In the past one year, there has been an increase in the number of first-time independent (non-executive) directors who are younger than the earlier choices and were handpicked for their knowledge of new-age skills, said top board members and leadership advisory firms.
According to data from Primeinfobase, about 830 first-time independent directors were appointed in calendar 2023, up from 776 the previous year and 518 in pre-pandemic 2019. The average age of these first-time independent directors has declined to 53 years in 2023 from 59 years five years earlier.
“Digital, AI, data mining and other tech-related skill sets have become an important part of board requirements,” said Arun Duggal, chairman of ratings firm ICRA and an independent director at several companies.
“We handle searches where we are replacing an independent director whose term on the board would be coming to an end. But we are witnessing that when companies are replacing such board members, they are seeking very different skills and experiences,” said Jyoti Bowen Nath, managing partner at executive search firm Claricent Partners. There is a surge of first-time board directors who are being selected for their knowledge around AI or ESG, she added.
Citing a recent search for a diversified Indian industrial group, Nath said: “The brief was to get someone extremely contemporary, well versed in AI and technology, a far cry from the briefs of yester years.”Over 1,400 independent directors will compulsorily need to retire by March 2024 in National Stock Exchange-listed companies, according to data from Primeinfobase. The average age of the directors at 2,257 companies listed on the NSE is 58.6.There is a dearth of directors who are equipped in technology and other new-age skills. In recent times, several senior leadership professionals holding an executive position at their organisations have been inducted by boards of companies in non-competing industries.
Monica Agrawal, managing director, financial services, Asia Pacific and India lead, Board Services, at Korn Ferry, said: “People who are currently in full-time executive roles are taking special approval to join non-compete boards. Since most of these skill sets are new age such as data security, consumer tech, ESG and these are working professionals the average age is automatically lowering among the first-time directors.”
Board’s key role is to contribute towards strategy and risk management and therefore what is required of directors is good appreciation of technology and not deep technical expertise. “The board’s job is to provide governance and increasingly there is a demand for directors who bring in strong appreciation of technology in general,” said Pankaj Arora, MD of leadership advisory firm Russell Reynolds Associates India.
Many companies are also looking for directors who can relate to the employee (and customer) base. “If the average age of the company’s employees (and customers) is 25-30 years and if there is no one on board who can relate to such a crowd, the board’s ability to understand the issues on the ground will be limited,” said Arora.