This page contains a Flash digital edition of a book.
DIVERSITY NEWS


BY JOSHUA H. SHIELDS


BOARD DIRECTORS AND DIVERSITY


EVERY YEAR, DIVERSITY & THE BAR PUB- LISHES A GENERAL COUNSEL SURVEY THAT TRACKS THE PROGRESS OF WOMEN AND MINORITY GENERAL COUNSEL for Fortune 500 and Fortune 1000 companies. We saw record numbers in 2012. For more on that, please see our last issue. MCCA plans to take it a step farther in 2013 when we profi le the diversity eff orts and results of America’s best companies. To that end, MCCA was present at the National


46


Association of Corporate Directors (NACD) annual con- ference in National Harbor, Maryland, in October 2012. Diversity at the board level is the fi nal hurdle for complete inclusion in the business and legal worlds. MCCA plans to measure the progress corporate boards have made next year with a feature story devoted to the issue, hopefully with the assistance of the NACD. NACD’s 2012 Blue Ribbon Commission Report is


titled “T e Diverse Board: Moving From Interest to Action.” T e fi ndings are straightforward: Corporations will not be able to build or maintain a successful enter- prise that yields sustainable long-term shareholder value, without bringing a greater variety of perspectives into the boardroom. T e essence of board diversity is broad. Gender, age,


race, and experience are all critical factors to consider when vetting a potential board member. T e commission recom- mends four actions to help spur diversity: 1. Review and evaluate board composition. Diversity discussions should be rooted in company strategy and board evaluation. A candid exchange of views on both issues will be crucial to understanding the board’s composition and the company’s strategic needs.


2. Expand horizons for seeking candidates. Boards should consider setting a nominee slate target for nominating/governance committee and recruiters.


3. Improve director evaluations. Board and individual director evaluations must be strengthened to hold the board accountable as an eff ective oversight body.


DIVERSITY & THE BAR® NOVEMBER/DECEMBER 2012


4. Preserve, enhance, or consider adding tenure-limiting mechanisms. Boards should consider selecting the most appropriate tenure-limiting mechanism for their company. Moreover, boards must adhere to the out- come when a tenure-limiting mechanism is triggered even if the director is still an active participant. T ere are three primary barriers to diverse boards:


structural, social, and habitual. Fewer than seven percent of boards have term limits. By design the majority of boards have very little turnover. More than 50 percent of boards do not replace a single director over the course of one year. Small board sizes are another impediment to diversity.


Publicly traded companies rarely have boards larger than 12 members. When a board member is about to retire, the board should add a new member or members before the retirement occurs. T is practice will help transfer institu- tional knowledge through the overlap of board members while maintaining the original size of the board. Another barrier to diversity is inadequate use of evalu-


ations as a tool for board members. Curtis Crawford, a panelist at the conference and president & CEO of XCEO, says he has been evaluated his entire career but when he was a director the evaluations ceased. He says evaluations should be part of every job, no matter what level. Eff ectively used, evaluations are a valuable tool for assessing board member performance, boardroom composition, and gaps in skill sets. T e commission stresses that third-party evaluations would make the process more eff ective and less stressful. From a social standpoint, and perhaps the biggest single


barrier to diversity at any level, is the tendency of individu- als to relate to others who are like them. More than 77 per- cent of director candidates are identifi ed through personal networking or word of mouth. T is recruiting approach will yield candidates from similar social circles, geographical locations, and professional relationships. In short, it will maintain the status quo. Another problem is the small world of directors. T e added requirement of diversity further limits the fi eld.


MCCA.COM


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52