5 Strategies for Finding the Right Director in Australia

In Short

• Selecting the right director is essential for long-term business success.
• Focus on candidates with complementary skills, experience, and alignment with your company’s values.
• Use a structured hiring process, including interviews and background checks, to ensure a strong fit.

Tips for Businesses

When hiring a director, look for someone who not only brings industry expertise but also aligns with your company’s values and goals. Be thorough in assessing their background, skills, and potential contributions to your board. This approach will help build a stronger, more cohesive leadership team.

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Table of Contents

• 1. Define Clear Role Requirements
• 2. Consider Diversity and Inclusion
• 3. Utilise Professional Networks
• 4. Conduct Thorough Due Diligence
• 5. Implement a Robust Interview Process
• Key Takeaways
• Frequently Asked Questions

A director (or collectively a board of directors) is vital for a company’s strategic direction and oversight, ensuring, amongst other important matters, that the interests of shareholders and other stakeholders are protected. In Australia, it is a prerequisite that a proprietary company has at least one director, and a public company must have at least three directors. Such directors are subject to a number of directors’ duties, including the duty to act in good faith, exercise care and diligence, and avoid conflicts of interest, which must be complied with under the common law, the Corporations Act 2001 (Cth) (Corporations Act), and other statutes. Accordingly, choosing a robust director or a solid board of directors becomes incredibly important to ensure long-term success. This article explains five fundamental strategies to assist you in finding the right director for your company in Australia.

1. Define Clear Role Requirements

Whether the search for a new director is through broader advertising or targeted headhunting, it is important to clearly define the role requirements to be a director in your company. 

Indeed, intimacy with the relevant industry, possession of leadership skills and being a natural strategic thinker are all important factors to consider: 

• Industry Experience: Specify the level and type of industry experience required, which may include knowledge of specific markets, regulatory environments, or technological trends as applicable to your company.
• Leadership Skills: Define the leadership qualities required, including the ability to guide strategy, mentor executives and navigate complex stakeholder relationships.
• Strategic Thinking: Outline expectations for strategic input, such as the ability to identify growth opportunities or manage organisational change.

However, equally as important is for the prospective director to align with the board’s policy statement and the company’s purpose, values, goals and strategic direction. As such, it is important to tailor the qualities and skills required to the nuances of your pre-existing board composition, if any, and the company.

2. Consider Diversity and Inclusion

Research consistently shows that companies that embrace diversity on their boards – across gender, ethnicity, and background – tend to financially outperform those that overlook diversity considerations. As such, when defining your role requirements and searching for a new director, it is critical to consider diversity and inclusion, particularly for the following key benefits:

• Enhanced Decision-making: Diverse boards bring together various perspectives, experiences, and skills, leading to more robust and well-rounded decision-making. 
• Better Representation: As the company continues to grow, it becomes all the more important for its representation to reflect and understand its diverse customer base and stakeholder groups.
• Innovation and Risk Management: Diversity can foster increased creativity and innovation by bridging different viewpoints and approaches to problem-solving. As such, a diverse board is more likely to identify and mitigate a broader range of potential risks to the company.

Ultimately, companies that strategise with skills-based and demographic-based diversity considerations are more likely to achieve greater impact in their endeavours.

3. Utilise Professional Networks

Professional networks can be an invaluable resource for identifying potential director candidates. The primary advantage of leveraging these networks is the access to first-hand insights into a candidate’s professional background, expertise, and working style. This information can be crucial in assessing whether a prospective director will collaborate effectively with existing board members.

However, it is essential to exercise caution to avoid creating a board composed of like-minded individuals (i.e., yes-mans). A key attribute of an effective board is independence of thought. The board should comprise diverse individuals who fulfil the specific role requirements. To properly utilise professional networks, you should consider but not restrict yourself to the following:

• utilising industry associations and professional bodies; 
• engaging executive search firms with broad networks;
• leveraging online professional platforms; 
• attending industry conferences and networking events; and 
• consulting with independent advisors or governance experts. 

4. Conduct Thorough Due Diligence

Given the importance of directors and the directors’ duties, as touched on above, due diligence is a critical strategy in the selection process. For example, some people are prohibited from acting as directors, especially those who have been convicted of certain types of offences involving a contravention of the Corporations Act, which are punishable by imprisonment for more than 12 months.

Some strategies to consider for both larger and smaller companies include the following:

• For larger organisations, engaging executive search or recruitment firms should be directed to verify the candidate’s curriculum vitae to the level specified in the board’s policy statement in accordance with their individual firm mandate; and
• For smaller organisations, utilising a combination of free and fee-based services to confirm candidate information without significant financial outlay. At a minimum, this should include:
  • conducting checks with the Australian Securities and Investment Commission (ASIC), including through sources on ASIC Connect such as Register of Banned or Disqualified Persons to determine, for example, whether a prospective director has been disqualified from involvement in the management of a corporation;
  • contacting the prospective director’s referees; and
  • verifying the prospective director’s curriculum vitae.

5. Implement a Robust Interview Process

It is important to round off the list of strategies with the implementation of a strong interview process. Some considerations, depending on the resources and timeline of the company, include:

• structured interview techniques;
• multiple interviews of different types; 
• the involvement of current board members; 
• questions testing cultural fit and values alignment; and
• gauging the prospective director’s approach to the promotion of diversity and inclusion.

Directors' Duties Complete Guide

If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.

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Key Takeaways

Selecting the right directors for an Australian company is a critical process. It requires careful planning and consideration. The five strategies above offer a solid framework for identifying directors who can lead effectively and represent shareholders’ and stakeholders’ interests. Moreover, these strategies help ensure compliance with Australian corporate law and support forming a diverse, skilled board aligned with company values.

If you have further concerns regarding directors, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions