Corner Office-Wanted: Board Members
So, do you think you’d have to be crazy to respond to the classified ad on this page, or what? Does the risk/reward ratio of the job make you suspect that it’s not worth doing?
Does the ad bring to mind recent television images of high-profile executives being led out of a courthouse in handcuffs? Perhaps it reminds you of recent headlines about those executives paying millions in fines out of their personal funds? Do you think maybe this is why more and more experienced executives are deciding to sit on the sidelines and opt out of board service?
There seems little doubt that a litigious environment and stricter regulation under the Sarbanes-Oxley Act are scaring people away from serving as corporate directors—just at a time when the role of the board of directors is more important than ever before.
The concept of directors—rather than executive management—serving as trustees for shareholders and other stakeholders is the foundation of the American free-enterprise system. Way back in 1932, Adolf A. Berle and Gardiner C. Means wrote “The Modern Corporation and Private Property,” in which they observed that dispersion of equity ownership separated ownership from control. So, it’s not exactly a new idea.
What’s changed is the nature of the job. Serving on the board of directors in those days, and until recently, was mostly a social engagement. The CEO or board chairman invited a few golf and drinking buddies to serve as board members and give a bit of casual advice at quarterly meetings. That changed, as shareholders became more assertive in the 1970s, and even more so in the ’80s. The Sarbanes-Oxley Act of 2002 has taken scrutiny of corporate governance to a whole new level.
Governance is not something to be taken lightly at all; it is a grave responsibility with serious consequences for uninformed or reckless decisions. (Oops, there I go again, reminding you of that risk/reward thing.) That’s exactly why I’m urging the experienced “gray hairs” like myself out there to step up to the plate. Businesses in our communities need our guidance and wisdom more than ever before, and it concerns me that the quality of boards of directors may diminish or erode if we can’t attract the cream of the crop to sit around the table with us.
I am sensing a growing chasm between the supply and demand for quality board members. Sure, I understand it’s a risky job without a lot of financial reward. But businesspeople are attracted to taking calculated risks, aren’t we? And, in my opinion, those of us who have been fortunate enough to accumulate knowledge and experience have a duty to the business community at large to give back. It’s simply the rent we pay for the space we occupy here on earth.
Of the various roles I’ve had in my career, being a board member has been the greatest privilege of them all. I have served on more than three dozen boards of directors—for small entrepreneurial companies, multibillion- dollar companies, for-profit and nonprofit organizations—and served as chairman for about half of those boards. In each and every case, it was my honor to serve the shareholders and stakeholders of those organizations, and I sincerely hope that they believe they are better off for having had me serve on their boards.
I’ve earned every one of my gray hairs for a reason, and if I don’t share the experience I’ve gained along the way, it will have been for naught (which is why I write this column each month, by the way). For as Publilius Syrus, a Roman writer who lived in the first century B.C., said, “From the errors of others, a wise man corrects his own.”
So, my fellow executives, throw away your security bankies, and realize that you have a lot to contribute through board service. The business community needs your help. It may be scary, and the boogie man may get you if you don’t do it right, but helping a company move forward in our highly competitive, globalized business world is very gratifying.
Nonprofits need our help as well. Some of my most gratifying board work has been for nonprofit organizations where I didn’t get paid a single cent. I got overpaid, though, in the gratification of knowing that I contributed to saving children’s lives and making them healthier, helping women to get out of abusive relationships, and giving the community access to visual and performing arts.
Whether you’ve already been a board member for many years or are still trying to figure out the difference between “old” business and “new” business, joining the National Association of Corporate Directors is beneficial. Their publications, seminars, and meetings provide valuable information and training about corporate governance issues. They also offer a two-day course on director professionalism, which covers the basics of corporate governance roles and responsibilities, fiduciary duties, financial acumen, committee roles, risk-oversight issues, and regulatory requirements.
You shouldn’t have to take a course to realize, though, that if you are a director you should exhibit certain characteristics. These include independence from the company’s management team, the capacity for objective judgment, and a serious commitment to shareholder value. Snoring though board meetings is not acceptable, nor is showing up at meetings unprepared, or expecting them to be a social event, or treating them as on-the-job training.
Of particular importance is the ability to effectively manage a potential crisis. You must be able to make difficult decisions quickly and not suffer from analysis paralysis, and be prepared to handle tough situations, such as firing executives and implementing divestitures or major layoffs. First-class directors are serious about their responsibilities, committed, engaged, and willing to sacrifice the time and energy required to do the best job they can do. They ask the tough questions that make management uncomfortable. They insist on measuring performance and progress relative to the company’s strategic plan, goals, and objectives, and they routinely evaluate external opportunities and threats.
If nothing I’ve written so far has resonated with you and increased your motivation to serve, let me appeal to your human selfishness: Consider your legacy. When it comes time to hang up your laptop and BlackBerry, people will either say you were a successful businessperson who made a lot of money, or they’ll say you were successful and selflessly gave back to business and your local community. It’s your choice.