NACD Blue Ribbon Commission Report on Building the Strategic-Asset Board

In 1996, the Report of the NACD Blue Ribbon Commission on Director Professionalism made recommendations on issues including establishing mechanisms for appropriate director turnover/tenure limitations, evaluation of the full board and of individual directors, and ongoing director education. It stated, “the primary goal of director selection is to nominate individuals who, as a group, offer a range of specialized knowledge, skills, and expertise that can contribute to the successful operation of the company,” and advocated that boards must “[expand] the pool of potential nominees considered to include a more diverse range of qualified candidates who meet established criteria.”

Twenty years later, the world in which boards operate has been transformed in fundamental ways, including increased complexity in the business environment; rapidly changing technology; volatility in global politics as well as in international economic and trade flows; the proliferation of information; the presence of major threats such as cyberattacks; higher levels of engagement between companies, boards, and investors of all stripes, including activists; new regulatory requirements; and greater levels of scrutiny from the press and the public. The velocity of the changes directors are facing shows no signs of slowing down.

We began the dialogue with our fellow commissioners by asking whether boards are keeping up. As a group, we concluded that there is no single answer. It is clear that advancing director ages and tenures, coupled with low boardroom turnover, are external symptoms that are of increasing concern to investors and other stakeholders. But equally—if not more— significant is the question of whether a board’s composition, director skill sets, and core board processes remain fit-forpurpose in a world where the board’s mandate is evolving in fundamental ways, including but not limited to earlier involvement in strategy-setting discussions with management and greater engagement between designated board members and major investors. This new mandate places substantially different demands on directors, and boards need to ask themselves, “Are we ready?”