Taking a company public? Just get a few mates to play board members and the listing's on, right?

Not so. With boards the days of roping in mates are "for the most part" over. The legislation that came out in response to various corporate collapses such as HIH, Ansett and Enron have put paid to that in a way.

In the wake of those corporate scandals there has also been a lot more emphasis placed on directors' roles and their legal responsibilities.

However, that does not rule out looking for directors close to home.

AMEC chief executive Justin Walawski said the first call for board directors was generally to individuals other board members already knew.

"In practice, what people tend to do is to look around their own circles for those they've worked with in the past, or who they might be currently working with on other boards," he said.

"And look for someone who's demonstrated good governance skills at board level. Failing that then they'll broaden that out to use contacts from those they do know, who may also be working on other boards."

If these techniques do not unearth a suitable contender then it may be necessary to seek the help of experts, such as executive recruitment companies. Walawski said this was something AMEC was seeing more often, particularly in the current corporate and managerial environment.

Gerard Daniels global practice leader board consulting Alison Gains told Australia's Mining Monthly that there had been a "steady incline" of requests to fill mining industry board positions.

However, Executive Search's Richard Hazelwood said the traditional informal avenues of recruitment were still the most popular.

"I get asked [to fill board positions] occasionally - only occasionally," he told AMM. "The majority of board appointments are still made through the personal networks of other board members."

What to look for

Having established where to source the latest boardroom addition, the next challenge is to understand the personal and professional qualities the board should be looking for.

Fat Prophets head of mining and resources research Gavin Wendt is adamant the principle ingredient to look for is success.

"I think the most important quality is success in whatever particular field they've been involved in," he said. "If you're talking about an exploration company, I'd want to see a board that ideally has had some sort of exploration success on the geological side. Look at their track record."

When considering the requirements of a new board member, consider also the current and future requirements of the company. What talents are needed on the board? Are there skill gaps within the board? Is the company about to head off into a new direction?

A company making its first foray into production or developing resource projects in Kazakhstan would benefit from board members with relevant operational or cultural experience.

While industry know-how is certainly an important quality, Wendt said it was not always a compulsory requirement for would-be board members.

Drawing attention to trucking magnate turned resources heavyweight Michael Kiernan, Wendt said the former ConsMin boss was able to transfer his transport sector business acumen to the mining company boardroom.

"He may not have had any real understanding of the mining industry but he was used to running a business," he said.

Walawski said knowledge of corporate governance requirements and a genuine commitment to shareholders were other essential attributes.

"At all times they need to be focused on how to add value for shareholders and to have the understanding that they're also in a stewardship role as well as a management role," he said.

Filling the board can be a balancing act and it is important to get the optimum set of skill sets on board - there's no sense having a crack team of technical wizards if nobody can balance the books.

Advocating balance, Walawski likened the boardroom recruitment process to putting together a sporting team.

"Balance is critical," he said. "Particularly with the resources sector it's a lot like a sporting team where you might have board members who all have very strong skill sets but if they're in the same area then you lose the opportunity to capitalise on scenarios that the board members don't have familiarity with."

While there is little doubt about the benefits of having a range of skills and corporate experience on board, the issue of seeking greater ethnic, class and gender diversity in the boardroom prompted cautious, polite dismissal.

"I don't think [diversity in board members' backgrounds] makes any difference," Wendt said. "At the end of the day, you run a mine. Maybe people of different backgrounds bring different views and that sort of thing, but I don't think that you necessarily have to have your board comprised of every single microcosm.

"I think you just pick people and if you're a serious company you will look at all applicants and judge them fairly."

Avoiding errors

Sometimes companies make mistakes when recruiting board members. However, there are ways to minimise these errors.

Closely aligned to the issue of balance is the need to get the numbers right.

Walawski said sometimes boards made up of just three or four people became overburdened with the job's pressure and responsibilities.

Recruiting a high profile board member will not automatically lead to corporate success either.

Walawski pointed to research that revealed high profile board members could add value to the share price but he said it was unclear as to whether this was a reflection of hidden value in a company or of the celebrity factor piquing overall interest in the company.

"It's probably a mixture of both," concluded Walawski.

Wendt advised boards to be aware of the company's evolving needs. What the board needed in the early days may not be what it needs today.

While a certain amount of industry consolidation may have enabled some smaller companies to snap up otherwise out-of-reach high powered executives, Walawski said the overall task of filling a company board had become more arduous.

"I think most people would agree that it's difficult to find really strong board members these days and part of the reason for that is [due to] the risks involved and, I guess, the cost-benefit analysis that people weigh up when they're asked to join a board, so there's clearly difficulty in getting strong board members for each and every company," he said.

Despite the recruitment challenges and the host of factors that can contribute to a company's success, getting the boardroom mix right will pay dividends.

Walawski said: "The board may not be the company maker or breaker but it's definitely the case that companies with a strong and knowledgeable board and strong and knowledgeable management will have a better chance than a company that is weak in one of those two areas."

Published in the August 2007 Australia’s Mining Monthly