The clock is ticking. For the 2015 financial year company directors’ reports will need to disclose more information about director skills and experience and to present this in a more meaningful way than in the past, or explain why the information is not provided.

The ASX Corporate Governance Council’s Recommendation 2.2 states: “A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership.”

Guerdon Associates has suggested in a prior article how this may be accomplished (see HERE), followed up be a checklist (see HERE). We also noted what proxy advisers may expect of board skill matrices when they are published (see ACSI’s requirements HERE and what ISS will consider HERE).

But, when it comes down to it, there is a lot that can be learned from others who have already trodden the path. We have applied this experience in assisting companies with effective disclosure and also in our board effectiveness work to identify what is required. The broader and deeper US market offers what we think are excellent examples to share. We present these in a sequence that we suggest may serve companies well.

1. Consider starting with a summary of the qualifications, attributes, skills and experience that should be possessed by all directors, as well as those represented on the board as a whole (i.e. across directors)

This approach gives shareholders a big-picture view of the criteria the company considers in selecting candidates. The most effective examples also clearly explain how the criteria support the company’s business and strategy. Particularly good examples include the Coca-Cola and General Electric 2015 proxy statements.

Coca-Cola includes a simple but comprehensive chart that summarizes what the company sees as its most important business characteristics and aligns them with specific qualifications, attributes, skills and experience that it thinks should be represented on the board. It can be found on p. 16 of its proxy report HERE.

General Electric highlights seven specific types of experience it seeks in directors and explains clearly why each is important to the success of the company’s business and strategy. See the experience requirements explained by GE HERE. 

2. Follow with a skills matrix that shows how each nominee fits stated categories of desired qualifications, attributes, skills and experience

The clear expectation of ASX Corporate Governance Council Recommendation 2.2 is that companies will have and disclose a skills matrix. These presentations let investors see at a glance what each nominee brings to the table and any gaps in critical skills, experience or other characteristics.

However, there is no single template for an effective skills matrix. In the US, Prudential Financial and Coca-Cola apply different skills matrix formats in their proxy statements.

Prudential Financial’s matrix in its 2015 proxy statement summarises the 18 categories of qualifications and experience that the company deems most critical on its board. It also explains why each of these categories is relevant to Prudential Financials’s business and uses a tick-in-the-box format to show which of the desired attributes each director nominee possesses. See their skills matrix on p. 17 of their proxy HERE.

Coca-Cola’s 2013 proxy uses a layered skills matrix in the form of a nicely presented circle chart that has not been used in later years. It summarizes which directors fulfil which of the principal qualifications the board values. Smaller circle charts below the skills matrix break down board membership by independence and tenure, so that shareholders can see the most important information from the profile section in a single glance. The charts can be seen on page 28 HERE. 

3. Back up the skills matrix claims with a robust bio for each director standing for election

Investors are likely to value profiles that include biographical data, a summary of the nominee’s professional experience and an explanation of the relevance of the candidate’s skills and experience to the company. The Walt Disney Company’s director bios present useful, detailed information about each director and an understanding of the board’s view of how the director’s experience and skills benefit the company’s business and strategy. Naturally it justifies the company’s conclusions on the skills and experience represented on its board. See its directors’ bios on page 53 of its proxy HERE.

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