Reference checking of board candidates: why? When? How? Whether a first-time or seasoned director, some form of reference and background checking is vital to ensuring that the best people are sitting at the board table.

• Author: Condit, Madeleine
• Position: DIRECTOR RECRUITING

Board directors take undue risk if they do not define what behaviors and personal attributes a new director should have, together with the credentials and experience required, when they develop a "wish list" of potential candidates. So why is personal reference checking not done consistently?

Why do this?

Sheila Penrose: There may be a belief that someone of the stature to be considered for a board seat does not need to have checks on their educational qualifications, legal proceedings, credit history or personal reputation. After all, they are your peer. Also:

* Reliance on references from those in the boardroom may give comfort on character and behavior ... but that's not sufficient.

* A request for references may offend candidates, while checking references without a candidate's knowledge may breach trust, which is key among directors.

* And there may be concern about reference checking by a search firm.

"Who knows this person?" tends to be the last question asked in making a board candidate choice. There's usually a connection of five (or less) degrees of separation!

Madeleine Condit: Sheila's comments reflect the discomfort many directors feel in reference checking personal characteristics of individuals, especially if known to a current board member; over 80% of corporate directors state they had some connection with a current director prior to their nomination.

* From my perspective, boards began to take reference checking more seriously as shareholders became involved with board composition and its effect on creating long-term value.

* After the 2009 SEC Proxy Enhancement required disclosure of the consideration of diversity, background, qualifications and any legal actions of nominees, the reference checking process became more formalized but not necessarily thorough.

What are boards checking for?

Condit: In today's economic environment, shareholders and consumers expect boards to be transparent in their governance practices. Regardless of recruiting a new director or evaluating the current director's performance, shareholders expect the best people to be sitting in the boardroom.

* One of the most critical steps in determining the most qualified person to be a new director is reference checking.

* Board referencing is different than a reference check for a new position. A job reference check generally focuses on how a person met financial and growth goals in a structured business environment through management, innovation, and...