One of the questions we hear most frequently is how to land that first public board assignment. Perhaps our advice on landing a corporate board seat worked because the number of first-time board members is increasing.
This trend can be explained by the number of board members who are retiring, but also because boards are seeking directors with more contemporary skill sets like compliance, security, and information technology. Additionally, boards are seeking more diversity. More companies are recruiting board members that reflect their shareholders' and customers' gender and cultural diversity.
The director's role and level of involvement in an organization's oversight and governance have also changed considerably in the last generation-and so has the compensation. Directors are expected to work hard and know their stuff. And companies are willing to pay well for it. Gone are the days when the boardroom was all but indistinguishable from the clubroom. It is a workroom.
There are numerous programs—notably, Northwestern, Harvard, Stanford, and other leading business schools—that offer extensive coursework on governance, committee function, regulatory compliance, and risk assessment that will help prepare the first time board member effectively deal with some of the macro issues that public companies face.
How does a first-time director go about effectively performing his or her duties and adding value in the process?
Many sourcebooks and references also provide valuable information and guidance, including The Corporate Director's Guidebook, published by the American Bar Association's Business Law Section. This text is written from a legal perspective, but it is very helpful. Take advantage of these programs and materials.
Aside from the technical issues, we asked some experienced directors for common sense advice for first-time board members. How does a first-time director go about effectively performing his or her duties and adding value in the process?
Keep reading for four tips on preparing for your first board meeting.
1. Do your research
Learn all that you can about the company before the first board meeting. Of course, you will have read its annual report, proxy statement, 10K and other SEC reports and press releases, and you will have browsed its website and Googled it. The MD&A in the 10K will have given you a bird's eye view of the company's business and operations. The company may also have sent you a packet containing orientation information for first directors that included most of these documents, together with its articles of incorporation and bylaws, copies of board committee charters, and the company's mission statement. If the company has not provided these materials, ask for them. Most importantly, take the time to read them.
You will have also received a confidential board package before your first meeting that included a meeting agenda, past board and committee meeting minutes, financial information, and other relevant materials. Study this information carefully, and make notes.
2. Personalize your knowledge.
Whenever you are invited to meet other directors and executives, accept. Use these meet-and-greet opportunities to get personally acquainted with your new colleagues and to ask questions that demonstrate your interest in them and their roles.
When you meet the CEO, ask about the strategic opportunities and challenges that the company faces. When you meet the General Counsel, ask about the legal and regulatory issues confronting the business. Ask to meet the Chief Accounting Officer to familiarize yourself with key accounting policies and any complex accounting matters, particularly those that distinguish the company from others in the industry. Ask the executives about strategic matters they deal with: marketing, sales, financial, operational, regulatory and economic. You get the idea.
Be up-to-speed with the company's opportunities and challenges because these Q&A opportunities will demonstrate your genuine interest in executives as individuals and the importance of their roles.
3. Dig a little deeper.
Discreetly ask around to find out what the company's customers or clients and competitors say about it. Ask the Chair of the Nominating and Governance Committee if you should meet any other directors and executive officers before your first board meeting.
Learn about your fellow directors if you do not already know them. It's easy to do online by checking the company's most recent proxy statement and the company's website, as well as the annual reports, proxy statements, and websites for the companies for whom the other directors work. What are your fellow directors' backgrounds and expertise? How many of them are recent additions to the board? Do they serve on other boards? A quick Google search can ascertain most of this information. While you're at it, check their connections on LinkedIn. You can gain a wealth of information about them by just sitting in front of your computer.
4. Know why the company recruited you.
What is your expertise? Is it your particular industry or your professional or governmental knowledge? Is it your executive experience? Is it your understanding of product development or marketing? Find out how your expertise relates to that of other board members and what the company expects you to contribute. If the board has engaged an executive recruiter, they will be an excellent resource. If not, the Nominating and Governance Committee can answer your questions. By the time you have your first in-depth meeting with the Chair or CEO, you should have a clear understanding of why you are there and how you can contribute.
5. Put your money where your mouth is.
Buy some stock, immediately, even if the board's policy does not require it (be sure that you do so in accordance with the company's rules and SEC regulations; the company will give those to you). Don't wait for awards of directors' options.
A client of ours says, "The easiest way to think like a shareholder is to be one." If you are personally invested in the success of the company from day one, your actions will reflect what is best for shareholders.
Continue reading for suggestions on how to be an effective, productive part of a company’s board, and for more expert advice on effectively communicating as a board director.