How can you build a diverse and independent board of directors for better corporate governance?

1 Why diversity and independence matter

Diversity and independence are two interrelated aspects of a board that can improve its decision-making, oversight, and accountability. Diversity refers to the representation of different backgrounds, perspectives, skills, and experiences among the board members, while independence means that the board members are not influenced by the management, the shareholders, or any other external parties. A diverse and independent board can bring numerous benefits to a company, such as enhancing creativity and innovation by bringing in new ideas and challenging the status quo, increasing credibility and legitimacy by reflecting the diversity of stakeholders and society, reducing risks of groupthink, bias, and corruption by ensuring a balance of power and a culture of dissent, strengthening monitoring and evaluation of the management by providing objective feedback, as well as improving stakeholder engagement and communication by addressing the concerns and expectations of different groups.

3 How to recruit diverse and independent directors

Recruiting directors who can bring in different perspectives, skills, and experiences to the board is essential for building a diverse and independent board. However, it can be difficult to find and attract such directors if you rely on traditional methods such as word-of-mouth or personal networks. To overcome this challenge, you should define the criteria and qualifications for ideal board candidates based on your company's vision, mission, values, and goals. Additionally, expand your search pool by using multiple sources and channels such as professional associations, online platforms, executive search firms, or referrals from diverse stakeholders. Furthermore, create a diverse and independent nominating committee responsible for screening, interviewing, and recommending the board candidates. Moreover, establish a transparent and fair selection process that is based on merit, fit, and potential rather than familiarity, loyalty, or influence. Finally, communicate the benefits and expectations of joining your board to the candidates such as the compensation, time commitment, learning opportunities, and impact.

4 How to orient and integrate new directors

Once you have recruited diverse and independent directors, you need to ensure that they are properly oriented and integrated into the board. This can help them understand their roles and responsibilities, get to know their fellow board members and the management, and contribute effectively to the board's work. To do this, you should provide them with a comprehensive induction program that covers the company's history, culture, strategy, operations, finances, risks, and opportunities. Assigning them a mentor or buddy can also be beneficial in guiding them through their initial period. Additionally, involve them in board committees, working groups, or projects that match their interests, skills, and expertise. Furthermore, it is important to create a safe and respectful environment that values diversity and independence by encouraging them to participate actively in board meetings, discussions, and decisions. Finally, solicit their feedback and suggestions on how to improve the board's performance, governance, and culture.

5 How to retain and develop existing directors

Building a diverse and independent board is not a one-time event, but an ongoing process that requires ongoing efforts to retain and develop your existing directors. To ensure that they remain motivated, recognized, and have opportunities to grow, you should review and adjust their compensation regularly. Additionally, give them verbal or written praise, awards, or testimonials to recognize their achievements. You should also provide them with continuous learning and development opportunities, such as training, coaching, mentoring, or networking events. Furthermore, you should assess and enhance their performance and potential through annual or periodic board evaluations, appraisals, or succession plans. Finally, renew and refresh their tenure and term limits by setting a maximum number of years or terms they can serve on the board.