A board matrix is just one tool that a board can use to examine the characteristics and qualifications of its board members. A board matrix isn’t purely about diversity and board construct, though, that’s part of it. It really boils down to board quality: Why are these directors here? Where is the company headed and how can these leaders guide the way? Are the blind spots covered? Is the company prepared for the changes that will inevitably come its way?
A board matrix in itself is not explicitly required in proxy statements, but the SEC recently issued two new Compliance and Disclosure Interpretations (C&DIs). These call for public companies to include diversity data for their boards of directors within their proxy statements. In parallel, legislation was recently introduced to Congress that would require public companies to disclose the gender, race, ethnicity, and veteran status of their board of directors (see “Improving Corporate Governance Through Diversity Act of 2019”). Previously, the SEC was interested in knowing how diversity played a factor in the director nominations process; now, they are calling for additional details on what board diversity truly looks like at the individual director level.
While there are many types of board matrices, and no single official format, a solid matrix should inspect and document the unique skills, race, gender, and age of each board member. It may include elements such as community connections, qualities, and industry expertise.
These elements are traditional for matrices. But a far more modern approach considers customers, opportunities, and threats. Board matrices should be more than a yearly check-in on diversity and director tenure; they should serve as a look into a company’s preparedness for the future. Do board members have a deep understanding of customers and stakeholders? Can the company take on modern threats like cybersecurity? Is the team poised to embrace macro trends such as a distributed workforce and ESG?
Taking the matrix one step further, the modern matrix becomes a crucial tool for an effective board refresh process. Annual evaluations and reports do not mean anything unless a board is willing to act on their discoveries. It’s this step—a willingness to make a change—where many boards fail. No director wants to vote off their long-time colleague, despite reports that show almost half of directors believe someone on their board needs to go. There’s comfort in the status quo. It’s challenging to avoid politics and emotion.
(For a glimpse into a company that took a courageous, proactive approach to the board refresh process, read our recent article about Forrester’s board refresh).
As the top decision-making body of a company and as agents of shareholders, boards have a responsibility to make the best decisions possible for the success of a company. A board matrix can help to enable diverse boards, encompassing a range of backgrounds, generations, and contemporary roles. This has been proven to reduce the risk of groupthink, conflicts of interest, and narrow perspectives.
We encourage boards to use a matrix to not just inspire diversity, but to ensure that everyone at the table is contributing and adding value at the highest level of impact.
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