Corporate Board of Directors: It will not be easy ticking off diversity mandates

Business owners and top executives usually decide who they want to sit on the board. At startups, the board is a small group of founders and funders. Since the owners are wrestling with market and liquidity issues, it has been hard to fault this structure much.

Large cap corporations receive much more attention for board makeup, and traditionally included bankers, the company promoters, retired corporate and government officials and those with star-power names. They tended to be grey-haired men, but as investor activism advanced, corporations at least tried to convince shareholders that these worthies were the best and brightest.

A couple of decades ago, the annual reports assured shareholders that their boards sought such qualities as “commitment, teamwork and integrity”. Such merit-badge assets made for good IR, but did nothing to target strategic skills.

Governance failures, tighter conflict rules, court decisions, director liability, and investor activism are tipping the balance toward targeted boardroom recruiting. For the first time, we are seeing corporate boards laying out talent profiles the board needs, and then seeking them, rather than rationalizing the folks already pre-chosen.

What's in demand today for getting into boards?

Digital and tech skills have been a board need for years, but the scary speed with which big data, ransomware, digital currencies and virtual meetings have advanced has made demand for this expertise in the boardroom too urgent to ignore.

Even private and family businesses feel self-conscious now with an all-male, older board. Search firms tell us that most board headhunting orders now begin with “we’re looking for a woman who...”, or at least in the US. Nasdaq has pushed the mandate even further, requiring boards to include not just gender and racial diversity. Will the UAE be far behind?

Board discussion today inevitably touches on environmental, social and governance issues, and investor and regulatory demands are exploding. A director with background and credibility here can help the board know where ESG trends are pointing.

Boards are less likely now to seek one tick-box ‘diversity’ or ‘tech’ prospect than someone who can blend several qualities. A minority exec with strong data security vitae not only covers several bases, but likely to make the board overall younger and more diverse.

Here are four ways the board interviewing process will change:

• The vetting and qualification process will grow far tighter. The grand old days of waving through someone the CEO likes will turn into something closer to a top employee hiring process, drilling down on skills, experience, and any disqualifiers that may be hidden away. Diversity will be a serious concern for boards, through regulatory mandates and investor pressure. That means some demographics that were boardroom shoo-ins before will have to wait.

• Though board and committee meetings have been more flexible and virtual since 2020, more boards are pushing to return to physical boardrooms. Scheduling and time commitments for board members are growing tighter. Exploding workloads make your ability to meet board time needs a potential deal-breaker. Candidate willingness to build in added emergency board sessions will be a big factor now.

• There will be some other board interview questions moving up in urgency. In our opinion, even non-diverse board candidates will be asked about their involvement when it comes to moving the needle at their companies. The other day, we heard one candidate saying, ‘That is an HR issue,’ which was the wrong answer, as far as the board was concerned.