Corporate board recruitment practices are rapidly evolving

Source: The post Corporate board recruitment practices are rapidly evolving has been created, based on the article “Corporate board recruitment is taking a strategic turn” published in “Live Mint ” on 18 April 2025. Corporate board recruitment practices are rapidly evolving.

UPSC Syllabus Topic: GS Paper 4- Corporate governance

Context: The article discusses the shift in corporate board recruitment practices in India and globally. Traditionally dominated by promoters and insiders, board appointments are now being reformed due to governance failures, legal changes, rising investor activism, and the demand for transparency. A well-structured board is now essential for corporate credibility and survival.

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Outdated Board Composition and Its Weaknesses

In India, board positions were often filled by promoters, family members, and loyal executives. In public sector firms and family-run businesses, members echoed decisions rather than questioned them. Startups had tight boards led by founders and investors. Even large corporations included retired bureaucrats or high-profile names, often selected for their influence rather than strategic skills.

Why Reforms Became Inevitable

1. Governance failures revealed major flaws in board oversight.
2. Conflict-of-interest rules and director liability increased scrutiny.
3. Investor activism pushed for transparency and protection of minority shareholders.
4. Court judgments highlighted the need for improved corporate governance.

What Modern Boards Now Look For

1. Independence: Preference is shifting to members who are independent of promoters and can protect broader stakeholder interests.
2. DEI and ESG Awareness: Candidates must engage with Diversity, Equity, Inclusion (DEI) and Environmental, Social, Governance (ESG) issues. Those ignoring them risk rejection.
3. Strategic Skills: Boards value digital expertise, strategic foresight, and global perspectives.

Changing Board Selection Process

1. Multiple Interviews: Replacing single sessions with one-on-one online interviews to assess diverse skills.
2. In-Person Attendance: Despite online trends, the ability to attend physical meetings is again a selection factor.
3. Stricter Vetting: Legal history, behavior (e.g. domestic violence, substance abuse), and digital footprints are reviewed.
4. Credential Checks: Academic degrees and job titles are now carefully verified to spot exaggerations.

Looking Ahead: The New Norm

1. Reputation Matters: Companies with ethical standards won’t risk appointing individuals with questionable records.
2. Public Sector Standards: These boards too must meet high standards, as they handle public funds.
3. Specialist Firms: Executive search firms focused on governance, cybersecurity, and diversity are gaining importance.
4. A senior board member summed it up: “Real governance starts when independent minds replace obedient nods.”

Question for practice:

Discuss how corporate board recruitment practices are changing in India and globally.