How founder CEOs can evolve their board and scale their business

The effective search process

Navigating the board candidate search process strategically is also crucial. “I don’t think it’s ever too early to start thinking about who could be helpful to your company in an advisory or board capacity,” says Lily Chang, retired senior advisor, Leonard Green & Partners who also serves on multiple boards. Fortunately, there are several tools and resources available to support these efforts. For example, conducting a board matrix exercise can help companies map out the core competencies needed and experience desired while also avoiding skill redundancies across board seats.

Some organizations also find it helpful to establish a board search committee. In that scenario, it’s important to bring a disciplined approach from the outset by determining a regular meeting cadence and defining decision-making protocols and authority. These bodies should also be mindful of creating a positive experience for candidates through consistent and transparent communications, which benefits not only board candidates but also the reputation of the company.

“You really want to keep it small and selective and move through the process in a disciplined manner,” says Alexis Hennessy, a partner at Heidrick & Struggles who specializes in board recruiting within the tech industry. The group also agreed that regardless of which methods a company leverages in seeking out new board members, its CEO is almost always heavily involved.

DEI and other considerations

The conversation around board diversity has grown complicated. On one hand, regulators and investors have increasingly outlined expectations around gender and racial diversity for boards, often positioning this topic as a crucial pillar of environmental, social and governance (ESG) matters. At the same time, a rising chorus of detractors have argued that these measures are bad for business, citing the Supreme Court’s 2023 decision to end race-conscious college admissions. The reality on the ground, however, is far more nuanced.

“Most publicly traded companies we’re seeing are taking matters into their own hands and holding themselves accountable for 40% of diversity on boards,” Hennessy says from an anecdotal perspective. And according to Jack Flug, a managing director with Marsh who leads its Financial and Professional Liability practice, the shift in diversity-conscious board recruitment activities we’re seeing now is likely only temporary.

Founders and other company stakeholders who continue to prioritize diversity, equity and inclusiveness (DEI) need to think differently and be creative in sourcing board candidates. For example, reaching out to accounting firms, investment banks, affinity groups and law firms in their sphere can be a great way to find diverse candidates, says Cecyl Hobbs, an executive director with Russell Reynolds Associates who advises organizations on an array of board matters. They also need to hold their search firms accountable by validating the diversity of these firms’ leadership and networks.

Hobbs adds that the importance of board diversity extends far beyond the regulatory realm: “When you’re thinking about winning the talent war, people looking to join a company are going to look at the board composition. They’re going to look to see the C-suite composition.” However, Hobbs notes that companies will need to be more strategic about building diverse boards: “One has to question, what is the business value? What is the rationale for bringing diversity to the board, and how do we then translate that into the kind of board members we’re looking for?”

“Indeed, the EY Center for Board Matters team works with our clients (as appropriate) to focus on diverse skill sets first, which often reveals the need for more diverse board candidates,” says Dan Clifford, EY Americas Center for Board Matters Board Network Leader.

Board service today also involves an even larger risk management effort, with individual board members now potentially liable in derivative actions and shareholder class action matters. For this reason, companies will also need to obtain directors and officers liability insurance to enable directors to focus on their duties. “It allows the board to do its job,” Flug says.