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Mar 12, 2015

Executive search firms must consider diversity when recruiting directors

Management has to be willing to replace recruiters that don't cast wide nets, says ethics summit panel

Calling an executive search firm out when it fails to deliver a broad enough selection of candidates for a position on the board was one of several points that panel members made at a plenary session on how board diversity affects performance at the seventh annual Global Ethics Summit, held in New York on March 10 and 11. The summit was co-hosted by Ethisphere and Thomson Reuters and coincides with Ethisphere’s annual list of the world’s 100 most ethical companies.

When a recruiter that insurance provider Aflac had contracted to find a new director came back with a list comprised exclusively of white male candidates, board member Melvin Stith told management to find another search firm.

‘I pushed management not to bring him back because I thought he did us a disservice by bringing into that boardroom only one kind of person he thought was qualified’ to be a director, Stith told an audience of roughly 250 compliance and ethics professionals. The recruiter learned his lesson and now calls Stith regularly to confer, added Stith, who is also dean emeritus and a professor at Syracuse University’s Martin J Whitman School of Management.

Stith believes that we won’t see more diverse boards of directors until there’s more diversity on companies’ senior management teams. He sees a need to ensure that management recruits widely, not only from top executives' college fraternities but going as far as to target gender-specific universities, for example.             

Georgia Nelson, a board member at privately held engineering services firm CH2M Hill Companies, said, ‘Everyone has a vested interest in making sure we cast a wide net’ when recruiting new members to the board. Directors are in a unique position to scrutinize the company’s succession plan and bench strength of management and to test that bench strength, she added.

Diversity on the board isn’t limited to gender and ethnicity, but includes having a comprehensive understanding of global issues, Nelson explained. When power company Cummins’ board, on which Nelson also serves, added former NASA astronaut Franklin Chang Diaz in 2009, there was general bewilderment as to why he was brought on. But he has proved to be the one director who always pushes the board to look beyond the three- or four-year time horizon it’s comfortable with to consider the implications of decisions for 20 to 30 years in the future.

Having a diverse range of perspectives and backgrounds on the board helps a board better understand the culture and environment in which employees work day to day, Nelson said. It’s up to the board to address any ethical issues that may not be in sync with that culture.

David Bogoslaw

Associate Editor and Online features producer for Corporate Secretary