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Corporate Compliance Insights
Home Governance

The Secret Sauce to Boardroom Composition: Start Telling Your Story

by Paula Loop
May 17, 2016
in Governance
Lack of diversity still a problem on most boards

This post was originally shared on LinkedIn and is republished here with permission.

Who’s really sitting in today’s boardrooms? Do the board members have the right skills and experience to direct the company for the future? Does the board’s diversity match that of its customers and employees? We know that progress is slow on that front: Only 20 percent of today’s S&P 500 boards include women, and minority board members make up just 15 percent of the S&P 200.* What about new perspectives — does the board have people who can bring those to light? This is what investors want to know these days. And these types of questions are putting corporate boards increasingly in the spotlight about their board makeup.

How to get it right

Director succession planning for board members is critical. Many boards are putting a lot of effort into this process, and they are probably getting it right. But very few companies are actually telling their story. And they should be.

Most proxy statements include a droll listing of the members of the board of directors. They will list the individual’s name, a brief bio and they’ll indicate which director sits on which committee of the board. Just covering those basic requirements does not bring to life why these board members are the right people to be overseeing the company today.

Isn’t the real secret sauce of an effective board the sum of all of its directors and the attributes and skills that they bring together as a whole? Shouldn’t a best practice be to paint the real landscape for investors so they can see how the board composition in total is in the best position to oversee management?

Start telling your story

Boards can do this through disclosure in the proxy statement. The best board composition disclosure in a proxy statement describes each individual board member’s background and goes on to outline the skills that each brings to the board. The proxy statement will often show a grid of the board members’ skill sets. While not all directors will check each skills box, as a whole, anyone who reads the proxy can see that they complement each other.

Good disclosure will address the tenure of the individuals on the board. It will highlight the number of individuals that are new to the board, those that have medium tenures and those that have been on the board for longer periods. This demonstrates that the board has new thinkers, some that know the drill and have been around for a while and those that have a lot of experience with the company. In addition, disclosing the other boards their directors serve on offers insight into their depth of board experience. While you don’t want board members to sit on too many boards, you do want several who currently serve on other boards so they can bring those experiences to your board table. Pictures of the board members will also help to highlight diversity and provide a visual element to the story.

If the nominating and governance committee is spending the time to focus on board succession, and the board really believes it has the right complement of individuals, then disclosure is key. Even if you have the best board in the world that works well together and is well-rounded and diverse, you have to tell your story or else people won’t really understand the full picture, and you won’t get any credit for it.


Previous Post

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Paula Loop

Paula Loop

Paula Loop headshotPaula Loop is the leader for PwC’s Governance Insights Center. With more than 20 years of experience at PwC, Paula brings extensive knowledge in governance, technical accounting and SEC and financial reporting matters to both organizations. Paula is a Certified Public Accountant licensed in New York and is a graduate of the University of California at Berkeley with a B.S. in Business Administration.

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