Recruiting and Acclimating the Best Board Members
Orienting the right people to your board bolsters retention efforts.
Recruiting and retaining qualified board members is necessary for the health of any corporation. An effective board must include active members engaged in overseeing the management of a company. The following are guidelines to ensure you recruit and retain the best members for your board.
To recruit the most qualified board members, the board should establish a nominating committee to vet candidates. The committee should examine the skills, talents and industry experience that may be lacking on the board. For example, is the board composed of individuals with sufficient expertise in the company’s industry? Does the board have one or more financial experts who are qualified to understand and examine financial statements and other relevant financial information? Does the board need a member with HR experience?
Once the nominating committee has determined the skill set or industry expertise needed for its board, its members should prepare a written job description and provide this description to potential board members. All members of the nominating committee should interview potential candidates to ensure the person will be a good fit for the board. For public companies, given new rules and regulations geared toward ensuring diversity, boards should be well versed in applicable board compensation requirements.
To integrate new board members, there should be an orientation process that provides an in-depth look at the company, its operations and its financial condition. Additionally, the new board members should have a clear understanding of what their fiduciary duties are. In particular, directors must perform their duties as a director (and committee member):
• In good faith.
• In a manner reasonably believed to be in the best interest of the corporation.
• With the care that an ordinarily prudent person in a like position would use under similar circumstances.
Directors should also understand that they are entitled to rely on information from an officer or employee, outside advisors on topics relevant to their expertise or a board committee on matters within its designated authority. Directors must reasonably believe this source of information is not only reliable, but also competent and worthy of confidence.
It is important that each director have a working knowledge of the corporation’s business. The board should avoid not only haste, but also the appearance of haste when making important decisions. Directors should ask questions and actively probe all information presented to them, judging its reliability and accuracy, understanding it fully and reviewing all issues important to the directors’ conclusion.
It is important for board members to:
• Understand the corporation’s financial statements and any monitoring of related controls.
• Review and monitor the performance of the CEO and other senior officers.
• Remain informed about the corporation’s operations, performance and challenges.
• Implement and monitor reporting and information systems to check for failures to comply with the law and regulations.
Ensuring directors are fully informed of their duties and obligations increases the likelihood of having engaged and effective board members.