Rebuilding trust in the boardroom: how boards can restore confidence after the crisis.

• Author: Gwin, Bonnie
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER - Survey

BOARDROOMS across the country are, to a certain extent, still reeling from the shocks to the system that began more than two years ago. Beyond the business and financial concerns that continue to keep companies wading in slow motion toward recovery, corporations are grappling with what is a "fuzzier" and perhaps even more complicated challenge: the issue of restoring trust.

The image of irresponsible corporate management--an idea advanced by some regulators, the media, and others--has elevated the importance of trust and trustworthy governance to a high priority in the boardroom.

Increasingly we are seeing that boards are placing a greater emphasis on characteristics related to trust when looking at their governance processes. Companies who have been in the media spotlight, gone through bankruptcy, or experienced some other seismic event are particularly interested in finding ways to improve the quality and performance of their boards, as well as rebuilding stakeholder trust and confidence. In fact, companies across all industries have taken on rebuilding trust as a major objective. They see this as not only the "right" thing to do--a way to live up to their corporate values--but also as a way to improve their board functionality and effectiveness. This is true not just in the U.S. but across global boardrooms.

We often hear this Litmus test in talking to directors about their boardroom discussions: If your deliberations and governance processes were laid bare on the front page of any major publication, would you be proud and would you be comfortable with how you were portrayed? This question is well worth consideration by boards today. How can companies build boards that will restore stakeholder confidence? Moreover, how can companies ensure that the process of putting together the board team does, in itself, evoke confidence and trust?

Qualities in demand in the boardroom

Examining the attributes that boards are prioritizing in recruiting new members, we are seeing a shift. The "hard" skills in demand today are relatively straightforward, jibing with new market realities and company situations, such as experience in Asian markets, emerging from deep financial crises, or major restructuring. But becoming just as important as these hard skills are the so-called "softer" characteristics being sought in new directors. While traits such as intellectual bandwidth--the ability to synthesize many different business challenges--remain a top...