Selection procedure for Board of Directors
The process of selecting the members of the Board of Directors (BoD) follows transparent criteria and allows for participation.
The role of the BoD is to ensure the organization’s prosperity by collectively directing the affairs of the organization. Overseeing rather than actively managing the day-to-day operation, the BoD is responsible for the organization’s governance, and for meeting the interests of its shareholders and stakeholders.1,2 BoDs mostly consult with management on the organization’s strategic and operational direction, as well as monitor the organization’s performance and reduce agency costs. 3
Recruitment and selection processes should be described in the organization’s by-laws so that they can be referred to whenever a position on the board needs to be filled.4 They need to clearly state the required qualifications and should enable participation of affected stakeholders in the process.
PURPOSE & LINK TO INTEGRITY
BoD selection procedures shall make sure that BoD members have adequate qualifications and serve the interest of the whole organization and not of specific interest groups. BoD selection procedures can help to significantly reduce integrity risks related to BoD members, which include:5
- Selecting board members with a questionable reputation (e.g. those involved in ongoing court cases)
- Selecting board members with conflicting interests and activities outside the organization
- Selecting underqualified board members
- Lacking representation of key professional areas (for instance financial management, consumer representation).
Moreover, selection procedures set the tone for what is required from BoD members right from the start. Hence, transparent and participatory procedures also raise awareness of the BoD’s responsibilities among its members, managers, and the public.
- Does your organization have a corporate governance structure including a BoD in place? (See also the tool Corporate governance structure)
- Do you have to adhere to any regulation applying to your BoD selection?
BoD selection procedures may include the following:5,6
- Applying guidelines on good corporate governance, set by the organization itself or by an authority such as a regulator
- A well-defined selection process and involvement of external experts in the selection of BoD members
- A thorough screening of BoD members during the selection process, documenting results and considering false information as a basis for immediate disqualification
- Disclosing assets of potential BoD members
- Considering deficiencies in skills.
KEY GUIDING DOCUMENTS
NGOConnect , 2012, How to set up an effective board of directors, NGOConnect
GIZ, 2013, Proposed Integrity Guideline Manual for the Kenyan Water Sector (Draft), 2013, GIZ WAVEPlus, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Kenya
WASREB, 2009, Corporate Governance Guidelines for the Water Services Sector, Water Services Regulatory Board (WASREB), Kenya
Nordmann, D., Peters, P., and Werchota, R., 2013, Good Governance in the Kenyan Water Sector, Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Germany
Davies, 2000, The board of directors. Composition, structure, duties and power, Organisation for Economic Cooperation and Development (OECD), France
Flory, 2004, Best Practices in Board Selection Processes, USA
Gottlieb, H., 2005, Recruiting for Board Members. Process? What Process?
McNamara, C., no year., Guidelines for Recruiting New Board Members
Authenticity Consulting, 2008, Different Overall Approaches to Staff a Nonprofit Board, Authenticity Consulting, LLC
- ProMetic, no year, Board of Directors Charter, ProMetic Life Sciences Inc., Canada
- Brefi Group Limited, 2000, The Board of Directors – roles and responsibilities, Brefi Group Limited, UK
- Larcker, D. F., and Tayan,B., 2011, Board of Directors: Duties & Liabilities, Stanford Graduate School of Business
- NGOConnect , 2012, How to set up an effective board of directors, NGOConnect
- GIZ, 2013, Proposed Integrity Guideline Manual for the Kenyan Water Sector (Draft), 2013, GIZ WAVEPlus, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Kenya
- WASREB, 2009, Corporate Governance Guidelines for the Water Services Sector, Water Services Regulatory Board (WASREB), Kenya