Equilar Survey Sheds Light on Director Onboarding

One-third of companies do not have a formalized and documented onboarding process for first time directors, according to an Equilar survey. The study asked 176 U.S. public companies about their onboarding practices and the effectiveness of the new directors in their first year. 

Key Insights:

• Board refreshment. 90% of companies surveyed have added at least 1 new director; over 52% have added between 2-3 new directors.
  
  
• Onboarding responsibilities. The onboarding process is typically led by the General Counsel or Corporate Secretary (56%). These roles are ranked the most engaged in the process followed by the CEO, Chairperson and Chair of the Nominating and Governance Committee.
  
  
• Onboarding tactics. Some companies (29%) of companies assign a “buddy” or mentor for a first-time director. The “buddy” assignments are not usually based on committee membership as only 27% use a fellow committee member to designate the buddy.
  
  
• First-year contributions. Three-fourths of companies reported that their first-time directors are engaged and contribute meaningfully to strategic discussions and board decision making in year one. 
  
  
  1. Specific experience/expertise (approximately 67%) is cited as the top success factor followed by interpersonal and communication skills (46%), cultural fit (39%) and diversity of thought/background (34%). 
     
     
  2. Top challenges include: contributing too little to board conversations (42%), poor cultural fit (37%) and lack of preparation (34%).

Center Guide to Director Onboarding. The Center published a CHRO’s Guide to Compensation Committee Chair and Director Onboarding which contains cutting-edge best practices for selecting, transitioning, onboarding and educating directors.  The report shares topics that should be included in the director orientation including a review of industry trends and competitors, company financial and operating goals and results, major shareholder perspectives and engagements, executive talent and rewards philosophy, the regulatory and legislative environment for the industry and essentials of corporate governance. One-on-one sessions with other directors and C-suite members help to build relationships and increase the effectiveness of the director being able to “hit the ground running” in their new role.