The Market for Corporate Directors - INSEAD Corporate Governance Centre (ICGC) - Report - Page 11
Search firms develop more tailored processes to find suitable candidate to become
director, but network is still the most the important key to get a position
Of the Relevance of Professional Director
What channels led to your board appointments?
The Paradox of Professional Directors
In line with the increase of professional directors sitting on boards and an intensifying debate on their
benefits, an outstanding majority (78% who do not get most of their income through their position as
part-time directors) of our respondents expressed the desire to become professional directors with only
35% today declaring receiving most of their professional income from directors’ role. Oddly enough, this
growing demand for professionalization takes place in a context where governance outcomes associated
to directors who had decided to become full-time professional are not significantly better than the ones of
nonprofessional director. An explanation of these meager results lies in the ideas developed in this report
so far. To overcome this apparent paradox, it is necessary to remember that the concept of professional
director is still not well-defined yet, and does not refer to a director who would have been trained or certified.
On the opposite, what used to set these directors apart, is simply their level of efforts and investment due to
no concomitant professional activity. Quite naturally therefore, a wide variety of profiles used to fall under the
label of professional director; from a retired CEO who cherishes the idea to remain involved, to contribute, and
play a part in a business environment, to an aspiring young manager who has decided to serve on multiple
boards after having developed skills and knowledge to this sole purpose and whose specific expertise digital
or sustainability for instance, adds value to the board aligned with company’s long term strategy and goals.
Consequently, this lack of consistency across directors types and the variety of their profiles, help us to
apprehend this apparent paradox. While from regulatory and compliance perspective professional directors
are subject to the country’s jurisdiction in which they serve, they actually lack a “formal professionalization”
of their job and duties. There are no set of rules or guidelines, training or accreditations that would define
them and establish some standards, as it is the case for other professions. A hypothesis that we form here
to explain the regain of interest for professional directors, is that most people are oblivious to this tension
of not having a clear understanding of what a professional director stands for. Everybody has his / her own
understanding of the concept, usually incorporating some knowledge and skills, which as odd as it seems,
is inconsistent with the concept as it was developed.
The question then remains to know how this concept of professional director could emerge and hold on
if it had such flaws. Simply enough, when the concept of professional director has emerged 30-40 years
ago, the only fact that a director had no concurrent full-time employment sufficed to consider him / her
as providing high levels of efforts, social, and human capitals. But in the recent years, the landscape of
corporate governance has dramatically changed with the shifts and trends following the 2008 financial
crisis, and this fact is no longer true. It does not follow that a director with no concomitant activities has
more social and human capital to offer than one with other professional activities. Time and efforts cannot
replace these capitals as a resource.
It appears more clearly that the professional director conceived in the way it was born decades ago, is not
in line with the current context in corporate global governance. We have to go beyond the idea that simply
dedicating oneself, with diligence and time, is enough to be a good professional director. It requires skills and
knowledge, supported by social and human capital that time and commitment will allow to put at the service
of the company by sitting on the board.
This is consistent with the study carried, where 71.7% of respondents attest joining boards of directors while
holding a senior executive position. They mature and gain knowledge to develop their skills which they see
as paramount in their becoming director. Industry expertise, interpersonal and technical skills, as well as
previous work experiences on board and executive levels, are, according to the directors we interviewed, the
most important criteria for getting appointed. And as they retain their positions and work commitments, we
are far from the idea of directors who would solely contribute with time they have to dedicate to their boards.
Towards a Formalized Professionalization of Directors?
Confronting the results of our survey where the desire to become professional director is growing, with
the literature and previous studies, a discrepancy appears. That there is such a strong aspiration for
the professionalization of directors at a time when it seems the concept has lost its relevance seems
contradictory. Yet, there are ways these results make sense and can provide us with teachings. In this part,
we present this renewed interest for professional directors, not as just an infatuation for professionalization
in the way both practice and literature has envisioned so far. We rather tend towards what we call a
“formalized professionalization” and which would correspond to an idea of professional director rooted in
skills, knowledge, and social / human capital. It also means this would require some kind of official training,
continuous learning in the governance space. In this sense, this report confirms results from the field where
we see that 76% of our International Directors Programme participants want to get certification. Many
of them follow subsequent programmes offered by the INSEAD Corporate Governance Center to obtain
Advanced Certification and further develop their skills and leadership and thus be better equipped to address
their duties and responsibilities.
The Hardships of Being Director
There is logic in this development of capacities with certification. It does not follow naturally from previous
management or executive experience that being a director is an easy task. Directors we have interviewed are
the first ones to recognize it, coming with a long list of challenges they have to face during their mandates.
While no particular challenge stands up, it is worthwhile to notice that devoting time required to serve is
no exception. It is a challenge for only 8.5% of them, while this number remains constant despite possible
growing concomitant activities due to serving on an increasing number of boards.