Blank slate: reconstructing a board.

• Author: Daniel, David S.
• Position: Board of directors

Companies undergoing reorganization or restructuring often must assemble a new board. Here is some advice for succeeding at this daunting task.

Over the past year we have undertaken multiple director searches for more than half of our board clients. Clearly, companies are taking the long view when board seats open up and are considering what boards need to enhance effectiveness. Somewhat like big-city developers assembling parcels, companies are clearly making the most of opportunities to upgrade and reshape their boards with a particular vision in mind. Given the growing preoccupation of many companies with improving board performance and the significant number of recent spinoffs and bankruptcies, the trend toward multiple-director searches is an important one.

The situations of two client companies - both multibillion-dollar retailers - we recently worked with illustrate some of the significant challenges and opportunities of multiple director searches at the far end of the spectrum. In these cases, bankruptcies required companies to rapidly assemble a new board that could guide the restructured company going forward. Under these circumstances, time constraints, logistics, and the sheer volume of directors to be recruited can test a company's endurance. Long-term rewards, however, can make the effort more than worthwhile.

While the two retailers for which we constructed totally new boards may represent extreme examples of the challenges inherent in multiple-director searches, other companies will certainly face many of the same challenges to a greater or lesser extent. In order to shed some light on the process, following is a look at some of the issues these companies faced in recruiting a new board, how they were resolved, and some of the lessons learned.

Overcoming obstacles

In the case of the two retailers, the first order of business was to create both a structure within which we could work with our clients and another in which directors would be able to function. Unlike the more typical situation where we are retained by a board or a CEO, here we were retained by a group of creditors - a number of people with a great deal at stake financially, and a somewhat cumbersome structure for decisionmaking purposes.

Faced with a diverse group of individuals with similar though potentially conflicting interests, we immediately had to clarify who would be the chairman of the selection committee before we could proceed effectively. Should it be...