I spend my time meeting a steady stream of talented, highly accomplished, frequently fascinating individuals in the business world. Increasingly, those I meet are exploring how to become a public company director. Some are active executives looking to broaden their perspectives and credentials to advance their careers. Many more are looking to transition into a “portfolio phase” of their professional lives.
While understanding the mechanics of “how” to get on boards is valuable, a much more fundamental question is “whether” becoming an independent director is a good idea in the first place.
A surprising number of effective business leaders would actually make lacklustre (and unhappy) directors. These are quality, successful business people. That is indisputable. The trouble is they just don’t want to coach. They want (and need) to be part of the action on the field. They enjoy calling the shots and would find “oversight” tedious, and team-based reflection and decision-making alien and frustrating.
Still, others are skilled at internal corporate politics and may meet the domain expertise, diversity and independence tests – but will likely fold when the going gets tough, shy away from asking direct and often awkward questions, or are geared to skim over the pre-reads as if they’re water bugs.
When a company adds a new director, it isn’t enough to simply bring the “right resume” to the table. Regardless of pedigree or profile, an overbearing, disputatious or thoughtless newcomer can quickly disrupt the workings of the most effective, high-functioning board. That places a high premium on identifying and selecting candidates who can establish the right chemistry with the balance of the board, as well as with senior management.
Correcting appointment mistakes – for the company and the new director – is costly. And complicated. While I have seen board chairs prepared to make quick calls to exit new additions who are simply not going to work out, examples are rare. These are difficult conversations.
Equally so, for a new board member who discovers early they lack genuine affinity for the business or cannot identify with the other directors, declining to stand at the next annual general meeting or resigning midterm can put a significant dent in their credibility and future board prospects.
Fact is, it is easier to get on a board than it is to get off. An early director departure has reputational risks for all concerned. Absent an intervening event, such as a change in strategy or merger, a good rule of thumb is that the market expects a director to serve a minimum of six years. If a new director comes off before then, the market is not going to draw a positive conclusion for the individual or the organization.
The best advice for all concerned to avoid these risks is to “measure twice and cut once”. Easy to say. Hard, meticulous work to get it right.
Thinking about a new career as an independent corporate director requires fully appreciating the actual “jobs” directors perform on behalf of shareholders. For the prospective director, it also means being truly honest with oneself about whether this work is really what you will be good at and find fulfilling.
While a great much has been written, said and codified regarding the role of directors on corporate boards, fundamentally shareholders expect their representatives to do two things: Ensure the enterprise has the right leadership and talent now and into the future; and, assuming that is taken care of, productively stress-test management’s thinking on strategic direction and major proposals.
That’s pretty much it.
The best boards are assembled like high-performing baseball teams. Chemistry matters and all directors must be equal, full participants. They all wear the same jerseys. Attracting and smoothly integrating a newcomer works best when the company is clear on what unique, individual contribution this board member is intended to make and why that matters to board deliberations and the success of the enterprise. Directors can and should play complementary, distinct roles (a well-balanced team cannot be made up entirely of shortstops).
To assess leadership and talent, while also being competent and constructive in pressure-testing management thinking, the board needs to be made up of directors collectively possessing the domain expertise to insightfully deliberate on the key strategic and operational choices a business must make to decide where to compete and how to win. For example, if a company’s growth strategy is significantly acquisition-driven, the board members will need a colleague experienced in post-merger integration to lead the questioning and deliberations.
Serving on a public company board can be a highly gratifying and fascinating experience. Providing the essential counsel and oversight to these enterprises and their leadership teams on behalf of shareholders is a critical factor in maintaining confidence in our public capital markets.
That said, governance work is not for everyone, and ensuring the fit is equally good for the company and the prospective director is crucial to making it work.
Special to The Globe and Mail
Published Saturday, Oct. 22, 2016 8:00AM EDT
Last Updated Friday, Oct. 21, 2016 3:00PM EDT