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Board Director Selection Process and Structure: Implications for Diversity and Efficacy

Authors:

Abstract

A primary concern in the governance field includes determining what kinds of boards are most effective and what board practices lead to optimal outcomes. One such pivotal board practice is the selection of directors that make up the board’s composition. Ultimately, board selection is what defines the board’s effectiveness, especially in terms of monitoring, strategy and overall accountability. While there are many important factors to putting together an effective board – industry expertise, social capital, gender diversity – we lack an understanding of the outcomes of various director selection processes and how certain aspects of the board’s composition (e.g. the nominating committee and the CEO) affects the structure and process of director selection. In this presentation, we focus on deep-level diversity as an enabler of board efficacy and an instrument to correct the existing problems associated with current DSPs and structures.

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
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 $/
,
73% new directors Fortune 500
sitting or retired CEOs or CFOs
4.2% of Fortune 500
CEO positions are
female
" $
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+
structural $
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#()#&
*identity&+3:$*
%&&;5
+:$
3<<*<'(%=5
>$#$$
?
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$  

+:@
 $$
-.$
$##
+:
A###
3+!A'(5
+:
35* 13
B65 
!9+>
C
++D
$ E$ 
#6$#
+F 6>C
+6+C
+>G$
$#$+
Proposition 1: When DSP is NC driven (CEO
driven), there will be a formal (informal)
nominating committee structure.
>*! 
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$$G
$$G.
 ##
6
:6#!
+,



#
+-,
#
#2
# H
 3I
1 6#
1 5
$/$

#
$/$
indirectly$
I$ $
$!
 I
+ #6$
*
++ 1

+$# 3
# #5
+B$ 
$
+I#

J
+-#
1 6
$$
+$#
#$ 
@/

F"JC
+#$ 
$ 
+$
6
  $
6
+"## 
$#
Proposition 2: Informal (Formal) nominating
committee structures will more likely result in a
process that emphasizes resources and status
(gender and values).

+9$ 
$$
6#
#2
+92$
 
E356I6
$I$$
I$-G$
!: *!: 
+%

3#A##5
+%3#$

59
Proposition 3: Gender-based and values-based
(resource-based and status-based) DSPs will more
likely result in deep (surface) level diversity.
  

 
-%
& +
K
$!
K
!6

 B6
%
&
!6
A #A
 
 B6
.%
& >
K
?$!
K"6$
  "
/%
&
!6
 I$

! 4#
!L+!
,
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