More than ever, industry firms expect their boards of directors to set strategies for the challenging times ahead and are revising what characteristics they want a potential director to possess, according to a new survey of industry governance trends.
Respondents appear to be getting more adept at defining what they want in board candidates, says the survey, conducted by management consulting firm Oberman & Associates Inc., Irvine, Calif. It points out that 42% of respondents in architecture, engineering, construction and management firms want directors who are “strategic thinkers” and “forward-looking.” Candidates with strong financial skills were valued by 40% of those surveyed; however, experience as a CEO or executive manager was cited as important by only 11% of respondents. The study says only 7% of respondents were looking for board members because of their “strategic relationships.”
The survey, completed in December, was based on responses from top executives of more than 400 industry companies. About 41% are from design firms, 25% from contractors, 22% from architects and 12% from others, says Oberman. About 45% of respondents posted revenue of $50 million to $200 million; 6% reported more than $500 million.
Not surprisingly, 14% of firms say they plan to add one or more “outside” board members, and 31% say they use “non-statutory” board advisers who offer guidance but cannot vote—up from 17% who reported this in Oberman’s 2008 survey.
Nearly three-quarters of respondents cited “strategic growth” as a top board priority in the next one to two years. About 52% cited leadership and succession planning as key, and 31% noted growth investment and risk management. Only 10% of respondents, most under $10 million in revenue, pointed to profitability and cost control as a board priority, which firm CEO Denys Oberman says reflects the delegation of performance to managers.
“Firms desire a board that can independently balance fiduciary responsibility and asset protection with the need to invest in the future to build value,” she says. CEO controls are being set through independent board review of both major decisions and policy as well as regular performance and compensation review, Oberman adds.
BOARD COMMITTEES | % OF RESPONDENTS 2010 | % OF RESPONDENTS 2008 |
---|---|---|
CEO, Executive Compensation | 48 | 58 |
Audit | 48 | 40 |
Governance and Nominating | 34 | 14 |
Finance | 31 | 14 |
Risk Management | 28 | 5 |
Succession and Leadership | 28 | <4 |
Mergers, Acquisitions, Ventures | 21 | 10 |
Executive | 10 | 5 |
Investment and Qualified Plans: Profit Sharing, 401K, Stock, ESOP | 7 | 25 |
Ownership and Transition | 7 | 5 |
Source: ObermaN & ASSOCIATES |