As scrutiny of public company leadership increases, corporations are feeling the pressure to get out ahead of criticism by examining and adjusting the makeup of their boards. This makes 2020 a great time for business leaders interested in joining corporate boards—including professionals from nontraditional backgrounds and underrepresented groups—to make the jump into one of these high-profile roles.
In the past, company boards recruited nearly exclusively from the ranks of current or retired CEOs, CFOs or existing board members. Now, several trends are converging to make board membership accessible to a wider range of candidates than ever, increasing the chances for business leaders who haven't served in the C-suite.
First, research continues to show that increased diversity in the boardroom is connected to stronger corporate performance. And diversity isn't just about gender and ethnicity—candidates with disparate ages, experience levels, and professional or economic backgrounds offer valuable insights and skills that are particularly welcome, if not critical, in today's business environment. One study of Fortune 250 companies found that having a variety of experiences and perspectives at the table allows companies to better understand opportunities, anticipate challenges, and assess the various risks, consequences and implications of possible actions. Nontraditional candidates can use these findings to their advantage.
Second, while diversity remains low, it's on the rise. The speed of change in the business world has been forcing leadership to bring in new perspectives. Spencer Stuart reports that today's new directors are younger and more diverse than ever before. The share of women and minorities joining corporate boards last year hit record highs, as 45% of new Russell 3000 board seats were filled by women and 21% of new seats in the Standard & Poor's 500 were filled by minorities.
These trends are as evident at Silicon Valley tech and life sciences companies as they are across the United States, according to the latest Gender Diversity Survey from Fenwick. Overall gender diversity in leadership, as measured in the Fenwick Gender Diversity ScoreTM continues to slowly rise, and companies in the SV 150 are improving at a faster rate than the mostly larger companies in the S&P 100.
Third, external pressures on companies to diversify are growing. At this year's Davos World Economic Forum, Goldman Sachs CEO David Solomon announced that the investment firm would no longer underwrite IPOs for companies that have all white male boards. As of 2019, California is requiring all public companies headquartered in the state to have at least one female director. BlackRock, the world's largest money manager, has embraced the public stance that companies in which it invests should have at least two women on the board. And proxy firm Glass Lewis last year implemented a policy of voting against the nominating chair of any company without at least one female director.
Should you join a board?
As businesses grapple with calls to diversify, women, minorities and other nontraditional candidates interested in joining boards finally have, hopefully, improved opportunities to succeed.
If you're considering seeking a directorship, I encourage you to think as strategically about your board aspirations as you do about your overall career goals. In my work with public company boards and management for the past 35 years, I've counseled companies, directors and officers in navigating corporate crises or defending U.S. Securities and Exchange Commission and U.S. Department of Justice investigations, securities class actions and fiduciary duty litigation.
Drawing on those experiences, I believe as a prospective board member, you should keep in mind a handful of considerations as you move through the decision-making process to enhance your chances of landing a board position and to provide meaningful contributions when you do.
On the positive side, a corporate board seat is an opportunity not only to showcase your professional expertise but also to gain even more knowledge and perspective. As you sift through the many technical, tactical, legal and business issues that come before the board, you will have multiple opportunities to gain a better understanding of corporate strategy and decision making. Some directors say every year of board service is like earning a mini-MBA. Depending on which company you sign on with, a directorship can also offer you a chance to learn a new or adjacent industry.
Your fellow board members as well as the management you'll be interacting with will all bring their own insights and experience to the table, providing incomparable learning opportunities. The networking possibilities are also massive. Developing good relationships with these colleagues will exponentially increase your professional reach in ways that can pay off dramatically in the future. Fellow directors will have connections, skills and expertise that may be valuable to you outside your board service.
Joining a board can provide financial benefits. Compensation for directors can range from six to seven figures, including stock awards and extra payments for meeting attendance and committee service. The highest-paid directors in 2018 were those at Twenty-First Century Fox, who received average compensation of $2.58 million. In contrast, board members at Applied Materials, which came in at No. 250 in a ranking of highest-compensated corporate directors by research firm MyLogIQ, received retainers of $70,000 each and stock awards of more than $222,000. For many directors, however, the opportunity to help steer a company from stasis to success is the far more valuable reward.
The downsides to directorships can be substantial, though. For one, joining a board typically requires a significant time investment—20 to 40 days a year per corporate board, depending on which company you join and its governance or committee needs. Your time will be spent not just traveling to and attending meetings, but also meeting preparation, committee work, research, reviews of strategic items like talent assessments and investment proposals, and educating yourself about the company and its competitive environment.
As a director, you will also be exposed to legal liability stemming from your decisions and the actions you take in your role as a company leader. Board members have a fiduciary duty to the company and its shareholders to act in their best interest. If management or the board engages in malfeasance, or even if shareholders simply believe wrongdoing may have occurred, you could be sued. Directors are typically indemnified by the company and protected from financial liability by directors and officers insurance and corporate measures, but being sued by shareholders or investigated by regulators can be distracting at best and catastrophic at worst.
And should you work for a company that is a potential supplier or partner to the corporation whose board you'd like to join, you may find yourself disqualified due to conflict-of-interest or independence rules limiting the degree to which directors and their family members can "do business" with the company on whose board they sit.
If you've evaluated the pros and cons and decided to go for it, here are a few guidelines on how to increase your chances.
How to position yourself for board service
1. Promote yourself. You've probably worked hard to build your resume and hone your skills. But that's not enough. You need to speak up about your contributions, the value you have created in prior companies, and broadcast your interest in serving on a board. Raise your visibility through published articles and speaking at conferences. It's important to self-promote early and continue to build your brand throughout your career.
2. Nurture relationships. Executive leadership is a highly networked world and many board members earn their positions through existing connections. Reach out to people who are already on the board of a company where you'd like to serve, to executives, or to advisors such as outside counsel. Look for common backgrounds—the same alma mater, volunteering in similar areas, serving on the boards of similar nonprofits. Corporate and defense lawyers with whom you have developed relationships can also be very helpful in identifying board opportunities. LinkedIn and other social media are a valuable source. Keep all your contacts current.
3. Develop a specialty. Companies increasingly are appointing board members with expertise in emerging areas, such as artificial intelligence, machine learning and cybersecurity. Professionals savvy in digital transformation or customer insight are also sought out. (Read more in Spencer Stuart's How Next-Generation Board Directors Are Having an Impact).
4. Join organizations. If you are engaged in a cause, join the board of a relevant nonprofit organization where you can gain the skills and experience that would be valued on a for-profit board. Numerous organizations are also invested in the effort to increase diversity on boards, including the National Association for Corporate Directors (NACD), Stanford Law School's Directors' College, Northwestern University's Kellogg Center for Executive Women, Harvard Business School's Women on Boards program, and the Alliance for Board Diversity. Others include Watermark, a San Francisco Bay Area membership organization dedicated to increasing the number of women in leadership positions; Athena Alliance, which provides leadership coaching, board opportunities, exclusive events and one-on-one mentorship; and Directors League, a peer-to-peer organization of active public company board members who share practical advice about real-world situations.
5. Seek out the right opportunity. Serving on a board is a serious time commitment. Don't rush into the first opportunity that arises. Assess whether it's an organization that you're interested in and one where you'll be able to grow as well as make a significant contribution, considering the strengths you would bring to the position.
Once you've made it to the boardroom, you'll want to make the most of your time there. Here are a few tips on how to do that.
Tips for new directors
1. Don't go into early board meetings trying to do something dramatic. Earning a seat on a public company board is an accomplishment, and many new members are eager to prove themselves the minute they arrive. But every company board has a unique culture, and it is important to take the time to learn who the other board members are, how the board operates and interacts with management, and the best way to navigate existing relationships. The board may have existed as a living, breathing organism for years or even decades before you came along, and individual directors may have invested years of their own professional time into the organization. While some boards may need immediate or profound change, don't assume that you need to prove your mettle in the first meeting.
2. Master the company basics. New board members should get comfortable with the details of the company business model, strategy, financials and senior management. It helps to spend a few days prior to your first board meeting getting to know the business and your management team. If you can apply a SWOT analysis—evaluating strengths, weaknesses, opportunities and threats to the company—to your self-education, you'll be able to start your service from a position of strength.
3. Know where you can be most helpful. Take stock of your skills and experiences, and don't hesitate to ask company management about where they can be most useful. Identify someone on the board who can offer insight into existing board dynamics and check in regularly with the board chair. Talking to the in-house counsel and outside lawyers can be very informative, too. You can gut-check your personal SWOT analysis with these folks and ask what you might have missed.
4. Find a mentor. First-time directors often benefit from having a mentor who's been on the board for a while, who can fill any gaps in your knowledge, and help make you more effective. Ask your mentor for feedback about your level of participation at meetings.
5. Learn to navigate conflict. Remember that your job as a board member involves asking difficult and probing questions for the good of the company. But there's also a skill and an art to the process. If you're new to the board, do your homework. Consult with your mentor or other board members to gain context about difficult subjects before raising them at a meeting. Early in your tenure, a good approach is to ask questions—even if you know the answer—in the spirit of arriving at the right answer collaboratively and helping to build general agreement.
6. Develop your voice. Once you have a sense of how the board works, who the players are, how decisions are made and what drives the company's strategy, you'll be better positioned to make your own voice heard about areas of concern, strategic gaps and new business opportunities. One way you can make an impact after you've settled in is by working to increase diversity. Leverage the research connecting increased diversity with better business performance to make the case for measures like voluntary targets for diverse board members and increased transparency about the company's diversity in corporate disclosures. Encourage the company to expand beyond the traditional sources when it searches for new board members, and advocate for increased mentoring for new directors. As with any effort to drive changes in policy, the best time to raise an issue is after you've established credibility. Boards can be political, so you want to make sure you spend your political capital wisely, and smart timing is part of that.
In the end, you can gain unparalleled professional experience from serving on a corporate board. More importantly, you can make substantial contributions to the company's financial and operational success, including by furthering efforts to be a more diverse organization.