Businesses need to better understand and reflect customers’ wishes and avoid groupthink, according to a new report which outlines five practical steps to achieve a more diverse board.
The report, Time for Change: Recruiting for Europe’s Boardrooms, is launched by Ernst & Young and aims to help businesses increase representation of women on boards and achieve business growth.
Based on interviews with board members, headhunters, business leaders and advocates of corporate governance throughout Europe, it exposes current barriers and highlights the need for fresh, innovative thinking in the process of making appointments.
Five practical steps are identified in the report to improve boardroom recruitment, covering structure, process, criteria for appointment to board, succession and support.
On structure, it says companies need to realign the composition of their board with the evolving needs of the business, looking at issues such as numbers and profile of non-executive directors, duration of service and sector-specific needs. They should consider rotating non-executive directors regularly and appointing individuals with a wider range of skills because this can help open up the board’s approach to managing changes effectively and sharpen its awareness of future developments.
On process, the report recommends companies investigate ways of using headhunters more effectively, such as rotating recruitment firms and separating evaluation from search. They should also consider hiring headhunters who represent the candidate, rather than the client, and advertise for boardroom posts, or use the growing number of databases to identify candidates who could bring new perspectives to the board.
On criteria, it advises abandoning the requirement that candidates “must have experience of a PLC board” in order to have a larger talent pool to draw from. Instead, it suggests widening the search to include those with analytical skills, independence of thinking and a capacity to support as well as challenge.
On succession, the report suggests making a succession plan and keeping it transparent and adds that, in order to create a high-quality pipeline of talent, companies should provide training for would-be non-executive directors by placing them on committees just below board level.
Finally, on support, it suggests companies consider large cross-border businesses to collaborate in the creation of a “board secretariat” to provide support for all non-executive directors, in terms of resources as well as opportunities. Such an organisation, it says, could potentially provide training for those who aspire to be non-executive directors, with their employers recommending them for participation in suitable courses. It states: “This is a radical idea, and one that would undoubtedly prove challenging to implement – but it may be one whose time has come.”
Julie Teigland, EY’s EMEIA Accounts Leader, says: “Organisations need to fully realise the benefits that come from engaging a more diverse range of individuals at the top. Change is moving at a sluggish pace at best throughout Europe. We hope this report goes a long way to stimulate debate further and help organisations ensure best representation and composition so they achieve competitive advantage.
“While gender is far from the only issue that needs to be considered, there is a widespread tendency to view boardroom appointments as a “closed shop,” where only candidates who have already served on boards are considered and personal networks are the primary tool used in recruitment. These factors work against efforts to broaden the base of experience and skills on company boards in order to equip them to meet the complex challenges of the modern business world.”