Our Firm continues to be actively engaged to advise on recruitment of directors for public and investor controlled companies. And, as we do annually, we are pleased to share two trends and the qualifications that boards are seeking in new directors.
** Boards are becoming increasingly forward thinking. CEO turnover will accelerate in 2014.
The days of meeting quarterly and spending a majority of board meeting time reviewing past activities are long gone. Increasingly, Boards are becoming more engaged with their CEOs as their companies are continually adjusting to a radically reforming global economy characterized by asymmetrical aspects and increasing velocity.
The challenge is how to best represent shareholders effectively when strategies and operating models must be flexible in an investor driven world where equity valuation is based upon operational excellence and bottom line results.
Obviously, this bears upon the board’s number one responsibility of selecting its CEO and evaluating his/her leadership against what oftentimes seems to be a moving target. And, as such more boards are “adjusting” their relationship with their CEOs, becoming more acute in their leadership selections, requiring more in-depth conversations around strategic insights, and most importantly, on performance expectations.
** The Impact of Activists will Increase
Virtually every board with which we have consulted, is concerned, and rightfully so, about the impact of activist investors.
While a number of recent articles about activists have been penned, one point is worthy of consideration i.e., all “activist investors,” while similar in objective, are not all the same.
Here’s an important point…
Many activists who receive the most publicity and create fodder for the financial media, seek a balance sheet event in a high profile investment. Clearly, our observation is that they are in the minority.
Most activist investors seek to unlock value via a forum to discuss their views on operating model oriented value creation i.e., strongly urging adjustments/enhancements to their investment’s strategy or its operating business model.
Regardless, all seek to influence a result benefitting their group of investors justifying their approach as benefitting all shareholders. Entrenched views by a board or a CEO of a company in which they are invested, aren’t in any activist’s lexicon. And, they have very deep pockets!
With the amount of capital available to institutional shareholders and their expectations, this trend will continue and likely be a more common governance challenge for directors going forward.
Forwarding thinking Board Chairpersons are embracing, and engaging with, activists in a constructive way, recognizing their insights may be valuable and a public brawl is disruptive to board governance and its leadership’s ability to operate. We expect this trend of embracing activism to be a more common approach in 2014 forward.
**What Boards Seek in New Directors
Beyond seeking sitting and retired CEOs, financial experts and functional or global expertise for our client’s boards…
For the first time, we were asked to recruit new directors with specific experience of having been on a board with activist investors and/or having been a CEO of a company with activists on their board. While we are not sure this is a trend per se, with our belief that activism will increase, increasingly, we believe experience with institutional investors will be sought.
The more common request is to recruit board members who are highly familiar with the workings of the new economy, web commerce and social media. These boards seek to enhance their insights to guide the strategy of the companies that they are charged to govern. What they seek, though, is uncommon i.e., that is potential nominees who have the experience and wisdom to be stewards around the boardroom table coupled with the experience of leading an enterprise that has transitioned effectively to new ways of “winning” in an instantaneous and interconnected commercial world.
About us…The Koblentz Group is a global executive and board of director search firm specializing in recruiting senior leaders and corporate directors. Over the past 30 years, its Partners have successfully conducted several hundred “sensitive matter” board recruitments for public companies, investor owned and private concerns. The Firm serves its clients worldwide.