need to be willing to learn from the diverse perspectives of others and allow them to change and reshape your thinking. We have helped boards recruit talent for more than 30 years, and we can assure you that the most ineffective directors are those whose default communication approach is to talk instead of listen.
Will you be able to ask good questions? As a director, the ability to ask questions that provide enhanced insights to make better group decisions is the key to having an impact in the boardroom. Questioning is a uniquely powerful tool for unlocking value in corporations as its fosters more-effective interactions, strengthens trust and chemistry, and better aligns the board and management team on the most critical issues. How you approach your conversations with the Board Search Committee will provide them insight on how you would interact as a director. For each open board seat, it is common practice that only 2–3 candidates will be invited to formally interview. Often, the board has a variety of skill and experience needs to be filled, and each potential candidate will bring something different and unique to the table. Future committee membership and board leadership, as well as factors such as ESG needs (Environmental/Social/Governance) and diversity can play a role in the assessment of the candidate’s fit. If you have been asked to interview, you should consider it a huge compliment and a testament to what board members know or have heard about you.
As you progress through the process, you will also meet the chair, CEO, lead director (where applicable), and most likely the rest of the nominating and governance committee. In many cases, it will be appropriate for you to also meet with a specific member of the management team, depending upon the committees on which you are potentially slotted to serve. You should prepare to meet 5–7 different individuals during the process and expect the interview stage to last 2–3 months.
Once the board has decided they would like to potentially invite you to join the board, several key next steps will take place:
#4: Receiving and Accepting an Invitation
Assuming a positive outcome to the steps above, the nominating and governance committee will recommend that you are formally offered a seat on their board. Once the full board votes on that motion, the chair or the chair of the nominating and governance committee will call you to formally confirm your selection and invite you to join the board as well as attend the next board meeting. It is routine for a candidate to immediately accept the offer unless the candidate was obligated by his or her company to reconfirm their approval before formally accepting the offer.
You should then inquire about the timing of the press release and, if not, the publication date for the annual proxy statement. It is critically important that your current company, CEO, and board are comfortable with the timing. Once the announcement of your board appointment becomes public, you should take the time to personally call everyone on the board whom you met and thank them for the help and guidance they provided to you throughout the process.
Corporate boardrooms continue to be reshaped for the new future ahead of them. It is more critical than ever to get the right board members at the right time for a company to optimize its impact on the world around them. Hopefully pulling back the curtains on the mystique of the board search process will help improve the outcomes and experience for boardrooms and candidates alike.
About Our Board & CEO Services Practice
Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:
Board Services
CEO Services
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
This article was originally published by Corporate Board Member.
Boards that are built to last evolve with the changing needs of their companies and leadership teams. Consider these four guideposts.
The third quarter of 2021 was the most active Q3 for global IPOs in 20 years, according to EY. The IPO rebound, popularity of SPACs and continued surge of private equity and venture capital activity has put tremendous pressure on boards to be ready for being a public company. As a result, many lessons and themes have emerged that serve as beacons and sirens for all boards to consider.
Over the course of our 30 years advising boards and CEOs, what clearly stands out is that the boards that are built to last evolve with the changing needs of their companies and leadership teams. In addition, considering the challenges and opportunities presented by ESG and DE&I initiatives, the stakes for boards to appropriately address stakeholders and have a meaningful impact are at a generational precipice. Accordingly, we are sharing our insider’s perspective on the four most important guideposts your company or organization should think about when building or enhancing your board.
#1: Board Architecture
In the real estate industry, there is a saying that, “the taller the building is, the stronger the foundation needs to be.” The same applies to creating boards of what we call “forever businesses.” As with the previous inflection points in corporate governance best practices, the past two years have reshaped the thinking around how to build a board that is strong enough to confront inevitable headwinds. Every board must start or revisit what their ideal board framework is to successfully execute the company’s strategy in today’s environment and in the next 10+ years.
1. Vision, Purpose, Strategy: All boards must approach their governance framework by understanding the journey they will need to take to reach their aspirational future state.
2. Stakeholder Interests Analysis (SIA): A new but now critical component for all owners and boards is to understand the ecosystem of stakeholders who will have influence or direct impact on the organization.
3. Capabilities: Boards should identify the skills and experiences directors needs to possess to help govern the company and advise management through any challenge.
4. Committee Structure: The number, types, and charters needed for each committee to effectively govern should be carefully crafted. Boards are moving past the standard three committees to include separate risk and finance committees as well as climate, digital and cyber which will require new competencies on the board.
5. Board Size: The number of directors, including independent versus management, should be determined in advance of building a board.
6. Governance Guidelines and By-laws: These should be developed early and include annual director versus classified elections and governance best practices.
#2: Board Leadership
Once the board architecture is finalized, the most critical and important decision is determining the leadership structure of the board, the characteristics of each key position, and who will serve in those roles. Especially for companies preparing for an IPO, the chair of the board, lead director and committee chairs will heavily influence the capabilities, effectiveness and culture of the new board.
1. Board Chair: Every organization has a unique journey ahead of them. Whether it is appropriate to have an independent board chair versus a combined chair and CEO is situationally dependent. Often, the capabilities and experience of the CEO must be overlayed against the needs of shareholders and other stakeholder groups. The board chair sets the tone and tenor for almost all significant forthcoming decisions.
2. Lead Director: If the board determines the best board leadership structure for several years is a combined chair and CEO role, it is imperative to clearly define and empower the duties of the lead director to help carry the workload of the chair and CEO as well as serve as an effective counterbalance to the internal power dynamic.
3. Committee Chairs: As most of the heavy lifting is handled by committees, it is critical for those chairs to have previous committee experience, the necessary capacity and the relevant capabilities to serve. ESG, DE&I and other significant compliance and oversight issues are landing on the doorsteps of the committee chairs, and it is their responsibility to help move the board and their fellow directors forward on addressing these issues.
#3: Board Leadership Succession
One of the most important but often overlooked aspects of building a board is Board Succession Planning. Many boards will prioritize and focus their time and attention on adding directors who can address specific capability gaps when the opportunity arises. This is because succession tends to become apparent when a retirement age or term limit is reached. During the last two years, we have seen a material weakness in the preparedness of boards to have actionable solutions available to address unexpected retirements, especially with committee leadership positions. Some boards approach succession planning like CEO succession planning. However, unlike CEO succession planning when a small number of executives are being groomed and developed for the position, more optionality is required for board succession planning given the demonstrably larger number of directors. All boards need to have a short-term and medium-term succession plan and roadmap for all the key leadership positions that is reviewed and confirmed annually.
1. Develop Director Succession Roadmap: An anticipated and emergency plan should be completed annually for each board leadership position. Ideally, the plan should consider how to fill the position if the need arises immediately, in one year, three years, five years, etc. Boards must pay close attention to the skills, experiences, and behaviors they desire in their leaders.
2. Refreshment: Build your roadmap with the intention that committee chairs will rotate every five years.
3. Diverse Board Leadership Equally Important: Similar to the board as a whole, leadership positions on the board must exemplify diversity as well. This will signal the board’s commitment to diversity as well as help enhance board culture.
4. Board Evaluations: The assessments of the individuals’ performance in these leadership positions must be part of the annual board evaluations. Expectations for the positions are rapidly evolving.
#4: Board Recruiting
The board recruiting landscape is currently incredibly active and competitive. There continues to be an urgency to recruit new directors who can add diversity of thought, experience, expertise, age, ethnicity, gender and/or geography. Whether your board is preparing to go public or is a public company board that just needs to address or enhance a specific capability gap, follow these best practices that we have gathered from advising a wide spectrum of clients on board recruiting.
1. Failing to plan is planning to fail. While focusing on addressing your most pressing gaps on the board, only add a director who has succession potential for one of the board leadership positions. If the director does not have that potential, it will present significant issues down the road.
2. Start yesterday. Many boards wait to recruit until it is definitively known that there will be an “open seat.” What we have learned from working with some of the most effective and well-run boards is they develop a candidate pipeline six months before the need is anticipated. In many cases, boards start sowing seeds with high priority candidates 12 – 24 months in advance.
3. Add what you need—not what you lost. When directors retire or leave a board where they played a significant role, the board needs to avoid the temptation to try to replace the voice and perspective that was lost.
4. Prioritize talent over title. Boards who are willing to focus less on a candidate’s title and more on specific expertise have a better chance of identifying candidates who also have the necessary knowledge to have a real impact and improve the effectiveness of the board. Serving on a board requires someone not only with a specific capability but also broad general management experience. Candidates with previous board experience typically will have an impact immediately and beyond their specific area of expertise. Additionally, it is important to recognize that titling structures differ from company to company and industry to industry. A CEO may bring cachet to the board, but many non-CEOs bring further valuable contributions.
The value of a properly functioning board cannot be underestimated. Your board plays a crucial role in the success of your business. With growing shareholder activism and stakeholder pressures, better corporate governance can only be achieved through a successful working relationship between your board and management as well as positive social and cultural board dynamics and interaction. Taking the necessary time and effort to build or enhance your board is time wisely spent.
About Our Board & CEO Services Practice
Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:
Board Services
CEO Services
This article was originally published by Savoy Magazine.
How access delivers results
Successfully recruiting diversity to the boardroom requires a customized search strategy that boutique search firms are uniquely positioned to offer. In my decades advising executives on their most important talent needs, I can attest to the enhanced value diversity brings to the boardroom dynamic. Nevertheless, organizations still struggle to get this right – despite best intentions – and the consequences of inadequate results can have long-lasting impacts on a board’s culture and ability to influence and effectuate.
The reality is that high demand for diversity talent requires boards to partner with a search firm that can genuinely represent them in a very crowded market. Understanding a few key decision points can help those responsible for board composition make informed decisions regarding which firm to select.
What constitutes a qualified candidate is inherently debatable, but this should be the first point addressed with a search firm. Traditionally, board candidates are current or retired CEOs, CFOs, GCs, and major business/division leaders on executive leadership teams. This is a safe, proven path. However, not only is it impassable for most candidates given the paucity of openings, but it perpetuates diversity disparities – a well-explored topic.
An alternative approach is to partner with a search firm to build a board succession plan based on an assessment of competencies. This allows boards to anticipate their makeup and cultivate talent to supplant needs while simultaneously solving for diversity. Succession planning requires a deep dive into the board, which means the firm must possess capacity, discipline, and diplomacy. This process fosters a trusted relationship between the board and firm, and boutique firms purposefully limit the number of their engagements to ensure this high level of accountability and client service.
Since pipelining talent alone is rarely sufficient to achieve diversity, search firms that gain a board’s trust to explore untraditional profiles can expediate the process. Executives with the expertise and perspective that can be additive, such as human resources, ESG, information technology or digital experts, commercial, and purchasing/supply chain leaders, are often overlooked as qualified candidates. Rarely will the “usual suspects” bring distinctiveness in these areas. Boards should also leverage the practical knowledge of indirect reports to the CEO, such as SVPs at large-cap companies, especially for mid or small-cap opportunities.
Board capacity, conflicts of interest, and schedules can dramatically reduce a slate. Untapped, qualified diverse candidates are becoming more sought-after. Therefore, the more boards a search firm is committed to at one time, especially when engaged to search for similar profiles, the more each client must analyze where they stand in the firm’s pecking-order. Boutique firms are unlikely to be searching for similar candidate profiles at the same time and can present clients with unrestricted access to a slate.
Finally, how a search firm approaches the candidate and characterizes the personality of the board can greatly impact the candidate’s interest. Without a deep understanding of the board’s intrinsic nature and strategy to enhance its expertise and perspective, missteps happen. Approaching high-impact candidates is a combination of art and science. Recruiters should develop an extensive appreciation of the candidates’ experience, expertise, character, and interests and articulate clearly how the candidate aligns with the profile and impacts the board. Boutique firms that put candidate care high on their value statement and possess the bandwidth and emotional intelligence to cultivate candidates will be more convincing.
In short, the bureaucracy and oversight that can thwart the success of recruiting diversity to a board are often absent in boutique search firms. On a topic this important, hold your search firm to a higher standard.
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Eric Douglas Keene is a Managing Director in the Board & CEO Services practice at RSR Partners and the founder of Keene Advisory Group. He has extensive experience recruiting a diverse range of senior executives to C-Suite level roles and to boards of directors.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
