Jayson Forrest is the managing editor of Money & Life Magazine.
What’s really involved with sitting on a board? Two experienced executives share their insights and tips to determine if being on a board is right for you.
Taking on a board position isn’t for the faint-hearted, requiring a lot of due diligence, prior preparation, time commitment and an understanding that there are liabilities for being a company director.
These were some of the key issues discussed at the recent Financial Executive Women (FEW) Leadership Conference, with Sarah Brennan and Greg Miller sharing their insights on the pros and cons of sitting on a listed company or not-for-profit board.
According to BMFS Consulting managing director, Sarah Brennan, the reasons people join a board are varied and depends on where they are in their career. She suggests that a great way to test whether a board placement is right for you, is to first consider joining the ‘executive board’ within your organisation.
It’s a view supported by the owner of GKM Consulting and Advisory, Greg Miller.
“Before committing to a board, ask for an opportunity to sit through a board meeting first and get to know some of the board directors,” he says. “But make sure you join the board of an organisation you’re passionate about, which will ensure your interest and enthusiasm in that organisation remains at its peak.”
Do your homework
However, drawing on their individual experiences, both Brennan and Miller agree there is substantial pressure placed on board members, which should not be underestimated by anybody thinking a directorship is easy.
“Before joining a board, you first need to do your due diligence,” Brennan says. “This not only includes the financials of the organisation but also the personalities of the other members on the board. It’s important that you ensure you are working with people who you respect and enjoy working with.”
Miller agrees: “Analyse the other directors. You need to understand where they are coming from. And when you do join a board, particularly for the first time, seek a mentor to help you. Often there is an expectation placed on individuals that because they are part of the management team, then they can be a board member. Well, that’s not the case.”
Brennan adds that there are more opportunities now to find good mentors, with the Australian Institute of Company Directors (AICD) offering a service to match individuals up with experienced directors and mentors.
“And don’t forget to check what the tenure is on a board you are considering joining,” Miller says. “Some boards require exceedingly long tenures, and while this is changing, you still need to be aware of the time requirement to sit on a board.”
Joining a board
For individuals preparing to join a board, Miller recommends getting some prior experience working on committees.
“It doesn’t hurt to first broaden your experience by working on other committees, whether they’re company related or not. And the AICD also offers some excellent courses to help prepare you.”
So, you’ve done your homework and due diligence, broadened your experience and have finally decided to seek a board position. That’s the easy part. The hard part now is being selected.
“It’s a reality that most organisations draw upon the same pool of people for directorships,” Brennan says. “However, that is progressively changing as more boards are looking to diversify the type of member they have sitting on their boards, ensuring they have a good mix of directors based on experience, profession, gender and age.
“That’s because boards now have more to contend with, such as technology and geo-politics, and not just financials, requiring them to be more inclusive and reflective of what’s happening in the wider community and markets.”
Brennan believes one of the best ways to be appointed to a board is to network.
“You can’t under network,” she says. “Network within your organisation, at industry events and gatherings, and get seen by management.
“If you’re serious, you need to have a ‘Board CV’, which is different to your ‘Executive CV’. A Board CV details your skills, experience and characteristics that you bring to the board.”
With ASIC already looking at taking a stronger approach to litigating companies and individuals, Brennan concedes that any board member could “lose their house and go to gaol” as a consequence of their action or lack of action.
“The board will have Directors and Officers Liability Insurance, and while this insurance will protect you as long as you’ve done everything right, it won’t if you haven’t. That’s why I own nothing in my name,” Brennan says.
“And there’s also the damage to your reputation to consider. Your reputation can be damaged by the actions of others, even though you’ve done everything right.”
Miller agrees: “As a director, you need to understand what’s happening on the board, and not just rely on the legal expert or the finance expert. You need to be over all the issues. That’s your legal and ethical responsibility as a board member.”
And being over “all the issues” at a board level requires a commitment in time, with Brennan saying that it takes at least one day per week in order to keep up-to-date with board papers, reading, research and preparation.
“So, there are risks and time commitment for being on a board,” Says Brennan. “It’s not for everyone, but if it’s something that appeals to you, then do your homework, get some prior experience, find a mentor and give it a go.”