Boards Double Down on Refreshment
Welcome to this week's news brief.
Boards are asking themselves whether they have the right people around the table to meet the moment, particularly at a time of intense disruption and complexity.
The soul-searching is leading some boards to double down on their refreshment practices, identify skills gaps and recruit directors who can enhance the board's agility.
"Boards today need to have [the] agility of thought and the ability to tackle complex situations as we are in a world we have not experienced before," one board chair told Agenda. "For many decades, people relied on playbooks that had been successful in the past for different situations. But I think we're writing new playbooks all the time."
Today's top skills among S&P 500 board directors include strategy, technology, corporate governance, human resources and international experience, according to ESGauge.
Private Equity-Linked Directors
The number of companies with board members connected to private equity has increased by about 10 percentage points over the past decade, reaching nearly half of Russell 3000 companies today.
Sources say the influx of PE-connected directors has its benefits — and its drawbacks. For one, these board members can bring specialized industry knowledge that boards might otherwise lack, as well as turnaround or transformation experience.
On the other hand, there's a concern that these directors can govern "in a way that is too intrusive or too heavy-handed with their advice," one source told Agenda.
Boards vetting a PE-linked director candidate should ask how they've collaborated with CEOs in the past and how they've handled stressful situations. They should also get a feel for how the candidate would work with the rest of the board.
"Experienced, good board directors don't have their own style; they adapt their style to the needs of the board," said one board member with PE connections. "It is very important to understand the right moment, the right form, the right situation [to have a PE mindset]. You don't want to create the discontinuity in the board."
Happy Holidays
Agenda will publish regular issues on Friday and Monday; however, today's news brief will be the last for 2024. Happy holidays, and we will see you in the new year!
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