8 positive trends that are transforming boards: boards are more aware than ever of their duty to create value for their shareholders.

• Author: Carey, Dennis
• Position: ROAD TO XL * DIRECTOR RECRUITING TRENDS

There has been more change on boards in the past five years than in the prior 20. While the emergence of activists has put a spotlight on boards, we believe a major driver of change is the overall view that boards are increasingly elected to be true "strategic assets" and, as such, can deliver a source of unique competitive advantage.

Boards that rise to this superior level, combined with an exceptional leadership team to which the board serves as a crucial partner, comprise the foundation of high-performing companies. The framework and characteristics for what we now consider a strategic-asset board has been evolving, spurred by boards that are more aware than ever of their duty to create value for their shareholders.

As we study high-performing companies and their boards we are witnessing and continue to encourage the following changes:

1. Board Leadership: There are two pillars of leadership in high-performing companies, exceptional CEOs and board leaders. Regardless of its form--lead director or nonexecutive chair--the board leader's role is clearly defined. Not all directors make good board leaders, and boards are assessing the key competencies required for thoughtfully selecting their leadership. Board leaders are increasingly expected to participate in shareholder communications and meetings and are now selected with this in mind.

2. Board Succession Planning: The identification and selection of exceptional directors takes careful thought and planning. High-performing boards take a long view and anticipate what skills and competencies will add the highest future value, and create long-term board succession plans as a roadmap. They are both opportunistic and patient in their focus to find directors with backgrounds and successful experiences that are aligned to future challenges.

3. Board Evaluations: High-performing boards do not wait for activists to run a slate of new directors, and respectfully manage transitions of nonperforming directors. They also have a culture of continuous improvement and benchmarking reflective of evolving best practices.

4. New Director Selection: Despite positive trends in board evaluations, removing non-performing directors is difficult. If a director candidate does not have a history of making good decisions and a consistent pattern of good judgment the odds of adding value are low. Against the backdrop of this practical reality, boards are doing more rigorous due diligence on track records of success of new board candidates who will be partners around the table for a long time. Intensive referencing is accelerating to ensure a good fit.

5. Director Compensation: High-performing companies have highly relevant engaged directors and pay them extremely well, often heavily equity-based. These directors stay current on such essentials as industry trends, competitors, and customers, and keep the company top of mind.

6. Diversity: "Diversity of thought" is highly valued and accepted as clear best practice to enhance board decisions. Progressive boards define diversity broadly--gender, ethnicity, age, geographies, but all candidates must demonstrate a history of making good decisions. In addition, next-generation digitally savvy executives are also much sought after as part of the new diversity pool.

7. Professional Directors: A new breed of professional director has emerged and has been embraced: highly successful executives who have elected, for positive reasons, to effectively change careers. Instead of full-time employment, they serve as highly engaged and effective directors of three to five companies. These directors stay current on a wide range of issues, study markets, listen to analyst calls, travel to company sites, and test the customer experience. Although there is still a slightly negative connotation to the older version of a professional director, smart companies are taking advantage of this rich talent pool.

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