The quality and extent of disclosure varies, and we estimate that 14% of the directors’ qualifications language and reasons for nominations were clearly linked to company strategy, suggesting that this is an emerging disclosure trend. In one of the stronger examples, we saw a company highlight its nominee’s areas of expertise, explain how these experiences contribute to the company’s future strategy and link these elements to a brief description of broader industry transformations underway.
Boards are thinking differently about what makes an effective board candidate, and the supply of possible candidates is expanding significantly. This larger pool means boards can be even more selective about their short lists. At the same time, the responsibilities of being a public company director are continuing to increase and become more complex, and boards are setting the expectation that directors must be fully committed to being engaged and active. There is greater concern over the possibility of being “over-boarded” and “over-committed.
Observations on skills and demographics
In 2018, 71% of the reviewed companies added at least one new nominee and 27% added two or more. This represents an increase from prior years when the levels were generally steady at around 56% and 21%, respectively. For companies that added at least one new nominee in 2018, our review yielded the following observations:
Top 10 areas of expertise for the new class:
For a look at the skills being added to boards, we found that the areas of expertise most frequently cited in new nominations were international business; corporate finance, accounting; and industry expertise. Around half of the new class was recognized for expertise in at least one of these categories. The next most common areas — technology; operations, manufacturing; and board service, corporate governance — were cited in 40% to 45% of new nominations. On average, 35% was recognized for experience in government, public policy, regulatory; risk oversight; strategy; or marketing, business development.
The top 10 most common expertise areas highlighted:
- International business
- Corporate finance, accounting
- Operations, manufacturing
- Board service, corporate governance
- Government, public policy, regulatory
- Risk oversight
- Marketing, business development
New class enhances career and gender diversity
Women continued to represent around 40% of new nominees, contributing to a slight increase in overall board gender diversity; in 2018, 27% of existing independent directors were women, up from 25% in 2016. Slightly less than half of the new class fits the traditional model of independent directors in years past (current and former CEOs), and that group remained predominantly male. The slate of non-CEO new nominees represented a different picture: this group reflected relative gender balance. Further, of those directors with noncorporate backgrounds, most were women.