Importance of Succession Planning for Board Committees

Nicholas J Price
5 min read
As two of the hottest topics that concern investors, board composition and board performance are under fire. Investors are expecting a heightened response to growing pressure on board performance and accountability. To address their concerns, boards must make a robust evaluation of their succession planning process. Some changes are likely in order.

The reactions of investors are predictable and expected after incidences of public accounts of boards' failure of oversight were reported. Business is more complex than ever before. Risks are numerous and stem from many different directions. Investor activism has been on the rise. Investors are increasingly interested in the board evaluation processes and results.

Even if investors weren't placing increasing pressure on boards, board directors should have a desire to address stakeholder concerns and be interested regarding their own effectiveness. This is one more reason boards should be taking a second look at board evaluation processes and disclosures. There is a third reason that boards should take a stronger interest in board evaluations.

There is a trend toward stronger regulations with respect to board requirements in other countries, particularly in the United Kingdom. It's only a matter of time before the United States follows suit. According to EY, in a survey of 2018 Fortune 100 companies, 93% of proxy filers provided investors with at least some disclosures about the evaluation process.

Designing and Implementing a Useful Evaluation Process

Performing due diligence in board evaluations is more than just doing a cursory assessment to ensure that boards are performing satisfactorily. It's time for boards to rigorously test their process for board composition, board dynamics and structure to ensure that the board will be effective for the present and in the future.

A thorough review of the board evaluation process requires determining the goals and objectives that they hope to achieve through the board evaluation process. Then, boards need to evaluate their actual performance against the goals they set for their performance goals, objectives and requirements. The process should include getting candid feedback from all board directors.

Boards will need to agree on action items and develop timelines to address the issues they identified during the evaluation process. In addition, boards will need to decide who will lead the evaluation process, who they will be evaluating, what they'll be evaluating and when to do the evaluation.

Investors will certainly hold boards accountable for regularly reviewing issues that are related to the implementation of action items that they identified during the course of assessing their board evaluation process to ensure that they're taking their reassessment seriously.

How Technology Can Assist in Effective Succession Planning

With the recent focus on investors illuminating issues around diversity and composition, it has left succession planning committees and nominating and governance committees with the need to have access to data and analytics so they can identify opportunities to diversify the board appropriately.

Diligent Corporation quickly filled this need with the Diligent Nominations Tool.

Diligent's Nominations Tool is a digital tool that gives succession planning committees the ability to do an online search for board directors and executives of over 5,500 companies across 24 global markets and 40 indexes. The search tool allows succession planning committees the ability to analyze director interlocks by individual or by company. Committee members will find highlights to indicate overlapping directorships, seats on competing boards and seats on companies that are listed on the FATF. The tool provides the shortest route to individuals via the people and organizations with which they're affiliated. In identifying the best opportunities, companies will also reduce governance risks.

Diligent's Nomination & Governance application gives nominating and governance committees instant insight into their board's composition, benchmarking it against other companies so that committees can conduct a quality executive search to identify the candidates their board wants and needs — and they can do this using just a few computer clicks. The tool performs an instantaneous health check on board composition and effectiveness while comparing the analysis with peers in the marketplace. The tool evaluates gender and age diversity, director interlocks and overboarding.

C-suite-level executives can be difficult to reach. The Nomination & Governance application takes the work and pain out of researching this faction of executives by providing detailed biographies of over 125,000 board directors and executives. Committee members can also use the tool to filter out candidates by experience, demographics, region, sector and discipline.

The tool makes quick work of displaying a matrix of the board's skills and expertise to provide a snapshot of its strengths and weaknesses.

Today's boards need a strong infrastructure, combined with the right technology in the boardroom to meet the governance challenges in this constantly moving business environment.

This is the understanding that Diligent's software designers had in mind as they designed and developed Diligent Boards and the suite of digital governance tools that compose Governance Cloud. The Nomination and Governance Tool fully integrates with the other valuable tools in Diligent's board management software system.

Diligent Corporation Is a Leading Innovator in Modern Governance Solutions

What is modern governance? It's the practice of empowering corporate leaders with the necessary technology, insights and processes they need to foment good governance, which will lead to risk reduction and increased profitability despite the fast pace of corporate happenings.

Boards need the right tools to improve governance, which will help them gain a competitive edge. Having the right information, including data and analytics, at the right time gives boards new opportunities to turn their insights into valuable actions.

Diligent became a market leader by creating and offering innovative technology that allows boards to govern, endure and thrive in the digital age while keeping their operations running as efficiently as possible. From the beginning, Diligent has made security a high priority in developing every software product. Boards can count on Diligent to ensure that their board business is highly confidential and protected by the world's leading security standards and secure data centers located within the client's region.

By implementing Diligent products, investors will gain the confidence and assurance that their investments are in the best hands possible.