Company Directors Search

Company Directors' Search

The Company Directors' Search has become a top priority for most companies. Most companies use the Company Directors' Search for finding out if an individual is eligible to become a director or not. In UK, a person disqualified under the Company Directors Disqualification Act 1986 is not permitted to become a company director for the specified period. Similarly, bankrupt individuals are also ineligible for directorship for a designated period. Furthermore, new applications of the Company Directors' Search are also emerging. Increasing number of companies, for instance, are conducting a Company Directors' Search to find non-executive directors, who will make a difference to their business. Indeed, the Company Directors' Search has evolved into a continuous process from a one-off task a few years ago.

The evolution of the Company Directors' Search into a continuous process is due to two reasons. First, rising regulatory obligations are forcing directors to relinquish their positions on the board, forcing companies to find replacements. A host of accounting scandals in the past few years have forced regulators to thrust additional responsibilities on directors. The quoted companies in UK for instance have to comply with a revised Combined Code, a set of corporate governance guidelines or give reasons for non-compliance. In the USA, the Sarbanes-Oxley Act has thrust greater oversight responsibilities on directors.

A non-executive directorship is now no longer seen as an attractive assignment with little or no risk. Consequently, many retired executives have reduced the number of non-executive directorships that they hold. Some working executives, who served as non-executive directors on other companies, have altogether relinquished their directorships. As a result, the turnover in the boardroom has increased. This has forced corporations to make the Company Directors' Search a continuous process.

In addition to finding replacements for the directors who are leaving, companies are now aggressively courting individuals who can bolster the reputation of their board. The quality of a board has become important after the recent accounting scandals. For long the public has reposed its trust in the board of directors. The board was seen as the guardian of shareholder interests. The accounting scandals at several big companies have shaken the public confidence in boards. Now the quality of a board has become important for investors and the public. Corporations are using the Company Directors' Search to try and regain public confidence by persuading individuals with an unimpeachable reputation to join their boards.

The second reason why Company Directors' Search has become a continuous process is intense competition. With competitive pressures multiplying in the recent past, companies are increasingly turning to non-executive directors for help. Typically, non-executive directors are either retired executives or working executives with relevant skills and knowledge. The non-executive directors with the right skills could make a significant difference to a business. In many ways, the non-executive director serves as an in-house management consultant.

The Company Directors' Search has become a key tool for companies looking to improve their credibility. Indeed the Company Directors' Search has gone from a risk-minimisation tool to multi-faceted tool in less than a decade due to the changing role of the board and intense competition.