ABSTRACT
The identity of a director is bound up in their experience and career history, and shapes how they and their peers perceive the unique contribution they make in influencing the decision-making process.
This chapter introduces the reader to the notion of ‘board capital’, which describes what the director brings to the board in terms of influence within the group. Rather than simply defining a director’s career experience and implied skill as a proxy for the value they bring to the board, the notion of board capital provides a more holistic approach to capturing the director’s relative value, both cognitively and ideologically. In doing so, it shows how board capital (and its perceived relevance) acts as an ‘internalised guide’ to how a director responds to the influence attempts of other NEDs, potentially with material consequences on decision outcomes.
This understanding of board capital also provides a means for ensuring that board composition is fit for purpose and board renewal efforts are well targeted and future focussed. It shows that where and how board capital is acquired matters, posing the bigger question of the gene pools from which experienced directors are typically hired. However, the chapter cautions that board capital may be an imprecise proxy for influence, as the source of real influence is not board capital but how directors choose to use it. The choice individuals make to utilise (or not utilise) the board capital they possess is largely dependent on their construal of their ‘place’ in the group (the hidden hierarchy is exposed and its effects described in Chapter 3).
This chapter concludes with a ‘letter to the nominations committee’, which contains advice offered to nominations committee members typically entrusted with the hiring of directors, board development and plans to renew and refresh board composition. It offers suggestions for how selection decisions might take into account the life cycle of the company, its strategic opportunities and challenges to deliver a ‘fit for future’ board.
