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While board governance has changed dramatically over the decade, the recruitment of new directors still relies primarily on personal recommendations by existing directors or the CEO, a new study concludes.

In a recent survey of 429 Canadian board members, 72 per cent said the most common method for finding new directors was recommendation by existing directors, followed by 66 per cent who said appointees are identified by the board's nominating committee and 49 per cent who said directors are recommended by the company's CEO or other insiders. Use of external search consultants ranked fifth at 23 per cent. (Directors were allowed to identify more than one key recruitment method.)

Find out who came out on top in our breakdown of board composition, compensation, shareholder rights and disclosure

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The survey was conducted by PricewaterhouseCoopers LLP and the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto.





Although the findings appear to suggest boards continue to use a long-standing informal approach to recruitment, governance experts say this doesn't mean directors are casually selecting their friends as nominees.

Mike Harris, leader of corporate governance services at PricewaterhouseCoopers, said most boards are now listing the skills the need for a new director and are doing a targeted search to find candidates. But he said they also still rely heavily on personal contacts to carry out the search once the criteria have been set.

He said many large company boards are looking for senior people such as CEOs, and said they are not easily found without personal connections.

"CEOs are unlikely to just register with some search firm and expect to be called," he said.

But the findings mean it is still vital for would-be directors to be part of the right networks to break onto corporate boards, said Brenda Eprile, leader of the national risk practice at PwC. She said she personally knows a number of executives who have been frustrated in their attempts to find board positions.

"If you're not plugged into that network, then good luck getting on these boards."

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They survey found that directors believe the most valuable skills for a board member are financial literacy, independent-mindedness, governance expertise and industry expertise. Executive experience ranked fifth on the list.

The review found directors from different industries named different key skills for directors. For example, 82 per cent in the energy sector said industry expertise was key, while 62 per cent of Crown corporation directors said risk-management skills were the most critical criteria for directors, and more than one-third of directors on not-for-profit boards said a strong personal network was a key criterion.

The Globe and Mail's Board Games 2009 evaluates and ranks corporate governance practices in Canada. See the methodology we use in compiling the survey

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