Challenges in Recruiting

1
Challenges in Recruiting Independent Board
Members
Andrea Redmond Russell Reynolds Associates
March 10, 2003
RUSSELL REYNOLDS ASSOCIATES
2
Current Situation

• Regulatory changes
• Investor confidence in corporate governance is
  severely eroded and public disdain widespread
• Economic challenges
• General climate of uncertainty

RUSSELL REYNOLDS ASSOCIATES
3
The Changing Role of the Director

• Time commitment is significantly rising
• Complexity of the role is increasing
• Greater shift from approving strategic and
  operational development to contributing to it
• Director liability appears to be increasing
• Honor/appeal of being a director is decreasing
• Intolerance for inactive directors
• Greater public scrutiny

RUSSELL REYNOLDS ASSOCIATES
4
The New Board Candidate

• The traditional CEO
• Financial experts
• Turn-around or crisis management experience
• International experience
• Strategy expertise
• Track record of operational excellence
• Women Minorities
• OUT professional directors, CMO, CTO, new
  economy CEO

RUSSELL REYNOLDS ASSOCIATES
5
Client Concerns

• Analytical approach to director recruitment
  required
• Candidates must have impeccable ethics
• Candidates must have not only the time to for the
  directorship, but also a passion enthusiasm for
  the role

RUSSELL REYNOLDS ASSOCIATES
6
Hurdles to Recruitment

• Time restrictions
• Limited CEO quality
• Operating performance issues
• Rising scrutiny of DO insurance

RUSSELL REYNOLDS ASSOCIATES
7
Recruiting Strategies

• Broaden the pool
• Target senior operating officers such as
  presidents of global business units
• Do not overlook the CEO of a smaller company
• He/she could have come from a much larger
  business
• He/she may have an impeccable track record
• Be open to considering success wherever it is
  found
• Look at women and minorities
• Do not chase the obvious candidates along with
  everyone else

RUSSELL REYNOLDS ASSOCIATES
8
Recruiting Strategies

• Directors are recruited most successfully when
  both the CEO and the Nominating Committee commit
  focused and prioritized attention to the search
• Demonstrate the importance of the companys
  governance to prospective directors through
  action
• Do not let the search languish between board
  meetings

RUSSELL REYNOLDS ASSOCIATES
9
Comments on Other Trends

• Director compensation
• Lead Directors
• Separate Chairman CEO
• Director evaluation
• Audit Committee advisor
• CEO succession planning
• Executive compensation

RUSSELL REYNOLDS ASSOCIATES