It used to be that being asked to join a publicly traded company’s board was a highly prestigious honor. And, once elected, the undertaking of corporate governance activities was rarely taxing.
Today, while prestige is still part of the equation when being considered for a board seat, it is very far from the reality of the contributions required of board members.
In the real world of 2009, board members have increasing responsibilities and time commitment in order to be effective. When asked to quantify this commitment, we suggest to board candidates that for proper preparation and study, attendance at board and committee meetings and for interim discussions and unplanned meetings, that a board member should allocate 200 to 250 hours per year. This assumes, of course, that the board does not face thorny issues such as SEC and regulatory matters, replacement of the CEO or a key member of its leadership, an acquisition or divestment, shareholder legal suits, etc. When these matters come front and center, board members can expect that their time commitment will increase dramatically depending on the complexity of the matter(s) to be resolved.
So, given the press of higher standards for board members and how they, as a board, must govern, my partners, who have conducted about 300 board recruitments over the years, ask any candidate, however qualified, several questions before presenting their credentials to our clients’ Board Nominating Committee.
Assuming that we can share the name of the company that has engaged us, and that we receive a pledge of confidentiality from the candidates under consideration, we know from experience that it is always better to present, and for a company to nominate, individuals who are truly interested in our client’s business. If not, when times require that extra effort, board members who aren’t passionate about their company or its particular challenges, will not likely be as valuable as those that are.
First, we ask every serious candidate: Are you familiar with, and have you studied, the company under consideration? Do you know its go-to market strategy? Do you have an impression of the company, its management, etc? Have you reviewed the SEC filings and have a fundamental appreciation of the current challenges as well as its enterprise risks?
Second, given your activities, are you prepared to invest the necessary time to be a contributing and active governor of the company? What conflicts may exist with other boards or other time commitments?
Third, will the candidate under consideration bring a set of competencies and experiences that will be valued by the board as governs a company as it exists today and in line with its forward strategy? How interested is the individual at dealing with complex matters?
Four, will the candidate be truly independent with the ability to act responsibly and to act with diligence? Is the individual willing to bring a “healthy skepticism” to board deliberations without being disruptive?
Boards are like teams. Not everyone will play the same position or be fully compatible. So, before considering a seat on a publicly traded company board, we suggest that one prepares for a board of director interview along the lines of the four questions cited above and be prepared to discuss the areas in which you may be especially helpful. Ask the tough questions about how the board, under consideration, truly functions. Finally, ask where the board sees the value of your professional contribution both at the board meetings, your committee assignments, and as an advisor on areas where your expertise may be useful and encouraged.
From our view, a well-prepared candidate makes for a thoughtful and productive exploration. Please keep in mind, the selection of a board nominee is a comparative process. Sometimes and perhaps too often, even well-prepared candidates, are not selected for election. Beyond competence, experience, and availability to serve, chemistry, among fellow board members, remains an important element in selecting the best candidate for the board’s recommendation and for election by the shareholders.