Episodic to Continuous Board Recruitment

Today’s corporate boards wield tremendous influence, providing strategic oversight and guiding organizations through complex challenges. The nominating committee is the architect of the boardroom, responsible for building and sustaining a corporate board that is equipped to meet the organization’s strategic objectives by identifying, evaluating, and recommending candidates for board service.

This responsibility extends beyond simply filling empty seats; nominating committees must ensure the board remains dynamic, forward-looking, and aligned with the company’s values and needs. Composition plays a critical role in a board’s effectiveness. Unfortunately, most nominating committees still approach recruitment with a one-off task mindset, waiting until a vacancy arises before beginning the board recruitment process.

In addition to exploring the external forces re-shaping board composition, in this chapter, I set forth a five-point plan to help nominating committees transition their board recruitment process from episodic to continuous. Only by adapting this proactive approach can the nominating committee ensure it balances continuity with innovation while addressing gaps in skills, perspectives, and experiences.

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The outdated episodic model

Over the years, the nominating committee’s responsibilities have broadened beyond the occasional recommendation of an individual to fill an open board seat, to one in which they must ensure the board’s adherence to appropriate standards of good governance. Indeed, in an effort to reflect this expanded role, many corporations have changed the committee’s formal name to the “Nominating & Corporate Governance Committee” to reflect this expanded role. At its core, however, the primary responsibility of the committee remains the recruitment of new board members. As the committee’s role has evolved, so too must its approach to how it participates in board succession.

The outdated episodic model of board recruitment is event-driven. Specifically, it is most often characterized by the retirement, illness, or other unexpected departure of a sitting board member which subsequently causes the nominating committee to begin the search process for a replacement. In some instances, the committee will engage the services of an executive recruitment firm to identify and assess potential board candidates. Either way, the result is usually a short list of candidates from which the nominating committee makes a recommendation to the full board. It is a rather archaic process which is not designed to find the right candidate(s) who can best help the organization confront the challenges and opportunities it will continue to face in the years ahead. As Susan Angele, Senior Advisor, KPMG Board Leadership Center, recently told me, “We urge the nom/gov committee to hit the reset button on what directorship and director tenure should look like."

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External forces

Historically, the nominating committee has operated in a bit of a vacuum in terms of the board recruitment process. Today, however, there are external forces at play which are slowly pulling back the seal on that vacuum. The continued expansion of shareholder engagement, along with the growing influence of proxy advisory firms and astounding advancements in technology, are disrupting the traditional episodic model.

Shareholder activism

While there have always been activist investors—shareholders advocating for change(s) at a company—the modern-day activist investor (ex. Carl Icahn, Nelson Peltz, Bill Ackman, Dan Loeb, etc.) has increasingly turned to criticism of board composition in their campaign against a company. Buoyed by the adoption of the universal proxy card, which allows them to propose their own slate of board candidates, activists have increasingly chosen to employ this tactic of singling out members of an organization’s board for not having what they believe to be the appropriate credentials. The company is then forced into the uncomfortable position of having to publicly defend the qualifications of its board members. As the number of activist campaigns continue to increase, more and more companies are likely to be placed in this position in the years ahead.

Growing influence of proxy advisory firms

While certainly not as overt as the efforts of activist investors, proxy advisory firms exert substantial influence over the composition of today’s boardrooms. Institutional Shareholder Services (ISS) and Glass Lewis have created a duopoly of selling their recommendations to institutional investors (i.e. CalPERS, BlackRock, Vanguard, State Street, etc.) on how to vote on thousands of proxy proposals each year, including board candidates. Although approval of a board’s slate of candidates has traditionally been a pro-forma exercise, activist campaigns have caused ISS and Glass Lewis to be much more vocal in terms of whether or not they support board candidates.

Advancements in technology

It is impossible to deny that we are in an era of breakneck developments in technology, particularly with the widespread adoption of artificial intelligence (AI). At a recent conference I had the good fortune to hear a talk from Amy Wilkinson, a highly regarded technology expert and member of the faculty at Stanford University Graduate School of Business. Wilkinson placed the impact of AI in context when she emphasized that “AI is bigger than the creation of the printing press.” The reality is that every single industry will be disrupted by AI in the years to come, and to compete in such an environment, boards are going to need individuals who, at the very least, understand the opportunities and risks associated with this technology.

These external forces have two significant implications for the nominating committee. First, they are placing the work of the committee under increasing scrutiny. And second, they are amplifying the competition to recruit highly qualified talent for the boardroom. This is why it is necessary to adopt a forward-looking approach to board recruitment which will help the board remain agile and well-equipped to navigate a rapidly changing business landscape and ensure that it is always prepared to address the board’s current and future needs.

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A 5-point plan for a continuous approach to board recruitment

Now that we know why today’s nominating committee must transition from the episodic to the continuous board recruitment model, how does a nominating committee pursue that objective? The following 5-point plan is designed to help nominating committees adopt the continuous model of board recruitment.

1. Maintain a dynamic board skills matrix

A board skills matrix has unfortunately become a pro-forma inclusion in the company’s annual proxy statement instead of a living document regularly updated to reflect evolving needs. When used effectively, the matrix serves as both a diagnostic tool and a roadmap for recruitment by helping the nominating committee identify gaps in the board’s composition, prioritize key attributes for future candidates, and align recruitment efforts with the organization’s strategic objectives.

As a starting point, it is imperative that the nominating committee use external evaluations to gain objective insight into where the board can improve its composition and update its matrix accordingly. Frank Kurre, a Managing Director at Protiviti, believes effective board evaluations are “essential for spotlighting gaps in skills, knowledge and perspectives in the boardroom and assessing board performance and composition. They identify opportunities to improve boardroom culture and dynamics and ensure the board’s composition aligns with the company’s strategic needs, thereby enhancing the board’s functioning over time. They also support the nominating committee in sustaining a high-performing board that is best positioned to help the CEO formulate and execute winning strategies.” Other considerations for maintaining a dynamic board skills matrix, include:

Frequent reviews: update the matrix at least quarterly to capture changes in the organization’s strategy, industry trends, and director expertise; communicate findings to stakeholders to enhance transparency and accountability.

Comprehensive metrics: go beyond technical skills to include leadership qualities, industry insights, cultural fluency, and geographic representation.

Active application: use the matrix to guide all discussions regarding recruitment efforts, inform succession planning, and communicate priorities to stakeholders.

The board skills matrix should be comprehensive, cataloging all directors based on:

Core competencies: technical skills, industry expertise, and leadership experience.

Emerging priorities: incorporate attributes related to emerging challenges, such as digital transformation, ESG (environmental, social, and governance) issues, and cybersecurity.

Diversity metrics: demographic, experiential, and cognitive diversity dimensions.

Strategic alignment: skills that reflect the company’s growth plans and risk profile.

Tenure: how long each director has served on the board as well as any relevant term limits or retirement age.

One critical mistake in putting together a dynamic board skills matrix is to only consider the current needs of the boardroom. As Justin Nowell, partner at Sidley Austin LLP, recently told me, “To build a high-functioning board, nominating committees need to start planning now for the candidates they’re going to need five years from now.”

2. Understand the board composition landscape

Does your nominating committee understand today’s trends in board recruitment—both within your industry and generally? More importantly, does your nominating committee even know who is on the board of its competitors? These are critical pieces of information which should provide valuable insight and inform recruitment strategies and succession planning. By benchmarking how your board compares to that of your competitors, the nominating committee can ensure that the board remains competitive and forward- looking. Here are a few key metrics for benchmarking:

Skills and expertise: identify areas of focus, such as digital transformation, human capital, or global market expertise.

Diversity representation: assess how competitors are addressing age, gender, ethnic, and cognitive diversity.

Director tenure: evaluate average tenure and refreshment rates and compare against industry norms to identify opportunities for improvement.

The monthly e-publication, Board Recruitment, is one way in which your nominating committee can stay up-to- date on the latest board appointments and departures among publicly traded corporations, as well as general trends in board recruitment and composition.

3. Consider internal impediments to board refreshment

Board refreshment is essential for maintaining a dynamic and effective boardroom that can address evolving challenges and seize new opportunities. Cultural resistance in the boardroom often hinders efforts to introduce new members or adopt modern governance practices. Long-serving directors and entrenched traditions can create an environment resistant to refreshment. This attitude has consequences, including groupthink, limiting the board’s ability to consider diverse viewpoints. A reluctance to refresh the board can prevent the inclusion of directors with skills aligned to emerging challenges, and investors and other stakeholders may perceive resistance to refreshment as a sign of poor governance.

Below are a few of the most common internal impediments to board refreshment along with action steps to counteract each.

Lack of term limits

Many boards lack policies that enforce term limits for directors. Without these guidelines, directors can remain on the board indefinitely, leading to stagnation and reducing opportunities to introduce fresh perspectives. A lack of term limits for directors can lead to:

Limited innovation: long-serving directors may become resistant to change, hindering the board’s ability to adapt to emerging challenges.

Reduced accountability: directors with indefinite tenure may become complacent, undermining the board’s effectiveness.

Missed opportunities: the absence of turnover prevents the inclusion of directors with skills in emerging areas, such as technology.

Independence: directors who stay too long get to know management and directors too well personally and can lose objectivity.

Strategies for successfully introducing term limits include: (i) implement term limits of 9 to 12 years to create predictable opportunities for turnover while balancing continuity; (ii) use staggered terms to ensure that not all directors are replaced at once, preserving institutional knowledge (staggered terms—or “classified boards”—are not without pitfalls, and should be thoughtfully considered before implementation, as they can also serve as a way to entrench underperforming directors for years, possibly causing more harm than they prevent); and (iii) communicate the value of term limits to stakeholders as a governance best practice.

Lack of retirement policies

Boards that do not enforce mandatory retirement ages often struggle to plan for succession, as directors may remain in their roles indefinitely. A board that lacks retirement policies may experience:

Unclear succession planning: the lack of defined retirement policies makes it difficult to anticipate vacancies and plan for smooth transitions.

Perceived resistance to change: stakeholders may view the absence of retirement policies as an unwillingness to embrace refreshment.

Missed diversity goals: delayed retirements can prevent the board from achieving its objectives related to demographic or cognitive diversity.

Strategies for creating expectations around retirement age include: (i) establish a mandatory retirement age (e.g. 72–75) while allowing for exceptions based on the board’s discretion; (ii) pair retirement policies with skills assessments to evaluate directors’ contributions irrespective of age; and (iii) engage directors in early discussions about retirement to ensure alignment and avoid last-minute transitions.

Lack of board service restrictions

Overboarding occurs when directors serve on too many boards simultaneously, limiting their ability to dedicate adequate time and attention to any single role. If directors are stretched thin by their commitments to other boards, this can result in:

Reduced effectiveness: overcommitted directors may struggle to stay informed about the company’s operations, challenges, and opportunities.

Increased risk: directors with divided attention may be unable to provide effective oversight, leading to governance gaps.

Negative perception: stakeholders may view overboarded directors as insufficiently committed, potentially harming the board’s reputation.

Strategies for combating director overboarding include: (i) implement policies limiting the number of boards on which a director can serve (e.g. one public board for sitting executives and four for nonexecutives); (ii) regularly review directors’ external commitments as part of the annual evaluation process; and (iii) encourage directors to prioritize quality of service over quantity of commitments, emphasizing the importance of active engagement.

Addressing these barriers requires a proactive approach from the nominating committee, along with a commitment to continuous improvement in governance practices. By implementing policies that promote turnover, embracing diverse recruitment strategies, and fostering a culture of adaptability, boards can ensure their composition remains dynamic, relevant, and aligned with the organization’s strategic priorities.

4. Develop a board candidate pipeline

Boards that rely solely on traditional recruitment methods—such as personal networks or referrals—often limit the diversity and quality of their candidate pools. This approach perpetuates homogeneity and overlooks highly qualified individuals outside of existing networks; it may also draw criticism from stakeholders, including investors and regulators, who rightly view the board recruitment process as a significant opportunity to build value.

I recommend a three-prong approach to building a talent pipeline, including identifying board talent within the personal networks of sitting board members, leveraging modern board recruitment platforms, and engaging external recruitment firms.

Professional networks: the “who do you know?” conversation

Boards must move beyond the “who do you know?” conversation as the sole method to recruiting new talent to the board; however, we would be remiss to write off the inherent value of identifying promising board talent from within existing directors’ personal networks. Truthfully, this type of networking is still how the vast majority of board seats are filled.

Board recruitment platforms

Modern board recruitment platforms, like BoardProspects, offer a cost effective, convenient, technology-driven way for nominating committees to identify, assess, and recruit potential board members from a large pool of talent. BoardProspects is an innovative platform designed to fully engage the nominating committee in the continuous board recruitment model. In addition to providing access to a searchable and trackable community of highly qualified board candidates, the features of the platform allow collaboration among the members of the nominating committee as to the candidates which best fit the needs of the organization.

Executive recruitment firms

Most large executive recruitment firms have a dedicated board practice designed to help organizations identify potential board candidates. These firms typically have a substantial database of potential candidates from which they can identify board candidates based on the criteria provided to them by the client.

5. Full-board engagement

An effective nominating committee engages with the full board to identify emerging needs and encourages all directors to contribute to the identification and evaluation of potential candidates. At a minimum, the board candidate pipeline should be a standing agenda item for both nominating committee and full board meetings.

Conclusion

In an era of increasing complexity, continuous recruitment is the key to creating resilient, future-ready boards. The continuous model of board recruitment is not just a best practice—it is a governance imperative. The nominating committee is at the heart of board recruitment and can best ensure that the board remains aligned with the organization’s strategy, responsive to emerging challenges, and representative of diverse perspectives.