Susan F. Shultz
Susan F. Shultz founded SSA Executive Search
International, Ltd. in 1981, and has conducted senior level searches nationally
and internationally, specializing in building and structuring corporate boards.
She recently joined with BarkerGilmore LLC in New York to chair its global board
practice and is recognized as a leading expert in corporate governance. She
founded The Board Institute to improve boards of directors through web-based,
easy-to-use, validated tools to evaluate the effectiveness of, and to educate
and benchmark boards, their committees and the independent directors. She
authored the highly acclaimed “The Board Book, Making Your Corporate Board a
Strategic Force in your Company's Success” (AMACOM) and has been featured in the
New York Times, The Wall Street Journal, Business Week, USA Today, Strategic
Finance, the Economist, CFO Magazine and numerous other media. She currently
leads the Global Board Practice for INAC Executive Search Worldwide, helping
public and private companies build better boards of directors. She can be
reached at email@example.com.
Editor's note: Bloomberg BNA recently conducted an e-mail interview with
corporate governance expert Susan Shultz about best practices for director
recruitment. She discussed the director search process and ideal director traits
for the modern board, among other issues.
BBNA:What have you
found to be the most desirable background for directors to have?
Shultz:A career that demonstrates unwavering integrity, independence,
courage and vision is very important. In terms of individuals with the type of
experience that clients seek, a current CEO is most desirable, followed by
recently retired CEOs, COOs, division presidents and line leaders. So, operating
experience in the company's industry or closely related industries is most
valued. Financial executives (ideally a CFO of a public company), individuals
who have achieved international success with their companies and minorities and
women are important as well.
In fact, women are proportionately the most
underrepresented group at the board level, followed by minorities. Many studies
show that the most successful boards include women and ethnic minorities. A
board that is not diverse in the current business environment will find it
difficult to be responsive to its constituencies. Diversity also includes market
disciplines, such as technology, marketing and human resources, age, geography
and background. Attorneys, especially strategic corporate counsel with their
unique perspective and experience, should have a place in the boardroom.
One particular area of diversity that is especially important and often
overlooked is an individual who knows strategy across many businesses, not just
a single industry or narrow group of companies. The synergies of dynamic, broad
diversity in the boardroom are magical. A growing trend is the global
board. A company with a significant investment in a region gains tremendous
advantage by including a board member with deep knowledge of that region. One
third of new directors bring global experience to their boards today.
BBNA:Are there skills that are more desired of director candidates
today, and how has the current business environment impacted this?
Shultz:Directors today are far more knowledgeable and engaged than
even was the case as recently as five years ago. They know more about governance
responsibilities and their company's business. Also, because of the escalating
demand for accountability and transparency, and in response to the complexity of
business today, there is much more emphasis on true independence and strategic
Boards used to be an afterthought, a combination of friends, family and golf
buddies assembled by the CEO. Now, boards are recognized for the competitive
advantage they can be, so there is much more thought given about how a board
member can add value to the company. Whether the company is driving into new
markets, operating in a regulated environment, doing considerable M&A,
expanding real estate holdings, going public, bringing on new management,
downsizing or leveraging social media, a board can recruit a director with any
particular, proven area of expertise that will add immediate value.
view, too many boards focus on compliance and financials in evaluating potential
directors, without locking in the breadth of diversity that makes a great board.
I am concerned that we confuse governance with compliance. The
emphasis should be placed on the business of the company. Compliance is a
single subset of the governance umbrella.
A tremendous change in recent
years is the sophistication and knowledge of director candidates. Today, boards
must disclose the qualifications of their directors and, for issuers of the New
York Stock Exchange, they must also disclose how those directors came on board.
This encourages an independent process of recruitment. The nominating committee
has responsibility for selection of new board members, adding tension to the
invisible influence of the CEO.
In one instance, we conducted a search in
which the board and the CEO disagreed about which of two
should join the board. The board's choice was brought on, and the CEO was happy
with the new director. This scenario would not have occurred 10 years
BBNA:Is there a set of metrics that you use to assess
your director candidates?
Shultz:We believe that as executive and
director search specialists, we add unique value by collaborating with our
clients on the strategy of the search. We “matrix” the existing board,
identifying everyone's current attributes and skills, and then we look at the
gaps--some obvious and some strategic. We then brainstorm the key future needs
of the corporation and define what qualities and type of profile the ideal
director should bring to the company. It is interesting to observe the evolution
of the boards we've worked with, as they have, over time, grown to recognize the
value of matrixing and of being proactive in the recruitment process.
area of the search for directors that is often overlooked is marketing
expertise; another is human resources. When you think about the most important
role of a board (ensuring that the right leadership is in place) and you
consider the current bullseye of governance (compensation), you may realize that
human resources expertise is essential. In recruiting, begin with the director
profile, not the person. We always evaluate director candidates relative to our
pre-agreed set of criteria and provide our assessment of the match with the
profile for each finalist we present to the board.
For further analysis of the
board of directors and director duties, see Bruce A. Toth & Christina T.
Roupas, The Board of Directors, Portfolio 63 in the Corporate Practice
Series, available at http://www.bna.com/board-directors-issues-p6971/.
BBNA:Is there key information that you, or the client company,
should always inform the candidate about regarding the specifics of a particular
Shultz:The culture of each board is unique. If we
can communicate that particular culture to the candidate, we can move the
director recruitment process to a new level. In light of this, we make sure to
communicate the reason we believe the candidate is qualified to serve.
The candidate should be aware of the time commitment, how many committees she
is expected to serve on and whether there are director and officer insurance
exclusions of significance, succession plans, and critical metrics for success.
Additional information that director candidates should be aware of include the
existence of lawsuits (96 percent of mergers and acquisitions generate
lawsuits), whether the company has or currently is facing regulatory issues, why
the company needs the candidate and what will make it most difficult to succeed
on the board. The candidate should also know of any challenges the company is
Candidates themselves will commonly ask whether the board is a
real board whose work is valued and important, who else is on the board,
and what D&O insurance coverage exclusions there are.
Boards can call upon director recruitment
specialists to assist them in the following key tasks:
(or refine) a matrix of existing skills, attributes, geographies, age, etc.;
the board structure, process and calendar;
a measurable profile for each director position and refine as needed;
proactively to each profile and incorporate original research with targeted
networking, instead of randomly responding to suggestions. Identify people who
have successfully dealt with your critical issues before;
potential candidates in the context of the board and the criteria;
references in both board service and personal contexts;
there is an effective director orientation; and
with the new directors after they are brought on board.
BBNA:Has a client ever asked you to expand your role to assist them
in areas beyond the executive or director search?
in which I've been called to help come to mind. The first has been in helping
boards transition directors who are not adding value off a board--the hardest
thing to do in the boardroom is to fire a director. Nonetheless, boards must
learn that a director seat is not an entitlement for life.
area has been in helping boards determine how they are doing by providing
measurable guideposts for improvement. Now that the national exchanges and the
Securities and Exchange Commission require more accountability and annual
evaluations, the time has come for this more professional and independent
approach. The objective and substantive evaluations that we provide with The
Board Institute, our online suite of board tools, can take boards to a new level
BBNA:What insights can you offer about the transition
period that occurs when a new director has been selected and a search is
Susan:The better the new director orientation, the more
effective the new director can be. Courts have ruled that passive directors may
be legally vulnerable, so the new director shares in the responsibility to be
Directors ought to be prepared to add value to the board
discussions immediately. We are able to provide suggestions for the new
director's orientation so that the new member will be up to date on critical
issues, important people and processes that make governance in the boardroom
work. Mentoring by a seasoned director, for example, following a sale from start
to finish, meeting key management, visiting major facilities, identifying key
risks and educating the director on the company's story are all critical.
BBNA:What motivated your founding of The Board Institute, Inc.?
Susan:The Board Institute's purpose is to reach, impact and improve
boards across the country and ultimately around the world. Good boards are about
good leadership and creating a risk filter in times of crisis. We help companies
learn how best to make their corporate boards a strategic force in their success
and to demonstrate their effectiveness to the marketplace.
Our educational content is reflective of the broad expertise in the
marketplace, and our “best of breed” partners provide expertise targeted to each
index. We are the only web-based solution of 93 entities accredited for director
education by RiskMetrics. A key advantage of using our tools is the ability to
stay up to date on governance mandates over the course of the annual
On the whole, boards are working and they are adding
value. As we blend carefully targeted individuals, the power of the board is
exponentially exploding. If we don't govern well, the government will do it for
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