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How to Land a Board Seat

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How to Land a Board SeatSenior Advisors Marla Persky, Ann Harlan, and Maureen Brundage, former GCs and current board members, discussed the advantages of board service, key factors to getting on a board, and the specific experience boards look for in candidates.

Look at data to gain insight into corporate boards.

Even though the number of companies listed on the NYSE and NASDAQ continues to decrease due to mergers and acquisitions and bankruptcies, a considerable number of companies are looking for directors. Think about private companies, family-owned businesses, startups, mutual funds, subsidiaries of public companies that have independent boards, and companies with advisory boards that may lead to other opportunities. Public company boards have more limited openings.

There are 630,000 publicly traded companies worldwide

  • Approximately 1% of US companies are publicly traded.
  • On average, seven-and-a-half seats are held by non-executive directors in public companies.
  • Women hold one out of every five corporate board seats in the 3,000 largest publicly traded companies in the U.S. (as of September 2019).

In the U.S., 2,800 companies were listed on the NYSE in April 2019 versus 3,000 in 2018

  • In 2020, 3,100 companies were listed on the NASDAQ versus 3,200 as of April 2019. In 2014, the number was 3,800.
  • The average term of service for a board member in an S&P 500 company is eight-and-a-half years.
  • Last year, S&P 500 boards named 428 new directors. Of them, 40% were women, 17% were under 50, and a third were active or retired CEOs.
  • The last remaining S&P company with an all-male board added a woman to its ranks in 2019.

Fortune 500 projections indicate that an equal number of men and women will be on boards by 2023

  • Women filled 183 of the 462 open board positions at Fortune 500 companies in 2018.
  • Racially diverse candidates did not see the same gains: African- American candidates filled 11% of new board seats, Hispanic leaders replaced 4% of new board seats, and Asian-American board members replaced 8% of vacancies in 2018.
  • California required its companies to have at least one woman on their board by the end of 2019, and at least two female directors by the end of 2021. New York, Illinois, and Maryland are considering similar laws.

If you’re interested in board service, it’s not just a U.S.-based game.

There are opportunities for board service, particularly in Europe, as companies seek to diversify their boards to achieve an international group of directors. For those with international experience, language skills, and a willingness to travel, European companies provide an interesting opportunity. Many European countries have either mandatory requirements for diversity representation on their boards or mandatory disclosure requirements. If they don't have a diverse board, they are obligated to publicly address what steps they have taken to define that diversity and why it seems to be lacking.

Think long and hard about whether you want to be on a board and why.

Serving on a board takes time. When you already have a demanding job, it’s not always easy to make the commitment that will be required of you as a board member.

  1. Be realistic. You really need to make sure you understand what's involved, the time required, what the risks are, and what the rewards are. Don’t just seek a board position because it’s prestigious.
  2. Not all companies allow employees to serve on a board. Find out your company's policy on board service. It may be formal or informal, and even if the policy appears to allow it, you need to discuss it with your leadership team because they may not want you in that role.
  3. Finally, be mindful of antitrust and potential conflicts of interest. For example, you cannot join the board of a competitor, so that can limit your opportunities because your industry expertise may be what will make you a compelling board candidate. You will need to wait until you either retire or change industries.

If you decide you’re ready, there are advantages to joining a board.

In addition to allowing for professional growth and the ability to flex different muscles from your day-to-day, there is the compensation factor. Income is not always generated from board fees only, but also from stock options and other perquisites. Compensation is not insignificant; it’s nice, but it should not be the driving factor to pursue board service. Since service can be very time consuming and also offer potential liabilities, a per hour calculation may indicate that the fees may not really be all that high.

  • Median compensation for directors on boards of S&P 500 companies, including both cash and equity awards, approached $225,000 last year, according to AON.
  • The smaller the company, the smaller the payout. The median was $174,226 for small companies and $126,625 at micro companies in 2019.

There is no compensation associated with not-for-profit boards and it is usually expected that board members will make financial contributions. It’s even more important, then, to be passionate about the mission of the organization.

The big question: How do you get on a board?

Although there's not just one way to get on a board, there is a common theme and it centers around networking, networking, and more networking. To network effectively, develop a value proposition – an elevator pitch – as to why an organization would want you to be on the board, what’s relevant about your skills and experience, and your actual value proposition.

Here are some more tips and considerations:

  • Consider what relationships you can leverage
  • Do the recruiters have you on their radar?
    • Only 25% of board openings are filled by search firms
    • If money is your prime motivator, recruiters will see that as a red flag
  • Visibility – do people know you are interested?
  • Be clear about what you want and don't want
  • Know your value proposition
  • Do you have unique experience, key expertise, and/or valuable contacts to bring to the table?
  • What are your transferrable skills and experience?
  • Are you financially literate?

To sum up: network, be prepared, and give of your skills.

Evaluate your experience against the relative needs of boards.

If you decide to pursue board service, step back and think about your experience and the expertise you have in dealing with matters that boards deal with. It's an interesting process to go through and you may realize that you do have a lot of experience. When a company is looking to add or replace a board member, it has a matrix of skill sets it is looking to fill. The matrix is used to identify and narrow down candidates. There are a lot of hot areas of expertise that can change over time, while certain skills are always in demand. For example, the current pandemic has increased the need for experience with crisis management, pandemics, supply chain management, and other areas that are not necessarily legal skills. Generally speaking, the desired skill set is not title driven, but experience driven. As a lawyer, you can deconstruct your skills to see what would be attractive; this is part of your value proposition. Current areas of expertise for potential board members to evaluate themselves for include:

  • Finance
  • Cybersecurity
  • Digital
  • Privacy
  • Operational experience managing large teams
  • Profit and loss responsibility
  • Experience with transformation (growth, reorganization, business integration)
  • Crisis management

Learn even more from the Q&As presented during the webinar.

Attendees submitted questions to our distinguished Senior Advisors and their answers provide additional insights and a variety of practical tips to help you become a board member.

How does a board generally interview and vet candidates for a director position?

The Nominating and Governance (Nom/Gov) Committee of the board is tasked with creating a profile of the candidate they are seeing and keeping a list of potential board candidates. The Chair of the Nom/Gov Committee usually works with the Corporate Secretary and often the Chair of the Board and CEO to administer the process. If a search firm has been retained, it also will be involved in the search for candidates and in the vetting process. Interviews are generally conducted by the Nom/Gov Committee and the lead director or Board Chair. The CEO also weighs in. Sometimes the final two candidates will interview with additional directors. When a board opening arises, usually the Nom/Gov Committee first asks fellow board members and the CEO for suggested candidates.

Is serving on a non-profit board a stepping-stone to a corporate board?

Yes, it can be, depending on the type of non-profit because your interaction with fellow board members may help in networking for a for-profit board seat. But again, it depends on the type of non-profit and the background of fellow board members.

I have 9 years of experience as a Chief Ethics & Compliance Officer for a global manufacturer, in addition to 15 years of GC experience in global manufacturers. Is the ethics and compliance experience of interest to boards?

Yes, definitely. But it is not your title that will create interest in you as a board candidate; it is your background and experience.

Am I missing the logic? 314 of 432 new SP500 directors were already public company directors, and therefore one should NOT believe that it is way easier to add a seat than to gain a first seat?

Having experience as a director does make it easier to get another director position because you have, arguably, already demonstrated you know how to be a director. However, the recent (past few years) willingness for public companies to put those without previous board experience in a board seat has definitely increased.

Will you recommend placement agencies or people who could assist in finding positions both in the U.S. and Europe?

This is a slippery slope. As Chair of Nom/Gov Committees, I (Marla) have never considered a board candidate floated by a placement agency paid by the candidate. When I work with search firms, I want the firms to have my interests in mind over those of the candidate. From Ann: There are several firms that will do searches on behalf of candidates. They typically charge one year of board fees, paid by the candidate or the candidate's company in advance. I have not worked with one, but they are fairly easy to identify. Buyer beware: they are not all created equally; references will be important.

Is it easier or more difficult for sitting/active GCs to join the board of a public or private company? I have heard serving while one is a sitting GC largely depends on whether management and the board of your employer is open to it.

First and foremost, you need to ask your CEO whether they are open to you sitting on another company's board. Not all are willing to allow this. Some companies have policies specifically forbidding company employees from sitting on boards of other companies. I (Marla) sat on my first public board while an employee (DGC) of Baxter International. The sheer number of private vs public companies would tend to suggest it is easier to find a private company board opportunity and yet, those board positions are almost always obtained through relationships and networking.

What is the average age of a board director?

Within the S&P 500 it is 62 years. Per Equilar, in 2017 the average age for large cap company directors was 61; small cap companies 60.

How do companies view service as GC and/or Secretary of a public company? Is that an advantage that might make up for not having prior public company board service?

It depends on the company and the candidate. Rarely do Nom/Gov Committees look for "lawyers" to be on their boards. They may look for someone who has experience dealing with crushing litigation or someone experienced in M&A or regulated industries. It is all about your experience, not your title.

Could you expand on board workload?

Generally, board service takes between 10 and 20 hours a month, although it happens most often in peaks around board meetings, shareholder meetings, proxy fights, major company challenges/opportunities.

I am in my second non-for-profit board. What are the key skillsets to develop to move to a business board (private or public)?

Business acumen, financial acumen, strategic capabilities, and industry knowledge are the cornerstones of board service as is the ability to work with management without managing.

What level does one need to be to be considered for a board seat? I am told unless you are SVP level in your company, companies will not even look at you. Quite disappointing for me since I am a senior counsel and becoming a VP in my company is at least a 10-year play. Please advise!

It is not about title; it is about skillset and experience with C-suites and boards of directors. You need to have a compelling and truthful value proposition that fits the needs of a company/board.

A comment I've heard several times is that, with the current emphasis on board diversity, a white male is at a disadvantage in seeking a board position. I'm a white male. Is this true?

There is a strong push for diversity, although most board members are white and male. It is still primarily about your background and experience. However, if a board is seeking to increase the diversity of its board members, that is one criterion that will influence who is considered and who is selected.

For companies with international ops, I would add Anti-corruption Compliance as a Hot Area of Experience.

Yes, agreed.

Are there best places to network to find out about these opportunities/express interest?

Network with other directors and CEOs as well as accounting firms, compensation consultants, and other service providers that interact with the board and C-suite executives.

Do you think that attending a Director's college or other training is helpful in obtaining board positions?

Not in obtaining a board seat, but in understanding how to present yourself and what is entailed in board service.

How essential/helpful is it to have formal qualifications or certification like NACD, or other courses?

Nobody gets a board position because they have a certification. It is all about background, experience, and fit. Certifications are nice to have.

Given the long lead time to become a board member, what can I do to best prepare myself, train to be a board member? Organizations to join?

NACD is one source. Most of the Big 4 accounting firms have annual director "training." Most large business schools (e.g., Stanford, Harvard, Northwestern, U of Penn, etc.) all have director colleges. These are expensive, but it is an investment in yourself.

Marla Persky, Ann Harlan, Maureen Brundage, and our team of professionals are happy to help accelerate the initiatives that you're already pursuing or to supplement your current strategic thinking to help you realize your vision. Please reach out if you or your organization may benefit from our recruiting, coaching, or advising services.

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