Consider getting on a board as if it were a job search
The month of May is the Annual Shareholder’s meeting for most public companies on S&P 500, according to Christine Short, a FactSet guest contributor. These Annual Shareholder meetings provide the opportunity for shareholders to vote on the election of directors, auditor, and other strategic matters.
Much work begins in the Autumn before the Shareholder’s meeting to prepare the proxy statements and SEC Form DEF14A that inform the decisions to be voted on. Because the election of directors is the most important part of shareholders’ meetings, the proxy statement goes into detail about directors, their background information, and how much they had been paid in the past several years.
Assisting business owners to have a well governed business is part of Next Act Advisors‘ mission-
I too want to assist in sharing my experiences having served on private and public company boards.
In a recent webinar with fellow sitting board directors of private companies, a poll was taken: “At which stage of the private company journey is there a need to focus on effective corporate governance?”
Their answers varied:
If you ever considered serving as a board director on a public or large private company board, the journey starts early. This blog details ideas on how to obtain a Board seat.
So, what is required to obtain a board seat?
You who are reading this post have done one of the most important steps toward securing your first Board Seat: You showed up!
Somewhere along your career, you decided that you may want to be a Board Director and you paused and opened this post.
You may be serving on a subsidiary board at the company where you are employed, perhaps you’re curious as to what being on a board means, or you may be a few years out to retirement and ready to try something new; whatever the reason… you showed up.
I often use the term “Intentionality” when describing how to get on a Board.
I would liken the preparation required to that of an Olympian athlete – it takes preparation to get a board seat, time, and a quality of mental state to carry you through your first and subsequent board seats. You must be intentional about the process. Not only because there are a lot of candidates, but additionally because there are very few seats annually to be filled.
Getting on a Board requires hard work.
On average, Russell 3000 companies board turnover is stable at 10-11% (according to Equilar Board Composition and Director recruiting trends report) – approx. 2,400 board seats come available each year.
As of 2016 there are an estimated 2,700 Private Equity firms around the world, and 1,700 in the U.S. alone.
There are also an estimated 5,000 Public companies in the United States, seeking an average of 7 board seats each (35,000 positions total). Meanwhile, 16,500 private equity companies in the United States are seeking 2 independent directors each, meaning 33,000 outside directors are needed.
A fellow board director often states the obvious with respect to the intentionality required to obtaining a board seat: “Consider getting on a board as if it were a job search.”
Successful board directors will tell you that they had a process in acquiring and maintaining a board seat.
It’s vital to do the following five steps:
- Identify your strengths; what do you bring to the table? Prior qualifications or prior passion for a sector where your prior experience is applicable.
- Identify or become known as a subject matter expert for the domains you have been responsible for. What subjects do you have expertise in, have you the board qualifications of independence, financial expert, etc.
- Who is in your network? Current and past work, school alumni, local non-profits, trade associations. Once identified, how can you expand these?
- Make a list of 35 target companies which represent the intersection of your strengths and your subject matter expertise.
- Sit in on financial analysts calls for these companies and learn as much as you possibly can about each one. If private, consider being involved as a judge at local universities start up accelerators, or becoming an advisor to an early-stage company.
The buck doesn’t stop with Intentionality and Preparation!
When I moderated a panel with three sitting board directors of private and public boards, in response to the question how did your first board position happen? The responses are unanimous: the opportunity came from prior relationships.
A Sitting CFO said, “I wasn’t looking necessarily, successful working my network; had just sold a business and someone who knew me while in the sale process approached me about an opportunity where my skills set was needed; he introduced me to the family-owned business.”
From an Academic: “At Law School, one of my students, mentioned his dad was going to be in town, could I meet with him on corporate governance matters, he happened to be the CEO of a public company and two (2) years later I was offered a board seat…”
And finally, a Prior Investor Relations professional stated, “While serving on a non-profit board of my alma mater and member of the Board of Trustees, fast forward five years, a partner and an executive search firm contacted me when she heard about the spec of the position and my name was given because of having seen me on the non-profit board of my school.”
The same panelists were then asked how they positioned themselves to benefit their board?
The Sitting CFO shared, “Three types of criteria: relative or similar financial & business models; expertise in a specific sector; and access to Boards and knowledge of what information is relevant for the Board.”
And the Prior IRO professional, “The Value Add that I developed over 15 years was the understanding of the levers for creating Shareholder Value and dealing with Shareholder Activism.”
The responses are unanimous: the positioning came from being a subject matter expert.
Finally, once you have started an interview process for a position, before accepting the role; chemistry with your selected board is vital. Once you get a board seat, you will find that Board work is hard work. For listed companies, the average preparation time and time spent in board meetings adds up to 245 hours per year per company. For private companies, the entry point often is as an advisory board member with a commitment of 5-10 hours per month.
Committee work is important.
Conflict is worked out in the committees – knowing when to pick your spots, manage your airtime when you are passionate about a topic; pick committee(s) in which you can contribute and be heard.
Teamwork is important.
Do due diligence before joining. Meeting with fellow board members, looking at the management team members.
A board is one body. It is a group. It helps to be successful when working as a sole practitioner 1 person 1 vote. Consider if the company has high integrity and is associated with people who would not be obnoxious.
My own experience has shown that, ultimately, the chairman is responsible for the board chemistry. Ask probing questions. Most board dynamics are built by one-on-one calls, and meetings with individual board members.
Intentionality, preparation, and chemistry are the key elements of obtaining the right board seat.
For founders along the private company journey, there is a need to focus on effective corporate governance from start up to scaleup.
For aspiring board directors, I am honored you read this post. I am happy to book time to discuss your experiences.
If you would like to learn more, please book a time on my calendar, and see if my experience can help you prepare to join a board.
Brenda A. McCabe