A perennial question for boards seeking new directors is whether to focus on specialized skills or more generalized knowledge. And while the use of board skills matrices – required by the Nasdaq Exchange – is both common and helpful, there is more to consider today.

The changes to the corporate governance world, just in the last two decades, is dizzying. Today, public companies operate in an environment where regulatory initiatives have been instrumental in enabling greater shareholder voice, allowing for the rise of activist investors and frequent shareholder proposals and enhancing the influence of proxy advisory firms. In addition, corporate disclosure requirements have expanded significantly, especially on climate-related risks and greenhouse gas emissions due to the adoption of rules by the Securities & Exchange Commission, the UK’s Financial Conduct Authority, and the European Union’s Corporate Sustainability Reporting Directive. These shifts in the regulatory and investment context in which companies operate has resulted in both direct and indirect risks for the business and the board. It’s never been more important to rethink who is on your board.

This new normal for boards in exercising their fiduciary duty has fundamentally changed the job requirements. While specialized experience has long been valued in board candidates, two somewhat new skills are increasingly in demand. A 2024 Spencer Stuart Pulse Survey, highlights that directors with experience in cybersecurity (92%) and digital/technology (92%) are seen as having the most positive impact on board oversight. However, with limited spots opening up each year and this fundamental change in the governance landscape, there is now a preference for “generalists” who can effectively manage the wide range of governance responsibilities. According to many respondents to the survey, the most effective boards are well-rounded in terms of experience and expertise and therefore able to contribute to the board’s dialogue in multiple areas.

As a result, we are seeing a different approach to on boarding and searching for board talent. The search is on for these new governance generalists who can span these multiple topics but who also exhibit cognitive diversity (see related post here).