As companies face increasing pressure to navigate global markets and drive responsible governance, the role of board members has never been more critical. Yet, many are unaware of the weight this responsibility carries.
What does it take to truly lead from the top?
This question becomes even more pertinent as many board members today are retired professionals seeking a way to stay engaged, often at a slower pace. While their qualifications and experience can be invaluable, are companies and candidates alike considering these roles holistically enough to drive long-term success?
Why Board Diversity is more critical now than ever
Board diversity is more than just a talking point—it is a crucial factor in fostering innovation, improving decision-making, and ensuring that companies can thrive in today’s, complex global environment. A diverse board brings together a broader range of perspectives, experiences, and problem-solving approaches, which in turn leads to better overall governance and company performance.
Diversity comes in many forms: gender, age, ethnicity, and professional backgrounds. Research from McKinsey shows that companies with diverse boards are 35% more likely to have financial returns above their industry median. This underscores that diversity isn’t just about fairness—it’s about fostering success.
The “Board Diversity and Effectiveness in FTSE 350 Companies” research, conducted by the Financial Reporting Council (FRC) in collaboration with the London Business School Leadership Institute and SQW, provides key insights into the impact of board diversity on corporate performance and culture.
Boards with higher levels of gender diversity in FTSE 350 companies are linked to improved financial performance, as measured by EBITDA margin. They also experience higher stock returns and reduced shareholder dissent. The study shows that increased diversity reshapes boardroom culture, promoting collaboration, consensus-building, and decentralized decision-making. Boards with diverse representation are less likely to experience overconfidence in their problem-solving abilities and more likely to prioritize fairness in recruitment processes. To thrive, future boardrooms require skills such as adaptability, strategic thinking, stakeholder engagement, and an inclusive mindset. Nomination committees are encouraged to partner with firms specializing in diverse talent pools and to ensure their own composition is diverse.
Rethinking the Board Selection Process
The process of selecting board members should go far beyond a simple checklist of technical qualifications. A well-chosen board not only strengthens a company’s governance but also plays a pivotal role in shaping its culture, strategy, and ethical direction. Finding board members should never be a mere “ticking the box” exercise, but rather a rigorous and thoughtful process that sets the right tone at the top.
To ensure alignment with a company’s strategic goals, the selection process should prioritise skills and experiences that complement the company’s long-term vision while promoting inclusivity. It’s essential to ask not only whether a candidate is qualified for the role but whether they are the right fit for the company at that specific moment in its journey.
The ideal candidate should bring more than just technical expertise—they must be able to work collaboratively with a diverse group of experts, lead ethically, and represent a wide range of viewpoints. At the same time, boards need to think forward, anticipating the skills and perspectives that will be necessary to navigate future challenges and opportunities.
The Challenge of Board Selection in Malta
In Malta, a significant gap exists in the platforms and networks available to connect companies with potential board candidates. Unlike in other countries where robust databases and networks are in place to help companies find diverse, qualified candidates, Malta lacks a formal system for this purpose. This makes it more challenging for companies to identify the right talent and for aspiring board members to showcase their skills to organisations seeking to diversify their boards.
In a small, interconnected community like Malta, personal and professional networks often overlap. This increases the risk of perceived or actual conflicts of interest when appointing board members. Candidates might be selected based on connections rather than merit, which can hinder diversity and innovation. This can lead to recurring appointments of the same individuals, potentially reinforcing homogeneity in decision-making.
Strong cultural ties and the weight of traditional expectations might also impact board selection processes. There may be resistance to introducing outsiders or diverse profiles into leadership roles, further narrowing the pool of suitable candidates.
To address these challenges, establishing a national board talent database or partnering with international governance bodies could be a game-changer for Malta’s corporate landscape, helping to streamline the selection process and improve governance practices across the business sector. Stricter governance codes, transparent nomination processes, and external consultancy in board member selection can be implemented. These approaches can help ensure that board appointments are based on expertise and diversity, rather than social or familial networks.
The Serious Responsibilities of Board Directorship
For candidates, serving on a board should never be seen as a prestigious title alone. It’s a position of immense responsibility, requiring a deep understanding of governance, risk management, and ethical decision-making. Board members are not just advisors—they are accountable for the company’s performance and must act in the best interests of the organization and its stakeholders at all times.
The role carries significant reputational and legal risks, and board members must be fully prepared to shoulder the weight of these responsibilities. In 2018, for example, a global retail giant faced a massive reputational crisis due to failures in board oversight. Poor decisions led to a sharp drop in stock value, and executives were held accountable for not adequately considering long-term risks. This case serves as a stark reminder that board decisions can have far-reaching consequences for a company’s future.
Setting the Right Tone at the Top
A well-structured board has the power to directly influence a company’s culture, strategy, and ethical direction. It is the board’s responsibility to set a tone that promotes integrity, transparency, and sustainable growth. This means that every board member should not only possess the skills and expertise to contribute to the company’s success but also embody the values that align with the company’s mission and vision.
Selecting the right board members is about more than just filling seats; it’s about building a leadership team that is capable of steering the company through complex challenges and guiding it toward long-term success.
Call to Action: Building Better Boards for the Future
For companies, now is the time to rethink how board members are chosen—not simply based on reputation or past success, but with a focus on diversity, skill, and the ability to meet the evolving needs of a complex business world. For prospective board members, the challenge is clear: step up with full commitment, prepared to lead and be accountable.
By approaching board selection thoughtfully and holistically, companies can set themselves on a path toward stronger governance, better decision-making, and, ultimately, greater success.
