The Market for Corporate Directors - INSEAD Corporate Governance Centre (ICGC) - Report - Page 9
Many criteria play a
role in the accession to a director position, a
to s ocial or human capital.
Prior board experience
Prior executive experience
Field of education
Certificate in Governance
Affiliation with specific institutions
potential candidates with specific skills, and more and more, that have certifications of such skills and talents,
with directors themselves, increasingly recognizing the importance of such certifications (3.7% think their
certification was the most important criterion to get appointed). Search processes are therefore carefully
tailored to target the right people; our study reveals that 66% of directors went through a single process
to access a director position. The third search process would most likely be the last; through completion,
90.1% of directors would have been appointed. In a similar fashion, it is very seldom that a search process is
unsuccessful. 64.5% of directors were not involved in more than one search process for a position that they
have declined or from which were rejected.
Many criteria play a role in the accession t o a director position,
almost pertaining to s
ocial or human capital.
Need for diversity
Surprisingly, the results remain remarkably stable whether they relate to the first, second, or third board a
director joins. And indeed, if directors are well aware of the criteria playing a decisive role in their appointment,
it appears nonetheless that they underestimate the impact of social capital. Previous studies have shown a
positive correlation between the demand for a director and the number of boards he / she sits on, which is
directly linked to an increase in ties and relations, and de facto of his / her social capital.
Further observations lead us to believe that there is a tendency to minimize the paramount role social capital
plays to become director. Of course, it is crucial that directors develop their skills and knowledge, but network
is the key to appointment. Thus, almost 2 directors out of 3 (62.3%) report they got on their first board
through prior relationships with CEO, board members, or shareholders. Two main implications follow from
this observation of the study. The first one, is that professional relationships have a much greater impact
than personal ones. Professional relationships led to 47.6% of the appointments, versus 14.5% for personal
relationships. The second observation, is that these relationships remain an outstanding channel to access
to a board position, no matter the number of boards a director sits on. Although, professional relationships
tend to be slightly less impactful with the growing number of boards a director sits on.
With directors under the spotlight, expectations put on their shoulders have increased, and with them, the
growing consensus that the board is liable and the organ effectively in charge of governing the company.
Directors have to take responsibility for it, and cannot merely sit few times a year at a board meeting and
expect their work to be done. Quite the contrary, stakeholders expect them to be active and impactful.
Therefore they look for professional directors as we have attempted to describe them so far; people with
skills, talents, and capitals. While scouting is still widely done through and within networks, with the growing
need of professional directors, executive search firms have developed. Those firms recruit high qualified
directors on the behalf of organizations. These search firms are increasingly becoming strategic, looking for
criteria belonging to
social or human capital play a role in the
accession to a director position.