Orrick, Herrington & Sutcliffe LLP was honored to be a part of the recent TechGC 2021 Public Company Forum. Orrick's colleagues, Erin Connell and J.T. Ho, participated on a lively panel discussion about board diversity, and the challenges related to finding diverse, qualified board members with Elliot Mark, who serves as General Counsel of Everbridge, Inc. This post provides a summary of the key takeaways from this discussion.
The pressure for public companies to diversify their boards of directors has never been higher. Not only has California mandated board diversity for California-based employers, but companies face additional pressures from proxy advisors, institutional investors, activist shareholders, and their employees. Despite the current landscape, however, many companies struggle to find suitable candidates. Factors that contribute to this struggle include the desire to stick with traditional candidates (for example, former CEOs or CFOs of public companies); the inability to find candidates with relevant industry expertise; and concerns that well-qualified diverse candidates will be “overboarded” because they currently serve on a number of other company boards.
To overcome these issues, a number of companies are looking to more non-traditional candidates, such as candidates who fall within or just below the C-suite (but were not CEOs or CFOs), as well as candidates who haven’t served in a corporate role but bring other valuable, relevant skills to the boardroom. Examples include former CLOs or GCs, law firm partners whose practices center on an aspect of the corporation’s key business, or individuals associated with a community that represents a key customer demographic. Consistent with this practice, companies also are recognizing the skill sets needed in the board room are not static. They evolve over time and warrant continual review and revisiting to ensure the right mix of backgrounds among board members.
Companies have also adjusted their recruiting practices. They are moving beyond traditional third-party search firms and instead are partnering with organizations whose mission centers around placing diverse board candidates. Companies also are leaning on their diverse contacts and colleagues to introduce them to people within their inner circles who might be qualified for board roles.
Companies also are recognizing the importance of building diversity into their board succession planning, as losing even one diverse board member can make a material difference. Strategic board succession planning also can be a tool for adding new diverse board members, without having to expand the board.