One such change, under Recommendation 2.2, is the need
to disclose the company’s board skills matrix which shows
the mix of skills and diversity that the board currently has
or is looking to achieve in its membership.
Many of the larger listed companies have been using
a board skills matrix of some description for a number
of years to assess the current skills, background and
experience of those on the board and to identify any
gaps that may exist. Until recently, however, most
companies have chosen not to disclose this matrix
and have instead limited their disclosures to a broad
statement of the mix that the board has determined
it requires and confirming that the composition currently
satisfies this mix. Disclosing the company’s board skills
matrix will require careful consideration to ensure that,
on the one hand, the disclosures are meaningful for
investors and, on the other hand, do not include
commercially sensitive information.
Other boards, particularly of smaller listed companies,
may not have formal processes in place by which they
assess their composition.
However, putting more rigorous and transparent
processes in place to assess board composition is good
practice not only for listed companies but also for unlisted
organisations with boards, including both for-profit and
To assist organisations that are looking to introduce
such processes, the AICD has prepared the following pair
of Director Tools documents:
- Checklist for assessing board composition;
- Guidance for preparing a board skills matrix.
Guidance for preparing a board skills matrix1
|Things to do:
||Things not to do:
||Things to consider:
|Identify desired skills, experience and
backgrounds of the board as a whole
under relevant headings, and in the
form of a matrix, map these against the
skills and experience of each individual
||Include basic competencies
that are expected
of all directors (for
example knowledge of
||Whether changes are likely to occur in the short
to medium term (for example changes to strategy,
changes in the external environment) that impact
on the desired skills / experience / backgrounds
mix of the board.
|Tie desired board composition to the
organisation’s strategy and the key
issues facing the organisation.
||Include vague or overly
general sets of skills
||The extent to which the board’s composition
takes account of different scenarios, which
might call for a different mix of skills, experience
|Differentiate between the skills and
experience expected for the board and
for the chair.
||How defensible the board’s existing or planned
future composition is, for example, if there are
unsolicited approaches for board appointments.
|Separately prepare a skills / experience
/ background matrix for each board
committee, where they exist.
||Whether is it necessary to have
specialist skills, experience or backgrounds
on the board, or whether it might be better to
draw upon these from within management or from
external advisors (this will depend, in large part,
on the size of the company and the board).
|Include term expiry dates (where
relevant) for each board member
in the matrix to assist with
||When it might be appropriate to engage an
external expert to undertake a review of board
and board committee compositional attributes
|Use a rating scale when assessing
the extent to which desired skills,
experience and backgrounds exist
on the board rather than a simple
yes or no response.
The extent which any gaps identified
in the matrix could be addressed through
professional development of current
Whether any self-assessment process by board
members adopted ensures a consistent approach
and outcome. The company secretary or company
representative may wish to audit this component
to ensure accuracy and fairness across all directors.
|Have the board, or a designated
committee (for example nominations
committee) critically examine the matrix
at appropriate intervals (for example
||What is disclosed to external stakeholders,
such as a statement of existing skills, experience
and backgrounds that reside on the board.
The board could consider developing an internal
skills matrix that is easy to adapt for regular use
and an external matrix that can be communicated
1 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations 3e, Australian Securities Exchange, 2014, Recommendation 2.2, focuses primarily on the disclosure of the skills and
diversity that the board currently has or is looking to achieve in its membership. However, having the right mix of backgrounds (which would encompass diversity) and experiences is also important and should
be included in the matrix.
2 While the AICD would recommend against the inclusion of vague or overly general sets of skills or experience in the matrix itself, it should be acknowledged that a director who has broad, generalist skills and/
or expertise is likely to be of significant value to a board, particularly where the board size is small.