It may simply be that time of year but I’m being “soft vetted” for board of director / board of trustee seats.
And whether the board seat is for an organization that is for-profit or for non-profit, there are things some things that anyone – you, me, or anybody else – should do.
Soft vetting is remeniscient of grade school (“If you did have a crush on someone in class who would it be?) and it’s part of the dance of keeping friends and avoiding making enemies. It’s also a case of surfacing qualified candidates who are interested and willing, and passing aside people who don’t meet those specifications. The idea is to avoid moving forward with someone who you’ll end up regretting, or with someone who will say “no” when the formal ask gets made.
In the old days – say before morass of MCIWorldCom, Enron, and Tyco created the accountability regulations known as Sarbanes-Oxley – being a director seemed like it had less risk, and more upside. While boards of directors were theoretically responsible, there was less perceived pressure from investors and the public. Board seats were more safe, perhaps more sleepy, and sometimes more lucrative.
Today the search for corporate board members and bigger name non-profits are often done by people like Phil Johnston with Spencer Stuart. Those slots are the equal if not harder than filling the open role of a chief executive.
Independent directors, like my friend Richard Yanowitch, are in high demand as companies move from a board dominated by founders and investors to a board that is often more balanced and more professional, with members who carry with them expertise and/or connections that will help a firm or organization move forward.
Part of a director’s responsibilities are spelled out in (if you’re based in California, as I am) in state statutes. “A director shall perform,” according to California law, “the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.”
More broadly, directors in general have three main responsibilities:
- Duty of care.
- Duty of loyalty.
- Duty of inquiry.
Satisfy all three requirements and you’ve generally discharged your duty, usually have no liability, are mostly indemnified from the organization, and are covered by something called Directors and Officers (D & O) insurance. Covered, that is, except when you’re not.
As a result of my brief 97-day stint (channel John Sculley for having a job and organization turn out to be different than expected) as an executive and officer with a start-up at which the chairman and largest shareholder had falsified the company’s D & O application – thus rendering the D & O coverage likely void – the first thing I do with any organization is make sure that the D & O coverage is valid and in place. No D & O coverage means no liability insurance potentially leaving officers and directors to fend for themselves.
What else should you look for in considering a board seat?
Do you have the time? Some boards are little prep and occasional attendance, others involve significant number of hours each month and/or predictable time around certain times of the year. Can you deliver the needed time?
Do I bring something that’s valued and otherwise absent? Will my skills and interests likely be utilized well? Leverage and participation in boards frequently consists of what you bring. For non-profit check writing boards, the biggest check writer can frequently have the loudest voice. In corporate boards, where your particular expertise is highly valued, that perspective is one you can leverage to have some clout and make sure people value and listen to what you have to say.
Is a place where I can make a significant impact? Boards and organizations can go through semi-predicatable periods; change agents in a maintenance / hold period are likely to get frustrated and feel as if their time is better spent elsewhere – maintenance and “big-company” people may feel the same in an organization that is earlier stage and highly entrepreneurial. I value my time right only next to my family’s health; if I’m not going to make a difference I’ll likely take a pass.
Is the board the right size – will the board perform well? Board size is in part a matter of time and place; who are the stakeholders/investors, what’s the lay of the land ahead, and what are the particular needs? While an emerging earlier stage company like Zyna (makers of social games like Farmville) has 5 people split between founders and early stage investors, an organization like the San Francisco Museum of Modern Art (SFMOMA) has over 50 elected trustees on their board. These boards will work and operate differently – and the board of Zynga has a very different skill set than a board of another for-profit firm like 150+ year old McKesson [Disclosure: I worked with McKesson as an SVP of Human Resources] And for some, like me, board performance is one of the keys to making a board experience worthwhile.
Am I interested / invested in what the firm or organization does; do I care? While non-profit boards can frequently be about matters of the heart, it helps to be interested in what the company or organization does. If biotech and health care bores you, better duck a board like Gilead, where the focus is on improving lives through therapeutics medicine. [Disclosure: Gilead is a client]. Like animals and the ocean? A board seat with the Marine Mammals Center may be the place for you.
Do I enjoy working with the people around; CEO or Executive Director, chairman or head of the board, the other board members? It helps to enjoy and respect your fellow board members as well as the senior staff of the organization on whose board you sit; hate ’em and it will be a bumpy tenure.
What do you know – and what don’t you know about the company/organization? Perform routine business basics like getting a picture of the financials, customer base, who the organization competes with, etc. Are there any holes in your knowledge; how forthcoming are people about strengths and liabilities?
If for-profit, is the compensation for the work reasonable? One measure of worth is compensation and if it’s a for-profit venture there should be something in it for you besides love and respect; are you getting paid (stock, cash, perks, etc.) fairly for the time and effort you’re putting in?
There are other questions that come up, and my former Bay Area Discovery Museum Board of Trustees member (and Skadden Arps partner) Jose Allen had a great list of questions for directors to consider for the BADM board orientation which can be found here. Deloitte has a great section providing a wealth of materials on topics and trends in board governance which can be found here. Last, the Society of Corporate Secretaries and Governance Professionals has a wealth of information and can be found here.
Being on a board can be a great experience and extremely rewarding and fulfilling. It helps, however, to stop and think about what you want to do, and what the board seat involves, before you either say “no” or yet” when the opportunity beckons.
Life Back West is an occasional set of writings focused on ways people, teams and organizations can be both more effective (doing the right thing) and more efficient (doing the right thing well). More about executive, career and team / leadership coaching services can be found at the “About J. Mike Smith and Back West, Inc.” sidebar or the “Hire Me” tab above. You can also read an online interview with me at WhoHub, as well as participate in my learning community courtesy of KnowledgeCrush.