136. Are we accidentally keeping all the best people out of boardrooms?

Boards often don't look for the best directors, and so the people who could be the best directors don't ever consider being on boards. A vicious circle!
 
SCRIPT
Since I started studying corporate governance back in 2001, a lot has changed in the way that most boards approach the identification and recruitment of new board members. Some of this has been driven by new regulations requiring greater independence and specific expertise. In theory, that should have really affected the composition of boards, especially those of listed companies that are most directly impacted by the new rules. But aside from some cosmetic changes on the independence front, the complexion (literally and metaphorically) of boards really didn’t change at all – for more about how I feel about director independence scroll all the way back to episode 6. Since then, most boards I interact with use some kind of skills matrix to illustrate the capabilities that they’re looking for and measure the actual board’s aptitude against. There’s nothing wrong with that, but my experience that that boards typically use skills matrices to reinforce the status quo. To be fair, there are a LOT of amazing corporate directors out there, but they’re often amazing in addition to (or even despite) their skills and professional experience rather than because of it. And the fact is that boards continue to emphasize measurable professional backgrounds instead of asking “what would a truly excellent new director look like? What would they bring to the table?” This leads to two problems. The obvious first one is that most boards fail to even look for excellent directors in the first place. The second one is equally, or maybe more important. People who could be excellent directors don’t even know that they could be, because they assume – correctly – that they’re not what boards are looking for.