Improving Board Efficacy

Hilary Tuttle

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May 1, 2014

Executives increasingly recognize the importance of periodically refreshing the board. According to "What Directors Think," a new study by NYSE Governance Services and executive search firm Spencer Stuart, the majority of directors feel it is essential to employ processes to refresh the board's ranks on a regular basis, with 51% rating it as important and another 16% as critically important.

Routine evaluations are the best tool to encourage refreshment, the survey found. Half of directors supported the idea of an age ceiling policy, while a quarter favored term limits. The top five attributes sought for today's boards are financial expertise, industry expertise, CEO experience, information technology and global experience. Those surveyed emphasized risk as a critical concern and a key asset for prospective board members. Further, experience with cyberrisk mitigation was a top attribute they look for when appointing a new corporate director.

Boards also recognized that they need to better understand risk, agreeing that increased knowledge about the oversight process would dramatically improve their efforts, and a third of respondents supported the idea of a separate committee to improve risk oversight. Four out of five directors also said that more time for strategic planning was the top item on their wish list.

Hilary Tuttle is senior editor of Risk Management.