Be strategic when filling multiple vacancies on the board: multiple departures offer a rare opportunity not only to fine-tune the board but to significantly realign its composition, competencies and culture.

• Author: Hanson, Lee
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER

WHEN THE PLANETS are aligned--or misaligned, depending on your point of view--your board can find itself facing multiple departures of directors. Several members may be approaching retirement at roughly the same time due to age or term limits. Perhaps an underperforming or inactive director needs to be removed in the same time frame. Or a director takes a position that conflicts with continued board service, or leaves an outside position, triggering a bylaw that requires board members to be active outside the boardroom. Additional vacancies can occur through illness, death, or an unexpected voluntary retirement.

Filling one board seat is hard enough; filling several simultaneously can seem like trying to change all four tires on a moving car.

Simple rules

It doesn't have to be that difficult. With foresight, the right attitude and these simple rules of the road, boards can avoid the mistakes that the pressure to make multiple appointments can cause.

Begin addressing multiple departures far in advance. On boards with age or term limits, the nominating committee should not only track anticipated departures but begin addressing them two to three years in advance. As many nominating committees have found in recent years, recruiting qualified directors has grown harder than ever. Many companies have restricted the number of outside boards their officers can join, and many executives prefer to focus on the increasingly complex demands of their own companies. And with increasing regulatory scrutiny, director liability, and shareholder activism, many qualified candidates find board service unappealing and risky. In the face of this new reality, deliberate planning around board recruitment mitigates a hasty appointment the board might later regret.

Regard multiple vacancies as a rare opportunity. Board departures don't often take place simultaneously, and on many boards even single departures are few and far between. When a vacancy does loom, many boards simply react by replacing a departing director with someone similar: a CEO for a CEO, a financial expert for a financial expert, and so on. This reactive approach can be a mistake even in cases of a single retirement and an even bigger mistake with multiple departures. Wholesale replication of the current board locks it in to the same skill sets and culture for years to come, whether or not all of those skills or the culture are relevant to the changing business environment. Multiple departures...