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Boards recruit new faces, new visions

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But Mr. McLean and several others say there also is a clear move away from boards filled with generalists to ones that represent a range of specific skills and industry expertise.

David Nadler, chairman of New York-based Mercer Delta Consulting, which advises many boards, sees this shift as a response to the rising stakes facing corporate directors.

In the past, he said, picking board directors was like decorating a Christmas tree. "It was like picking nice ornaments that look good," he said. "You had retired politicians and public figures or other people that seemed to add lustre to the Christmas tree of the board."

The problem with that approach, he said, is that while individual directors might be fine people with good intentions, they sometimes lack specific knowledge. "I was amazed in the '90s working with boards of technology companies that had no knowledge of technology."

David O'Brien, chairman of both Royal Bank of Canada and EnCana Corp., and a director on several boards, said an active board requires a lot of general business knowledge, some business savvy and specific industry knowledge. "It is not enough to have a lot of well-intentioned people sitting around the board table . . . you need people who understand the business and get engaged. That takes a lot more effort."

Indeed, many chairmen at prominent Canadian firms say that when they set out to fill a vacancy on their board, they are looking to fill a very particular set of skills.

This new-found search for specific expertise has been especially intense in the area of financial literacy, given the rising importance of the audit committee and the requirements from regulators that companies have directors with financial expertise. Along with former corporate executives, financial experts such as former federal auditor-general Denis Desautels and retired accounting firm executives Hugh Bolton and Thomas O'Neill also have attracted high-profile board appointments.

As well, about 15 per cent of the independent directors who joined a single board since the beginning of last year also are reported to have an accounting designation. The real number is likely higher since not all firms give details of director qualifications.

Yet for all the talk of building boards and expertise, most director appointments still seem to be happening by word of mouth and personal referral, rather than a more formal search process.

"We have never needed an outside headhunter," said Mr. McLean at CN. "We talk to senior advisers, our counsel in the [geographic regions that] we are looking for directors."

Paul Cantor, who as chairman of Russell Reynolds Associates specializes in director searches, estimates that about 80 per cent of appointments are done through networking or the recommendations of lawyers and accountants. Boards need to work as a team and many fear that appointing a director who they do not know could damage that relationship.

Indeed, many chairmen say the need to build camaraderie around a boardroom table makes it difficult to hire new directors without some personal reference, either from a current director or another colleague. At the same time, they admit that can be tricky when searching for foreign candidates.

At Finning International Inc., chairman Conrad Pinette said the board uses a formal search process to get the international representation it feels is vital. But he said the board is careful not to make commitments until directors are confident the chemistry is right. "We have gone right down to the final selection process and then said, 'No this is not going to work.' "

Mr. Galloway at Bank of Montreal sees both sides of this debate. "One of the things that is still important is the culture of the board," he said. "It is not easy when someone is bringing on a total stranger. I don't think we should throw out the old method. It wasn't all terrible to say 'I know this person and I think he would fit well on the board.' "

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