Corporate board members have an increasing desire to play a role in the appointment of general counsel, though their search criteria priorities can differ significantly from CEOs.
Almost three-quarters of public company board members surveyed earlier this year said the board should be involved in the appointment of a GC, according to a report from Corporate Board Member and BarkerGilmore, an executive search firm.
One reason directors want a say in the process is the role of GCs in helping boards carry out their oversight duties.
For example, 86% of the 226 directors surveyed said GCs regularly attend nominating and governance committee meetings and 52% said they routinely present at those gatherings. Additionally, 79% said GCs routinely attend audit committee meetings and 59% said they regularly attend compensation committee meetings.
“These findings demonstrate that most boards do expect the GC to contribute to the oversight conversation,” the report said. “It, therefore, only serves directors well to ensure that this individual possesses the skills and depth of knowledge required to add value for the board.”
Directors expressed a range of opinions about the level of involvement the board should have.
One general sentiment was that the board chair or the nominating and governance committee should be permitted to review the final candidate and provide guidance, but it is not the board’s role to select the GC. Half of the respondents said the hiring decision ultimately rests with the CEO.
Other respondents said that given the impact of a GC, “the board should be heavily involved in selecting the best individual to advise both the CEO and the board.”
John Gilmore, managing partner of BarkerGilmore, says his experience handling GC searches has been that boards typically like to be involved in the beginning stages when the position description and objectives are being ironed out. The board then expects the company’s CEO and executive leadership team to evaluate and vet the candidates and to come back to the board with a candidate who they think would impress the board and receive its blessing.
“It's rare that the executive leadership team has vetted a candidate and the board says we're not interested in this individual,” Gilmore said in an interview with Legal Dive.
Nevertheless, challenges can arise during a search because boards and CEOs have different priorities regarding the criteria for GCs.
BarkerGilmore surveys of CEOs and board members over the years show that boards typically prioritize corporate governance and fiduciary responsibility competencies while CEOs tend to place an emphasis on the GC's ability to serve as a strategic advisor and help navigate risk across the enterprise while achieving business goals.
“These different priorities are, therefore, important to keep in mind so candidates can represent skills and experiences accordingly,” the report says.
According to the most recent survey, high integrity (76%) and sound judgment (72%) were the most important competencies.
Strategic perspective (19%), emotional intelligence (13%) and financial acumen (1%) were three competencies for GCs cited less frequently by board members.
Gilmore says he was particularly surprised by the low value directors placed on emotional intelligence.
“All of the components of emotional intelligence are what makes a GC great,” Gilmore said. “They're good listeners. They're good relationship builders. They're calm and cool under pressure. They're humble.”
The low priority placed on strategic perspective and financial acumen by surveyed board members also was a contrast to other results from the survey.
For example, 76% of directors said they would like the GC to express views on business strategy and participate in strategic planning in addition to their core responsibilities as legal counselor and risk manager.
This view was shared more by directors at larger companies than smaller ones, with 87% of directors at companies with $10 billion or more in market capitalization saying they tend to seek out a more strategic perspective from their GC. By comparison, 61% of directors at companies with less than $500 million in market cap expressed that view.
Gilmore said the high percentage of directors wanting the GC to play a growing role in supporting business strategy aligns with the viewpoint of CEOs.
“What we're finding is the CEO looks at the GC as another member of the executive leadership team, and you don't want to waste a seat at the table with someone who can't speak business,” he said.