European Audit Committee Leadership Network, January 2014
On 22 November 2013, members of the European Audit Committee Leadership Network (EACLN) met in Rome to discuss the issue of board and audit committee composition, among other topics. For this session, members were joined by Dominic Schofield, Senior Client Partner, Korn/Ferry International.
This document summarizes key points that Mr. Schofield and members raised in the discussion, along with background information and perspectives that Mr. Schofield, members and other experts shared before the meeting.
As audit committees struggle to manage their evolving responsibilities in the shadow of the overarching issue of risk and its management, they are reassessing the skills and experience needed by the committee, and boards are adjusting their strategies for recruitment. Several themes emerged from the discussion in Rome:
Financial expertise remains fundamental
An increase in responsibilities for most audit committees has not reduced the need for financial expertise, which remains a core requirement. On boards that lack finance committees, a focus on both the risks and opportunities involving finance has created a need for broader knowledge of financial matters, including issues such as liquidity and capital structure. Mr. Schofield and some members noted that having more than one financial expert on the committee helps drive discussion, and they said that ideally all members of the board should have a certain level of financial literacy.
Non-financial expertise and soft skills are increasingly important
Despite the continuing importance of financial expertise, the audit committee’s new responsibilities are putting a premium on other skills and expertise as well. Deeper industry knowledge, combined with broad business experience, expertise in specific issue areas like technology, and soft skills such as the ability to challenge management in a constructive manner are all among the capabilities audit committees seek.
A tough environment for recruiting is driving new approaches
The challenges of the current recruiting environment include gender quotas and director compensation that varies across jurisdictions and has not grown to match increased workloads. To satisfy the expanding requirements for skills and experience in this environment, boards are relying on more systematic approaches that target specific skills using longer-term succession planning. Alternative pools of candidates are drawing interest, including younger candidates and candidates from other sectors and geographies.