So You Want to Be A Director?
By Sarah Wilshaw-Sparkes
Do you want to be a director? Really? Why?
- 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?
Directors’ Duties – or “Danger, Will Robinson!”
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?
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 minimise 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
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. Also bear in mind that 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 a not- for-profit. 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.
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’s path to her current Board appointments 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.
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”.
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.”
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 I have to say that (more by accident than design!) I have met my own criteria.
There is very real benefit in sitting on Boards. My sense is that most women 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!
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If you would like to find out more about Professionelle and how we might benefit you or your organisation, please contact our Director, Jayne Chater on email@example.com or 021 779 967.