Corporate board recruitment is taking a strategic turn

Board appointments have long been dictated by promoters and top executives, with allies handpicked who echo rather than challenge them.

- RALPH WARD & M. MUNEER

This is apparent in India's public sector companies. Family-run businesses have also been known for it. At startups, boards are typically composed of a small group of founders and funders. This structure, while not without its challenges, is understandable. In contrast, large-cap corporations receive much more attention for the composition of their boards. Traditionally, these included bankers, company promoters, top officers, retired bureaucrats and high-profile figures. Many are chosen more for their connections in high places than their strategic skills.

However, governance failures, tighter conflict-of-interest rules, court decisions, rising director liability and increasing investor activism have shifted the corporate focus towards finely targeted board recruitment. Corporate boards in developed economies are identifying the specific skills and expertise they need and seeking out individuals who possess those qualities. Broadly, today's boards need leaders with an ability to see around corners. Friends of promoters or buddies of current board members must make way for independent board members, whose role includes representing the interests of minority shareholders.

The skills in demand for board members include digital technology prowess. Despite setbacks to diversity, equity and inclusion (DEI) in the US, it remains a guiding principle, just as board discussions inevitably touch on environmental, social and governance (ESG) issues, regardless of trends in America. So ESG expertise is valued too.