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Challenges in Recruiting Independent Board Members. Andrea Redmond Russell Reynolds Associates. March 10, 2003. R USSELL R EYNOLDS A SSOCIATES. Current Situation. Regulatory changes Investor confidence in corporate governance is severely eroded and public disdain widespread

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slide1

Challenges in Recruiting

Independent Board Members

Andrea Redmond

Russell Reynolds Associates

March 10, 2003

RUSSELL REYNOLDS ASSOCIATES

slide2

Current Situation

  • Regulatory changes
  • Investor confidence in corporate governance is severely eroded and public disdain widespread
  • Economic challenges
  • General climate of uncertainty

RUSSELL REYNOLDS ASSOCIATES

slide3

The Changing Role of the Director

  • Time commitment is significantly rising
  • Complexity of the role is increasing
  • Greater shift from approving strategic and operational development to contributing to it
  • Director liability appears to be increasing
  • Honor/appeal of being a director is decreasing
  • Intolerance for inactive directors
  • Greater public scrutiny

RUSSELL REYNOLDS ASSOCIATES

slide4

The New Board Candidate

  • The traditional CEO
  • Financial experts
  • Turn-around or crisis management experience
  • International experience
  • Strategy expertise
  • Track record of operational excellence
  • Women & Minorities
  • OUT – professional directors, CMO, CTO, “new economy” CEO

RUSSELL REYNOLDS ASSOCIATES

slide5

Client Concerns

  • Analytical approach to director recruitment required
  • Candidates must have impeccable ethics
  • Candidates must have not only the time to for the directorship, but also a passion & enthusiasm for the role

RUSSELL REYNOLDS ASSOCIATES

slide6

Hurdles to Recruitment

  • Time restrictions
  • Limited CEO quality
  • Operating performance issues
  • Rising scrutiny of D&O insurance

RUSSELL REYNOLDS ASSOCIATES

slide7

Recruiting Strategies

  • Broaden the pool
    • Target senior operating officers such as presidents of global business units
    • Do not overlook the CEO of a smaller company
      • He/she could have come from a much larger business
      • He/she may have an impeccable track record
      • Be open to considering success wherever it is found
    • Look at women and minorities
      • Do not chase the obvious candidates along with everyone else

RUSSELL REYNOLDS ASSOCIATES

slide8

Recruiting Strategies

  • Directors are recruited most successfully when both the CEO and the Nominating Committee commit focused and prioritized attention to the search
    • Demonstrate the importance of the company’s governance to prospective directors through action
    • Do not let the search languish between board meetings

RUSSELL REYNOLDS ASSOCIATES

slide9

Comments on Other Trends

  • Director compensation
  • Lead Directors
  • Separate Chairman & CEO
  • Director evaluation
  • Audit Committee advisor
  • CEO succession planning
  • Executive compensation

RUSSELL REYNOLDS ASSOCIATES