EY - Time for change

Recruiting for Europe’s boardrooms

Time for change

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The call for greater diversity finds common ground among Europe's leaders as boards evaluate the profiles, recruitment and support of non-executive directors.

At the heart of every business is the boardroom – the central hub of strategic thinking. Europe’s boardrooms are far from uniform in structure. However they have, in recent years, shared growing concerns about ensuring the best composition and representation to maintain a competitive advantage. There is now a growing sense that board recruitment needs to be shaken up.

Need for fresh innovative thinking

Our research – conducted through interviews with board members, headhunters, business leaders and advocates of corporate governance – shows the need for fresh, innovative thinking in the process of making appointments.

This report is part of our commitment to help businesses ensure they have strong board oversight and provide transparency in order to support the effectiveness of capital markets.

Perhaps these efforts would be more widely successful if all boards asked themselves one key question: is this a risk and compliance issue, or is it about realizing the business benefits that come from engaging a more diverse range of individuals? - Julie Linn Teigland, EMEIA Accounts Leader, EY

A case for change – the recruitment process

In terms of age, gender, professional qualifications and means of recruitment, non-executive directors are alarmingly homogenous. Yet, there is more awareness than ever, both of the dangers inherent in “groupthink” at the top of businesses and of the need to better understand and reflect customers’ wishes.

Europe has been successful in bringing the issue of gender diversity to the forefront of global debate. However, the recruitment methods used to fill boardroom positions have hardly changed.

Across the continent, personal networks abound as the dominant method for the identification and recruitment of candidates for board jobs. The UK stands out as having the most process-driven system of appointment through executive search firms (also known as headhunters). But Germany and Italy, for example, remain highly networked, making the pool of likely candidates both predictable and limited.

Succession planning

Evaluation and appraisal of non-executive directors is an essential ongoing process that helps to refresh the capabilities of any boardroom. In reality, smaller and medium-sized companies may only have a handful of non-executive directors, who will therefore be on every committee.

“Placing individuals on committees just below board level is one way of showing them how much you value them – and also getting them ready.” -- Malcolm Le May, Member of Audit & Remuneration Committee, Pendragon, and Non-Executive Director

There is clearly a need to distinguish between well-resourced companies and smaller businesses that do not have the resources to keep changing their non-executive directors. But, there is scope for appointments from a wider pool of talent than research to date has suggested.

Induction and mentoring for a wider pool of talent

Our research found considerable support for the idea of active, hands-on training and onboarding* in order to create a wider and more effective pool of non-executive directors.

“The question with training is not whether or not it’s appropriate, but how are the skills to be acquired? Having said this, a mentoring process within the boardroom is essential.” -- Nicholas Hamilton, Senior Independent Director & Audit Committee Chair, Miton Group PLC

Where women are concerned, there have been attempts to provide visibility to those who might otherwise be overlooked. In the last few years, various databases have been created in an attempt to make it clear that there are “board-ready” women available to step into boardroom roles, and there are many training schemes for non-executive directors as well.

The attraction of being in the boardroom – the pinnacle of strategic business thinking – cannot be underestimated, across Europe and beyond. The challenge lies in how best to find and place the right candidates in the positions where they can be most effective.

 

 

* Onboarding – bespoke process that enables new board members to acquire the necessary knowledge, skills and behavior to become effective representatives