The Importance of Board Composition
23 October 2023Board composition is the mix of people who a board chooses to govern an organization. This includes the mix of directors who are inside and outside directors, the proportion of men, women and minorities, and whether the board members are of different generations. It also takes into account the balance of expertise in governance and management issues such as fundraising, or legal risk.
Diversity is a major driver of a well-balanced board, and many boards are looking for new ways to diversify their membership. To determine gaps in their diversity, companies can conduct an audit of current board members and decide the areas where recruitment efforts are the most required. Diversity is a must across all dimensions including race and gender, age and education as well as skills and experience.
A matrix of board needs will help boards understand what kind of individuals they require to fill their boards. A matrix is a grid similar to Excel that lists the characteristics of directors on the board and the abilities required to fulfill their responsibilities. Based on this information a committee can come up with an initial list of possible nominees and rank them by how closely they meet the criteria.
A board should balance the interests of shareholders and the management team. This usually means that the board has an assortment of directors from outside and inside and that the inside directors have experience useful link managing nonprofits or businesses. Boards typically have a chairperson who is the head of the committees and board members and oversees the activities of the board.