Having trouble recruiting directors? Don't despair.

• Author: Carey, Dennis C.
• Position: Includes related article on director compensation - Corporate directors

To improve your chances of getting top-notch directors, you may want to consider some of the following suggestions, related chiefly to streamlining your board and making the board process more efficient.

If it seems increasingly difficult to recruit good directors it is not your imagination and you are not alone. More important, however, there are steps you can take to make it easier and to ensure that your company has the best shot at recruiting the best candidates for your board. These are but a couple of the conclusions we have drawn from dozens of interviews and informal conversations we have recently had with CEOs as well as a look at the specs of more than 50 director searches we have completed for Fortune 500 companies within the past year. (Spencer Stuart conducts approximately 300 director searches per year; this analysis was conducted on a subset of those searches.)

Much of the difficulty in recruiting directors might be attributed to the basic laws of supply and demand. Demand for directors - as quantified by the increase in the number of our board assignments - is clearly way up. The supply of director prospects, however, particularly of the traditional CEO candidate, is way down.

A number of concomitant trends have caused the demand side of the equation to escalate steeply in recent years. The overall aging of boards is clearly one trend. In fact, a number of our board clients have had to replace more than one retiring director during the same time period, which only adds to the recruiting urgency. Moreover, the emergence of thousands of new companies, as a result of IPOs, spinouts, and related phenomena, has made competition for talent more intense than ever.

The now well-established "best practice" for boards to eliminate insiders on boards and replace them with independent outsiders - long advocated by governance experts - adds significantly to the drain on the pool of available candidates. Interestingly, even as boards have decreased in size, the demand for independent directors has remained stronger than ever. And, as boards increasingly evaluate their effectiveness and survey the expertise they have on board, they are likely to find themselves deficient in one or more areas of strategic importance. This determination, too, often leads to the desire to recruit new directors.

Supply constraints

We see several factors constraining the supply side and thus the ability of companies to fill board seats. One of the most significant barriers to recruiting capable directors is related to the fact that, despite the greater diversity of functions represented on boards, the strongly preferred candidate is still the active CEO or designated heir, preferably one that has been...