Who Will Sit on Tomorrow's Boards?

THE JOB IS TOUGHER THAN EVER. Standards of independence are higher, and committee work takes weeks longer than it used to. Sitting CEOs are often unable to sit on more than one outside board. And fear of personal liability at the slightest whiff of corporate malfeasance scares some potential directors away from the job.

So do boards face a dangerous shortage of qualified future members? It depends on whom you ask. "If you go by the standards of 20 years ago, when all you wanted was another Fortune 500 CEO, then yes," says Stephen P. Mader, vice chairman of board practices at search firm Christian & Timbers.

Nominating committees that refuse to consider candidates without "chief" in their title have a frustrating slog ahead. But those that embrace the next generation of directors will find the talent pool considerably deeper.

Board searches are "getting much more difficult," says Gerry Roche, senior partner of Heidrick & Struggles. "We've raised our fees, and we're trying to get clients to expand their horizons." Leaders of nonprofits, academic institutions, and even the former Siberia of health care are under consideration in some circumstances, Roche says, when they would not have been tapped in the past. The challenge is adjusting nominating committees' expectations to the new realities.

As business practices change, board composition is evolving along with them (see chart, right). Twenty years ago, most directors were handpicked by the chief executive, largely on the basis of their people skills. A popular director could be stretched thin— Gus Levy, Goldman Sachs' legendary senior partner, sat on no fewer than 12 boards while doing his day job.

Today, canvassing the golf course just doesn't cut it any more. Since firing a director who doesn't work out is difficult at best, each decision is critical. The casual process has collapsed.

Instead, nominating committees, frequently with the help of search consultants, dedicate much of their time to filling board seats as they become empty. According to Beverly Behan, a board consultant at Mercer Delta and the author of Building Better Boards, "most committees are taking a much more systematic approach to composition than in the past." Behan says diligent recruiting now focuses on three areas:

Skill sets. A candidate must round out existing board members' competencies by bringing desirable expertise to the table.

Personal attributes. The candidate should be a good cultural fit. For example, a Midwestern manufacturing company that needs a financial expert may not feel comfortable with a Wall Streeter.

Representative factors. Candidates should add to the board's geographic or demographic diversity, to reflect the company's business goals more closely.

In an ideal situation, a new recruit has it all. Financial services company FNB Corp. hit a home run in June with Dawne Hickton, who holds the titles of chief administrative officer, general counsel and corporate secretary at RTI International Metals. FNB, which recently acquired Pittsburgh's Northside Bank, needed a director familiar with the smokestack industries where it would be doing more lending. Although RTI is based in Ohio, Hickton lives in Pittsburgh, where she went to law school and practiced. And she was a known quantity. "Hickton brings three things to the board: business acumen in manufacturing, name recognition in Pittsburgh, plus gender diversity," says FNB spokeswoman Kathryn Lima.

The good news is that once a nominating committee is willing to look beyond the traditional specifications, the pool of talented potential directors widens considerably. One obvious source of supply is the cohort of recently retired CEOs, who come fully loaded with experience and are free to serve on multiple boards. Another advantage: In the event of an upper management crisis, a former CEO may be able to step in while succession issues get ironed out. Former Clorox chairman and CEO Craig Sullivan serves on the boards of Kimberly-Clark, Levi Strauss, Mattel and a handful of nonprofit organizations. And Sears' former chairman and CEO Arthur Martinez is a director at PepsiCo, Liz Claiborne and ABN AMRO, to name just three boards.