The following post includes excerpts from articles authored by David Chun, Founder and CEO of Equilar, and Dan Marcec, Director of Content at Equilar, which were published in the 40th Anniversary issue of Directors & Boards. Learn more here.
The boardroom landscape has become much more complex, but the good news is that board members’ networks are much bigger than they realize. They may have just lost track of it—a concept that can be thought of as “board amnesia.”
Board amnesia is a simple idea. Traditionally, when it was time to add a new board member, the remaining directors would look around the table and ask each other, “who else do we know?” But think about it: A seasoned board member with a 50-year-long professional career undoubtedly has worked directly with dozens if not hundreds of qualified director candidates. At retirement time, it’s not surprising they might not be able to recall every one of the qualified individuals with whom they’ve connected over the years.
Over the past decade, the boardroom landscape has become much more complex. In conjunction, there have been increased calls for more diversity on boards to face those new experiences. And the old way of asking “who do you know?” simply won’t yield enough qualified candidates to meet the increased demands of today’s boardroom.
It’s amazing that technology has been applied everywhere across the business world except at the very top level of public companies. Boards now have the opportunity to leverage big data and social networking concepts to tap a much broader candidate pool and identify relationships to bring in board members that will help them drive shareholder value.
Luckily, curing board amnesia has never been easier, and here are three ways boards can get started.
It’s amazing that technology has been applied everywhere across the business world except at the very top level of public companies.
1. Change Your Perspective
Up until now, many boards that have fallen behind the diversity curve point to the fact that there are not enough qualified candidates available. An Equilar analysis conducted earlier this year in partnership with The U.S. 30% Club found evidence to the contrary—approximately four in five females currently serving as public company executives had never served on a board. If boards expand their view beyond who they know or have worked with before, there are significant opportunities to access a deeper pool of potential directors.
2. Disclose Your Progress
Gender is just one example of diversity. While the SEC has considered proposals that would require diversity disclosure, there’s nothing pointing to a forthcoming rule yet. By voluntarily disclosing this information, boards can paint a clearer picture to their shareholders and the general public, creating transparent and open dialogue with concerned parties.
According to Equilar data, a majority of S&P 500 companies—or 61.0%—disclosed that they “consider ethnic or racial diversity” when assessing the board or director candidates. However, disclosures of that type are often limited to boilerplate language. A much smaller number of S&P 500 companies disclosed the actual composition of their current board in terms of ethnicity or race—a total of 12.8%, or 64 companies.
3. Seek New Skills
As the corporate landscape continues to evolve, so have the skills required on the board of directors. As new considerations create greater risks, boards are cultivating an array of experience from a diverse set of directors to engender more comprehensive oversight.
New perspectives expand the board’s viewpoint on the broader landscape and add a range of voices bringing more depth and detail to boardroom decisions. Moreover, disclosing this information shows investors and other stakeholders that boards are taking new corporate risks seriously.
For more information on Equilar research and data analysis, please contact Dan Marcec, Director of Content & Communications at firstname.lastname@example.org.
Equilar BoardEdge features a one-of-a-kind search function that not only allows users to filter by name, company age, title, experience, location and gender, but also provides a social media-style connections map that shows how potential candidates and companies are tied to each other. The newly launched Equilar Diversity Network—a “registry of registries,” connecting candidates from various diversity organizations with boards—BoardEdge is the only recruitment tool available with this comprehensive network.