•;Credit trained; ideally, a
top banking executive
•;Familiarity with workout situations
As was true of the post-Chapter 11
Reader’s Digest slate—and for that matter,
of all boards—none of the directors
could be conflicted due to creditor ties,
competitive issues, or connections to
major suppliers or customers. Total
independence is imperative. For both
FGIC and Reader’s Digest, at least one
of the directors needed to possess the
leadership skills qualifying him/her to
become non-executive chairman.
As mentioned earlier, it’s essential that
directors be qualified to serve on or
chair designated board committees. At
the same time, however, none of the
candidates should be “overboarded,”
meaning that they serve on too
many other boards of directors.
The audit committee is particularly key
in a post-bankruptcy company. Under
Sarbanes-Oxley legislation, at least one
of its members must be a “financial
expert” as the law defines it. In the
FGIC board selection process, it was
deemed advantageous to have nearly
all the candidates qualified as financial
experts. Other complex financial
services companies emerging from
Chapter 11 may be wise to do the same.
In short, each post-bankruptcy situation
carries a set of special considerations
that should factor into the selection of
board members and should be diligently
addressed by the creditors. A skilled
search consultant or other impartial
professional can work collaboratively
with creditors, bringing original
candidates into the mix and evaluating
them together with those suggested
by individual creditors to appoint a
board best equipped to enhance the
long-term value of a company.
To construct an effective board, it is
essential to exclude those who merely
go along to get along. Homogeneity
is not the goal in selecting board
members. Enlightened and constructive
dissent fosters good governance.
Thus directors, in setting a general
strategy going forward, should arrive at
consensus after healthy debate. Board
members must have the capacity to
buttress their positions with rigorous
analysis of the issues before them.
Those kinds of thought leaders are
the most valuable directors and
will likely need to be pursued using
adroit recruitment techniques.
Once the position description
incorporating the three items referenced
earlier has been agreed upon, as well as
directors’ compensation, these are the
recommended next steps in the process:
•;A preliminary list of appropriate
candidates, along with their
biographies/resumés, should be
presented to a committee appointed
to oversee the selection process;
the list should include at least
three times as many candidates
as board seats available.
•;In-person candidate interviews
should be conducted by one or
more members of the committee.
•;The candidate pool should be
winnowed down to a reasonable
number of desirable individuals;
reluctant candidates who are
deemed to be particularly valuable
should be intelligently pursued.
•;Once a list of finalists has been
agreed upon, the candidates’
references should be checked, both
for background flaws (legal, credit,
criminal, etc.) and particularly for
their track records as directors.
SEPTEMBER 29-OCTOBER 1, 2014
WESTIN HARBOUR CASTLE