Do you want to be a director? Really? Why?
Perhaps because…
- being a Director offers you more flexible work than the
corporate or professional services life
- you're approaching retirement and foresee that a portfolio of
Directorships could contribute to a reasonable income and a second
career
- you have a skill that you know could be useful outside the
confines of your job
- you have a cause you're passionate about and serving on the
board is a way to contribute or give back
- you have observed men filling most of the Board seats and
thought - well, why not a woman, too?
I heard all these reasons and more at the recent Diversity on
Boards conference in Sydney and at the Board Readiness workshop
that ran the day before. These events were both organized by Women on
Boards which is a not-for-profit with 6500 subscribers and
which states its goal as improving the gender balance on Australian
company boards.
Up to 300 professional women gathered
for the Sydney sessions. We ranged from newbies keen to understand
more about what being a Director truly entails, to those who came
to share their significant wisdom and years of governance
experience. And we all wanted to engage in the debate on whether
there should be legislated quotas (a la Norway) for women on listed
company Boards. That topic will have to wait for another
article. In this one, I'll tackle what I learned about being a
Director, assessing potential Directorships and improving the odds
of ever being offered one.
Directors' Duties - or "Danger, Will Robinson!"
Elsewhere, we have published articles on what a
Board does, in terms of its advice and governance functions. The
first session at the Board Readiness workshop was a sobering
reminder that serving on a Board is not all privilege, power and
perks.
If I said to you that in a new role you would be responsible for
ensuring compliance with a raft of financial reporting, health
& safety, superannuation etc laws but that you would, given
time constraints and limits to your skill set, largely have to work
through others, by delegation, would you feel a faint tinge of
alarm? If I added that the legislation today stretches further and
wider than ever before due to governance failures (think Enron)
would you start checking for the exit? And if I finished by
pointing out that unpaid not-for-profit directors face the same
responsibilities and burdens as those paid handsomely to sit on the
largest listed companies would you grab your bag and head for the
hills?
As Fiona Shand, who presented this session, said,
Take this very seriously. It is not an easy option
any more.
Managing the risks
Of course, only a tiny number of Board directors end up facing
civil or criminal proceedings. Most Boards function more or less
competently for the benefit of their organisations. It follows that
there are ways to protect yourself and minimize the risks. I'm not
talking here of financial devices like putting your assets into a
Trust. Instead, I'm referring to attitudes and actions that will
keep you and your fellow Directors on the 'right' side.
- Read the company's Constitution and the Companies Act so you
know what you are allowed to do as a Director. For example, you
have the right to access the company's books at all reasonable
times
- Do your homework. Read the Board papers with your brain in gear
so that you come prepared with questions to assure yourself that
management has considered the relevant angles
- Don't treat delegation as 'set and forget'. It should be 'set
and keep checking'. Courts will look for evidence that you reviewed
the processes and effectiveness of your delegated authority. Sub
committees, for example, should keep minutes, and have stated terms
of reference and clearly delegated authorities eg spending
limits.
- Regularly ask yourself if the Board's decisions could stand up
to the cold light of day on the front page of your national daily
paper. If not, be prepared to speak up. It's your reputation that
is at stake!
- The same "speak up" advice applies if you believe important
issues have been glossed over, or if there seems to you to be a
conflict of interest, for example. Speaking up can apparently form
part of your defence if things unravel badly. Of course this is not
a comfortable process…
[In most boardrooms,] collegiality trumped
independence Warren Buffett
Due Diligence
Before you take your seat at your first Board meeting, there are
practical things you can do to ensure your future success and good
fit. We heard at the conference from a number of Directors who had
taken the due diligence phase of assessing a potential Board
position very seriously. Also bear in mind what I was told at a
governance training session in NZ, run by Janine Smith of The
Boardroom Practice: you don't have to take a Directorship just
because it is offered!
Here are some things to consider in your due diligence
phase:
- Who else is on the Board? How are they regarded? Take a good
look at the Chair, too. S/he is critical to the Board's
interactions and style. Also, to learn good governance at the
outset, you need to be on a well run Board
- What does the Board composition tell you? How independent is
it: what proportion of directors are non-executive and do any
directors represent particular interest groups, like Private Equity
investors, or the family owner? Vested interests are a major driver
of Board ineffectiveness
- Find out about the business, its environment and challenges,
its culture. Read the annual reports, press clippings. You're
looking for ways your skills and experience could add to the Board,
as well as for red flags like potential conflicts of interest and
style you may have
- Is there a Board induction plan to help you get up to speed
quickly?
- When you're getting very close to 'yes', you can dig deeper.
Ask to see minutes, audit reports, the strategic plan. And check
the "D&O" which refers to the directors' and officers'
insurance policy, an essential even in nfp. I won't pretend I
caught all the technical details on this but here's another
conference tip: the major law firms and regulatory websites often
put out very helpful free guides on issues directors need to know
about. So do the big insurance companies: I googled D& O in NZ
and found this and this.
Building a Pathway
On your way to being offered a position, the chances are you'll
have had to put in some hard yards to research the Boards in areas
you're interested in and then to work to meet the right people. Denise Aldous shared with us her path to her
current Board appointments and I'll repeat the highlights because
it makes the points so well.
Arriving back in Australia after years overseas in a CEO role,
Denise discovered that her offshore experience counted for little.
What to do? After careful personal reflection on her strengths,
skills and interests, she concluded that a Director role would suit
her strong strategic focus and that she had specific benefits to
offer. Next she went on the Australian Institute of Company
Directors course. I loved her rationale:
The course is a small amount to pay for realizing
if being a director is what you want to do.
And then she began to tackle such issues of how high to aim? how
long to try for? which Boards to target? On the last question, she
broke the market into public, private, listed and not, and nfp. She
classified 330 state boards in NSW alone according to her criteria
set! (Only a handful made it through).
During this process, she also identified sectors of interest,
such as finance. She identified a top bank as her stretch goal and
then planned back, looking at the bank's wholly owned subsidiaries,
and ultimately down to the building societies and credit unions. At
that last level, she selected targets and is now working hard to
get in front of their current directors and to keep up relevant
contacts.
Her systematic efforts to network were truly impressive: she met
2 or 3 new people every week for almost three years as a result of
joining relevant business groups and organsiations, placing her CV
on databases, speaking and writing, and - shudder - cold calling.
And needless to say, she tracked them all, and followed up
regularly.
The results from all her hard work are flowing in. Most recently
she was appointed to the Cronulla Sharks Board, to complement her
positions on Uniting Care NSW/ACT, Kea Australia, the Enterprise
Challenge Fund and as a lay member on one of the NSW Bar
Association's Professional Conduct Committees. A last, great piece
of advice:
Don't give up the day job…Most Directors don't
start with the lucrative top Board roles. You have to put in a lot
of effort at the voluntary level first.
Advocates
Erica Smythe similarly shared her journey through several
resource company Boards (she is now Chair of Tora Energy) and
not-for-profit Boards in diabetes, an area of particular personal
interest for her. Erica has 7 Board positions, "4 that pay and 3
that don't".
She showed us an animated Powerpoint slide that tracked all her
Board appointments back to the organisations in her past from which
had come the advocates who recommended her. Thus, a man who had sat
opposite her in negotiations over a railway line years ago and who
later moved on to the nominating committee for the University of
WA, remembered her favourably and put her forward for the
University's Senate.
Erica's key message was about the importance of advocates in
your path to the Board. You may not always know who they are but
the chances are that they will have seen you in action somewhere
and been impressed. They are therefore prepared to risk their
reputation in putting you forward. As Erica expressed it,
The interactions you have today create your
future. Positive and negative impressions about your attitude and
experience remain with people, even after the detail fades.
Final Thoughts
The key lesson I took from the conference is that being on a
Board is no sinecure. It can involve a lot of hard work,
considerable potential risk and little financial reward. That being
the case, the next Board I aim for will necessarily be one that
sits squarely in a cause I care about or an industry that
fascinates me. And when I reflect on the governance positions I've
held or still hold - the Montessori Trust, the primary school
Board, my consulting business and now Professionelle - I have to
say that (more by accident than design!) I have met my own
criteria.
The many wonderful women I shared time with at the conference
also seem to believe that there is very real benefit in sitting on
Boards. My sense is that most of them think first and foremost
about what they can bring to the organisation, rather than the
other way around. To support this, let me end by sharing a piece of
as-yet unpublished research by Renee Adams, who spoke at the
conference, and Patricia Funk called, "Beyond the Glass Ceiling:
Does Gender Matter?"
The core issue it addressed was: do the women who have broken
the glass ceiling and made it onto a Board look very like their
male colleagues in the values and attitudes they hold?
The answer is no. Women directors hold different values and
attitudes to male directors. Women directors are:
- More benevolent
- More universal (tolerant and protective of the welfare of all
people and nature)
- Less hedonistic (seeking pleasure and sensual gratification for
self)
- Less concerned with power, security and conformity
- More interested in stimulation (novelty and challenge)
- Less risk averse (yes!)
It's good to have the research confirm what we instinctively
intuit!
© Professionelle Ltd 2009