The director as competitive weapon.

• Author: Ogden, Dayton
• Position: Putting In Place the Right Board for the 21st Century

Think 'board as arsenal' and each director a carefully considered strategic element in the arsenal.

CLEARLY there has been a sea change in the business world in the course of a generation, and boards have been brought along with the current. While much has been made in the media about the "revolution" in the boardroom ignited by outside pressure groups, the changes have actually been more of the evolutionary variety. Change has taken place in small increments but, when viewed in the context of longer-term trends, there is much evidence to support the fact that boards are dynamic institutions and that the criteria for selecting effective directors continue to evolve to better meet the needs of shareholders.

As part of the annual Spencer Stuart Board Index (SSBI), which we have undertaken for more than a decade, we examine major long-term trends affecting boards. It may be useful to consider some of these trends as both context and catalyst for modifications in the profile of the next generation of directors. In this way, we can attempt to answer not only the question, "What sorts of directors will boards need?" but, "Why?"

Here are some of the ongoing trends we are seeing both in the 1996 SSBI and in our work with boards, followed by some thoughts on how these trends will continue to shape the profile of directors now and in the future.

Boards are smaller. The decrease in size is mainly a function of a net decrease in the number of inside directors, as well as the fact that smaller boards can operate more efficiently. Leaner boards mean each director plays a more critical role. As a result, there will be even greater emphasis than in the past on identifying the most effective director to fill a particular seat.

Outside directors predominate. In a shift from the insular boardroom of a generation ago -- where directors were primarily close friends and confidantes of the CEO, interlocking directorships were common, and the board was essentially an extension of management -- companies now realize they must complement the management side of the equation with a wide range of outside intelligence and expertise if they are to expand their horizons to new markets or remain viable competitors in old ones. Think "board as arsenal" and each director a competitive weapon -- a carefully considered strategic element -- in the arsenal. Boards will be increasingly eager to recruit directors who can extend their peripheral vision in key areas with specific...