Archive for July, 2014

Directors` selection and recruitment: the Matrix of Skills

July 21, 2014 1 comment

Lawrence Trautman discussed, in a paper published in July 2012, (1), about the attributes and characteristics of directors, and the recommendations a company should follow when deciding on the composition and structure of its board.

A first advise the author offers to those building a board, is to consider certain variables: (i) the company life-cycle stage (ii) its international footprint in the future (iii) its technology dependence profile and (iv) its capital needs. More generally, the choice of a board sits on an established and communicated strategy for the firm, he says.

As Trautman says, the first clear mandate directors generally have, (even if legislations differ), regards their duty of care and loyalty to the company and its shareholders. The business judgement rule protects directors when deciding and acting in good faith, in an informed and responsible manner. Somehow this also affects the Nomination Committee members in their responsibility to foresee the directors`s succession.

Secondly, according to the author, every board has the same fundamental needs (a charter for the committee charged with nominations; independence and external advice).

A director nomination process starts with a selection of personal attributes nominated director should have, among which we can spotlight ethical behavior, availability and time flexibility, personal and professional achievements, interpersonal skills, independence and soundness of judgement. Also director need to demonstrate some experience features, (general business and industry knowledge, financial acumen etc).

We will not analyse in depth Trautman`s view on board composition and board committees`s structure, that he explains brilliantly, nor the role of the lead director, nor the actual corporate governance demographics. We will nevertheless focus in a tool for optimizing the directors`s selection process:

The Matrix of directors`s skills. Read more…