Adding new board members is a critical decision for any company, as it can affect its strategy, performance, culture and reputation. However, finding and selecting the right candidates can be complex and time-consuming, involving multiple sources, criteria, interviews, checks and disclosures. Here are some good practices to help boards navigate this process.

Maintain an evergreen pool of potential candidates. Boards should regularly be on the lookout for qualified candidates who could add value to the company and its shareholders. Candidates may come from various sources, such as current or former directors and officers, professional advisors, bankers or others. Boards do well to keep a database of candidates and update it regularly, as well as solicit new nominations from other directors as needed.

Define the goals and criteria for each search. Boards should have a vision of what they are looking for in a new director, based on the company’s strategy and needs. Boards should also have a framework of desired or required attributes for directors, such as independence, appreciation of a distinctive corporate culture, and knowledge of technical areas of corporate operations. Boards should formalize these goals and criteria and communicate them to the nominating and governance committee (NomGov), which usually leads the search process.

Consider external and internal candidates. Boards should not limit themselves to the candidates in their evergreen pool, but also consider external candidates who may bring fresh perspectives. Boards may decide to retain the services of a professional director recruiting firm to help identify and attract external candidates. Boards should also consider internal candidates, such as senior executives or managers, who may have a deep understanding of the company and its culture, but they should be aware of the different process and expectations involved in appointing them as directors.

Vet candidates thoroughly on several levels. Boards should conduct a comprehensive and rigorous evaluation of each candidate, covering several aspects.

  • each sitting director should interview the candidate, to assess fit, contribution and compatibility with the board.
  • the interviews should probe not only for the overall adherence to the search criteria, but also for the specific skills the candidate can bring to the board.
  • the candidate should undergo a formal screening process, to ensure compliance with the company policies and external rules on independence, as well as any other eligibility requirements, such as stock ownership.
  • the candidate should complete a detailed and accurate questionnaire, to provide the basis for all required disclosure in the company proxy statement nominating them for director.
  • the candidate should undergo a background check, performed by a third party vendor to verify their credentials.

Make the final decision and announcement. After completing the vetting process, the NomGov committee should present its recommendation to the full board, along with the supporting information and documentation. The board should then make the final decision, based on the best interests of the company and its shareholders. The board should also prepare and communicate the announcement of the new director, highlighting their qualifications, achievements and value proposition.

At Mayer Brown, we understand the importance and complexity of adding new board members. We have extensive experience and expertise in advising boards on all aspects of the process, from defining the search criteria, to conducting due diligence, to preparing the disclosure and documentation. We also have access to Board Exchange, a database of director candidates whom we are prepared to introduce to board searches, based on our knowledge of their skills, background and suitability.