Four Traits of Top Board Members
For years, there was nothing more subjective than measuring board members: How did they get along with people? How many boards did they serve on? Did they have a decent golf game?
But as stakeholder demands of board members have risen in recent years, and the responsibilities of directors have widened, new metrics of how to measure the effectiveness and influence of board members are cropping up. Take, for example, a recent ranking by The Wall Street Journal of the top corporate board members, which was based on 18 indicators ranging from the number of boards they serve on to if they’ve been a CEO.
At the same time, many companies are clamoring to know how effective their boards are. While many boards conduct annual self-assessments, experts say stakeholders are asking for deeper evaluations that rate their strategic alignment, meeting effectiveness, and decision-making skills. Indeed, Korn Ferry’s annual study on board evaluations show that while improving, many boards still don’t bring in a third party and simply self-assess. “On a basic level, boards are evaluated on if they can function productively together,” says David Dotlich, president and senior partner at Korn Ferry. “Beyond that, many boards don’t reflect on how they’re doing, and that’s a mistake.” Below, we break down some of the traits of successful directors.
Tenure and Timing
One of the most scrutinized traits of late is how long board members serve. It takes most board members a good one to two years to get their bearings, and many experts say the sweet spot for board tenure is from five to 11 years. Korn Ferry’s own data show the average tenure for board directors is about eight years. But when directors spend too long on a board “they become part of the establishment and cease to challenge as much,” Dotlich says.
To help combat long-serving directors and encourage regular board refreshment, some companies—albeit not many—are instituting term limits. According to the Conference Board, less than 10% of all S&P 500 firms have such limits.
And when it comes to the number of boards a director serves on, the exact number can be highly contextual. “If you’re a CEO or CFO of an active public company you probably can only take on one board,” says Scott Atkinson, senior client partner in Korn Ferry’s CEO and Board practice. “If you’re a retired executive, it could be more.”
Committee Commitments
Another significant indicator for how well a director will perform is how many and which committees board members serve on. Typically, the compensation committee and governance committee hold the most weight and are the most desirable ones. “In most cases less is more,” Atkinson says. “If you’re on four boards and six committees there’s no way you can have time to be truly effective.”
Indeed, in the WSJ ranking, directors who sat on all three committees were docked for too much involvement. The risk and compliance solutions firm Diligent noted that “best practices suggest that board directors shouldn’t serve on more than two committees in the interest of being committed and effective.”
It’s also important for directors to think about how they get information. “Are they only getting information fed to them by management or are they also developing their own relationships with employees to understand what’s really going on?” Dotlich asks.
CEO Experience
As the board’s remit has morphed into taking on a more active, strategic role—particularly for the board chair, as noted in Korn Ferry’s Board Chair of the Future study—having the experience of being in the top job can be invaluable as a director. The WSJ ranking, for example, gave a substantial boost to directors who’ve been CEOs. “If you’ve dealt with the same issues a CEO is dealing with you can provide much better advice,” Dolitch says.
But directors who’ve held CEO roles sometimes can struggle with shifting from being the top operator to serving in an advisor role. Experts say board members who can prioritize continuous feedback, practice active listening, and have a curiosity for self-learning are more likely to make a smoother transition from CEO to board member.
