The accounting scandals at renowned global conglomerates such as Enron, WorldComm and Xerox put a serious question mark over the role of corporate boards and brought to the fore the necessity for strict governance inside companies. Consequently, corporate governance has emerged as one of the most serious management issues for companies across the world. “One clear trend that has emerged in the last several years across the corporate world is the strict scrutiny of the performance of the governing board,” says David Kidd, head of global board practice at Egon Zehnder International, a firm that specializes in board consulting and building leadership teams. Till recently, he adds, “it was awkward to ask board members questions about the way they functioned but now, it is almost a given that if executives are evaluated, so should be a company board.”
Kidd should know. At Egon Zehnder, he advises the boards of many large global companies to strive for transparency and professionalism. “This is the only way good boards can become better,” he says.
After leading Egon Zehnder’s talent management practice for seven years, Kidd now focuses on board searches, board reviews and senior-level executive searches. Most of his executive search assignments concern the energy, resources and industrial sectors, while he consults boards across sectors such as consumer goods, retail and financial services.
Kidd, 53, was in India recently to participate in a session on corporate governance organized by the Wharton School and Egon Zehnder. In an interview with Mint, he talks about corporate governance trends in the developed and developing economies and the imperative of having a good board.
Edited excerpts:
What are the trends in board practices globally and in India?
The one clear trend that has emerged in the last several years across the world is evaluation of board performance and taking board appointments more seriously. Even five-six years ago, it was awkward to ask board members questions about the way they functioned but now, it is almost a given that if executives are evaluated, so should be a company board.
Board reviews are either done internally—by the chairman, company secretary and legal officer—or by an external agency such as our firm.
Increasingly, companies are hiring a service provider to evaluate their boards, although many companies in the UK still conduct it internally. We (Egon Zehnder) have conducted around 200 board reviews in the last two years. Most review projects have been driven by public companies and also some privately held and family owned firms that are looking at globalizing their businesses.
Another trend that has gained significance is the appointment process for board directors. There is a shift towards what is required from a board director and, thus, there are clearer candidate specifications being delineated by companies.