How a candidate made the cut: this step-by-step board-recruiting process turned up a new compensation committee chair.

• Author: Reda, James F.
• Position: DIRECTOR RECRUITING

FINDING AND SELECTING qualified outside directors is one of the most challenging and rewarding dimensions of building an effective compensation committee.

Before beginning the search for new directors, the company should develop a board prospectus. The board prospectus can be a helpful tool in recruiting director candidates, and can assist the company in networking with lenders, advisers, and others who might know of attractive director candidates. The board prospectus should describe clearly the purpose and goals of the board. It should convey the qualities and capabilities the board is seeking in directors, and describe the board structure, director compensation, and anticipated time demands on members. The board prospectus should convey the business, culture, philosophy, and values of the company. See the accompanying sample board prospectus.

Attracting candidates

In general, the following factors attract good directors:

- Quality of management,

- Ethics of the company,

- Prospect of serving with respected peers,

- Opportunity to learn,

- Opportunity to make a difference; to make an impact on the future direction of an organization in a measurable way,

- Opportunity to use his or her own knowledge and expertise,

- Opportunity to network with top business leaders,

- Opportunity to serve in a prestigious position,

- Compensation (to a limited degree),

- Entrepreneurial spirit, an opportunity to create something special, and

- Personal challenge.

How to approach candidates

Once a list of qualified candidates has emerged, the focus shifts to seeking information from the candidates to narrow the field to those with the best fit. Some of the following questions can solicit useful information from the candidates:

* Why do you want to serve on the board of this company?

* What is your opinion of the company? (Does he or she have knowledge of how the company competes, how it markets, who its competition is, who its customers are, what its critical issues are?)

* How will you contribute to the board? (Ask for clear and simple examples of how the candidate can contribute.)

* What are your specific areas of expertise? How will your expertise add value to the board?

* What is your financial acumen? (Each director should have the ability to read and understand financial analysis, but need not have a professional financial or accounting background.)

* On how many other boards do you serve? (List for-profit and not-for-profit separately.) What role do you play on those boards?

* What is your view of the role of the board and corporate governance?

* What has been your most rewarding experience as a director?

* How specifically have you added value to the boards on which you serve?

* What has been your most difficult experience as a director?

* Are you willing and able to commit to the level of participation we require?

* What are your concerns?

Making the final selection

In screening director candidates, some of the most important qualities to consider are also the simplest. At a minimum, the candidate should exhibit integrity and the ability to make thoughtful and sometimes difficult decisions.

The candidate should show candor, an eagerness to learn, and a lively interest in the business and work of the board and the committees on which he or she is likely to serve. The candidate should demonstrate courage of conviction, readiness to express his or her viewpoint, and the kind of personality that can be effective in a boardroom setting--an ability to be a team player, for instance.

With respect to each serious candidate for director, the...