Mr./Ms. finance professional: you may now be seated; New rules are driving the demand for independent directors and finance experts and changing the dynamics of selecting boards of directors. Three recruiters talk about the new realities for finance pros who aspire to board seats.

• Author: Heffes, Ellen M.
• Position: Boards of directors

As a senior financial professional, you believe you are qualified to serve on a board, and you are willing to devote the time and energy to do so. You view board service as a good way to share the expertise you've gained over the years. But, it hasn't happened. Your phone hasn't rung, and you don't promote yourself because, frankly, like a young lady wanting a date for the prom, you simply wait for an invitation because you know that's the way it is done.

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Or, is it? With the growing need for specialized board members--what with Sarbanes-Oxley legislation, regulatory changes, increased transparency, board diversity and stepped-up activist agitation--there has been a shift in the process for gaining board seats. Now, as recruiters have gotten into the act, the proverbial "who-you-know" route is morphing into--besides which CEOs and directors you know--which recruiter relationships you have and whose databases you are in.

With the composition of boards changing, Financial Executive's Executive Editor Ellen M. Heffes asked several executive recruiters to talk about the environment and the process for working with candidates to fill the empty seats.

Julie Hembrock Daum, the New York-based practice leader of the North American Board Services Practice of executive recruiter Spencer Stuart, says that about 40 percent of the firm's approximately 300 board searches last year were for finance experts. About 20 percent of Egon Zehnder International's current open board searches are for finance experts, says George L. Davis Jr., its Boston-based U.S. co-managing partner and U.S. co-head of its board practice.

While many CFOs and others have complaints about the extra work spawned by Sarbanes-Oxley, for search firms, it's another story. At Spencer Stuart, Daum says the new regulations have "had a huge impact in our business, in volume and also in terms of the process and who we're looking for and how we go about looking for them." The firm's board recruiting practice business doubled the year that Sarbanes-Oxley was introduced, as the new regulations have increased interest in candidates for audit committees as well as compensation committees.

Carter Burgess, New York-based managing director for The Directorship Search Group, notes Sarbanes-Oxley has increased the level of activity because "the pool has tightened."

Besides activity and volume, Sarbanes-Oxley has brought about major changes in process. Daum says one major change--which was not regulated, but has happened--is that boards are taking responsibility for recruiting new board members. In the past, she says, it really did tend to be the purview of the CEO. "Now, it's the board, usually working in conjunction with the CEO."

She says there are several reasons why boards are interested in putting a process in place to help them identify directors. In this era of governance and transparency, "everybody is more careful about making sure that they don't just put the first person they know on the board, but, rather, [that] they really identify the kinds of skills they need and who are the people that have the best qualifications."

Also, boards have to now disclose in their proxy where the name came from. "People don't want to say, 'that is my golfing buddy,' [but rather] they want to be able to say that they went through a legitimate process," comments Daum.

Another consequence of Sarbanes-Oxley is that it has become a lot harder for CEOs and boards alone to recruit directors. "All of a sudden...