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:

1. A Trusted Partner and Coach
   Exceptional Chairs work closely with the CEO and the board, actively participating in strategic planning and monitoring business execution. They don’t just observe; they engage, offering guidance that aligns strategies with the company’s goals.
2. Focusing Time on Tough Strategic Issues
   Great Chairs steer the board’s attention toward complex challenges and risks, prioritizing the tough conversations that drive long-term value. Their leadership shines brightest when navigating uncertainty and inspiring excellence.
3. Master Communicator and Facilitator
   The ability to foster open dialogue and build consensus is key. Top Chairs don’t just facilitate meetings—they cultivate an environment where diverse viewpoints are encouraged, and every director feels heard. This leads to productive discussions and well-informed decisions.
4. Crisis Leadership
   Their strategic acumen, deep understanding of the business, and focus on shareholder value are crucial to guiding the company through turbulence. They remain a steady hand, ensuring that the board stays focused on what matters most.
5. Cultivating Trust and Embracing Diverse Perspectives
   The most revered Chairs create a culture of trust and inclusivity, where diverse opinions aren’t just welcomed—they’re expected. This culture allows the board to explore all angles, pushing past surface-level discussions to uncover the most innovative solutions.
6. Strategic Engagement and Providing an ‘Outside View’
   Great boards are deeply involved in strategy, often acting as a sounding board for management. They challenge the status quo, bringing an external perspective that sharpens strategic thinking. This proactive involvement ensures that the company’s direction benefits from a broader, more diverse set of insights.
7. Big-Picture Mindset and Objectivity
   Effective Chairs are forward-thinking, balancing short-term wins with long-term vision. They steer the board toward critical strategic issues and emerging risks, ensuring that decisions are grounded in a comprehensive understanding of the company’s future.

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.

# # #

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.

• Vision, Purpose, Strategy: Boards must align their governance framework with the company’s long-term vision.
• Stakeholder Interests Analysis (SIA): Understanding the influence and impact of various stakeholders is now essential for board members.
• Capabilities: It is crucial to identify the skills and experiences needed for directors to effectively govern and guide management.
• Committee Structure: Expanding beyond traditional committees, modern boards might include dedicated groups for risk, finance, climate, digital, or cybersecurity, which in turn demands new directors with this expertise.
• Board Size and Composition: Decisions about the number of directors and the balance between independent and executive members should be made early in the board’s formation.
• Governance Guidelines and By-laws: These should be established early to embed best practices and operational guidelines for board function.

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:

• Board Chair: Financial sponsored boards typically have the Chair position occupied by an individual connected to the lead ownership group. However, once a path to IPO is in sight, selecting the right Non-Executive or Executive Chairman is paramount to unlocking the full potential of the board and its impact on the company.  
• Committee Chairs: Once a Chairman is identified, selecting committee chairs with the necessary experience and capacity is vital for advancing board objectives and helping the company and board get ready for any pre- and post-IPO governance challenges.

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.

• Value Talent Over Titles: Prioritizing current capabilities over past titles often leads to more effective board compositions, with non-CEO members making substantial contributions.
• Focus on Needs, Not Replacements: It’s important to seek directors who add the needed capabilities for executing the strategy rather than trying to replicate any outgoing director’s contributions.
• Look to the Horizon: Boards need to balance the short term “open seats” on the board with their longer-term director succession needs. Any director added to the board must have the potential to take on additional leadership responsibilities in the future. This is especially true with smaller sized boards with less options for committee chair positions.

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.

# # #

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.

‘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.

# # #

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.

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:

• ISS
  • At least one racially/ethnically diverse director at Russell 3000 or S&P 1500 companies
  • At least one gender diverse director at all companies
• Glass Lewis
  • At least 30% gender diverse directors at all Russell 3000 companies
  • At least one director from an underrepresented community at Russell 1000 companies
  • Generally follow applicable state law mandates on board diversity, other than California, where such state law board composition requirements are currently being appealed

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:

• Creating a pipeline of future potential candidates (who are not ready to serve on a corporate board yet but meet the diversity and potential skills and experiences requirements), then strategizing how to develop a relationship with them and help them become “board ready.” One apporach is to have potential candidates serve on subsidiary or advisory boards to facilitate a mutual “getting to know you” period. This allows boards to better understand the potential candidates’ skills and experiences while providing them with the opportunity to gain insight on what it’s like to serve on a board.
• Advance planning of diversity additions well in advance of actual need; being strategic about not only diversity needs but balancing that with the skills and experiences needed to keep the board inclusive and effective.
• Viewing diversity in a diverse way – less about checking a particular box and more on truly equitable inclusion based on the relevant board’s particular business’ needs which, for instance, might reflect diverse customer and employee populations on the board.
• If a great diversity candidate is identified, but there is no vacancy on the board in the near-term, temporarily increase the number of directors until another director steps down from the board. This option is admittedly easier for larger companies.
• At every governance committee meeting, members should review the current list of prospective director candidates for any updates or actions required.

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:

• Board Leadership and Director Recruiting
• Director Succession Planning Board Evaluations and Effectiveness   
• CEO Succession Planning
• CEO Search and Selection
• Managing CEO Transitions and Onboarding

We would love to hear your perspective on the evolution of board diversity and assist you in achieving your board’s diversity goals. 

# # #

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.