The HR executive's role in director recruitment.

• Position: Human resources - Panel Discussion

From staff support to the board to acting as an intermediary with director candidates, the human resources executive has capabilities to bring to the search and selection process.

SpencerStuart historically has worked closely with the chief executive officer and chairman of the nominating committee in recruiting directors for their boards. The secretary of the corporation and/or legal counsel have often been involved as staff to the committee or the CEO in this process. Within the last few years, chief human resources executives have begun to get involved in providing staff support as well, particularly in refining the "specifications," providing input on long-term issues, including future board composition and the appropriate mix of skills needed in committee work, and leading due diligence/reference activity in concert with our firm. And, in a recent case referred to in the following discussion by Ed Carrington at Hercules, getting directly involved in meeting the finalist candidate as part of the process and facilitating the flow of communications leading to a successful recruitment.

With the turndown rate for boards running as high as eight to one, staff support will become increasingly important to the CEO. The demand for highly qualified directors is accelerating as the traditional pool of prospects diminishes. CEOs are cutting back on outside directorships, and diversity demands are increasing through institutional shareholder action and public advocacy. As a result, the identification of "next generation CEOs" and/or key executives is more important.

The role of the human resources executive in this process runs the gamut from "no involvement" to "deeply involved," as reflected in the comments of our roundtable participants. However, there is a strong belief that the human resources executives' role in this area is likely to increase as the recruitment of good outside directors becomes more difficult.

We have also witnessed the emergence of some HR executives as potential prospects for board directorships. Although only a few serve as outside directors today, we see demand on the rise, especially in cases where the HR function is integrated as part of the overall business strategy.

To explore these and related issues, SpencerStuart and DIRECTORS & BOARDS convened a diverse industry group of top HR executives at the Wharton School at the University of Pennsylvania. The participants included:

* from Aetna Life & Casualty, Mary Ann Champlin, Senior Vice President, Human Resources;

* from AMP Inc., Gary D. D'Lamater, Director, Global Executive and Human Resource Development Programs, and Leonard I. Hill Jr., Director, Global Human Resource Development;

* from Hercules Inc., Edward V. Carrington, Vice President, Human Resources;

* from Merck & Co., Steven M. Darien, Vice President, Human Resources and member of the company's management committee;

* from PECO Energy Co., William J. Kaschub, Senior Vice President, Human Resources;

* from Unisys Corp., Thomas E. McKinnon, Corporate Vice President and Vice President of Human Resources.

Also in attendance were George Helmer and Peter McLean, representatives from SpencerStuart, and James Kristie, Editor, and Robert H. Rock, Chairman of DIRECTORS & BOARDS and the moderator of the roundtable.

Excerpts from the discussion follow. We believe you will find that the comments provide important insights into the emerging role of some HR executives in director recruitment.

Robert Rock: Let's initially get a broad view of what you believe to be the evolving role of the human resources function as it relates to the board.

Edward V. Carrington: Being the classical staff function in a corporation, it's my belief that HR has an accountability to the chairman to ensure that we match the competencies of the board members to the competencies of the company. We should be providing the same type of counsel to the chairman, and to the CEO, if they happen to be different people, that we would if we were trying to identify the right type of person to staff a division of the corporation.

Leonard I. Hill Jr.: There are two areas I will identify. One, I see boards today using HR to facilitate the total succession flow process, which includes the board itself. Up to this point, boards have had their own internal mechanisms for handling their own succession. Secondly, I see boards using HR as the medium to affect business change. What many boards are confronted with is that their companies may have the technology, the finance, the marketing strengths, but do they have the HR competency base to bring its capabilities together? If not, they are not going to effect the necessary business changes. HR has to become a component to...