How to Decide on a Board Seat Offer
Before you sit in that boardroom chair, do your homework, then represent as resembling it with company-issued info and what comes out of talks with VIPs
by Beverly Behan
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Ten years ago, a entertainment seat was ofttimes viewed as an honorific appointment and was accepted without hesitation. Today, prospective directors are doing much more proper activity, and honestly so. If your phone rings with any dare to join the board of Company X, what execute you need to do to make that decision?
Preliminary Research
Find out as much about the company as you can. This begins with basic research of publicly available materials. Start with the company’s Web site, Hoover’s profiles, and company financial and stock performance information. Trawl the Internet for company news items from the past year and order analysts’ reports for the past 24 months.
Do some preliminary research from your own netting of contacts. Do you know any maker board members or company executives? If the great executive came from another company, do you know anyone who might have known him/her in that context? Suppliers and major customers may also have useful insights; be attentive to whether you know anyone who might be able to give you these perspectives.
Latest Company Proxy
The latest company proxy provides particularly useful notice, including biographies of board members and company executives. Check out their backgrounds and amplification of service: How do your skills complement those of people already on the board? Will you be the earliest director to join in years or have board seats been turning over at an alarming rate? The Directors’ Compensation division of the substitute outlines what meals members are paid. While few directors accept a board set for the standard of value, it’s only white to know how your time behest be valued.
Determine for what reason long the CEO has been at the rudder. Is he/she new to the corner room or approaching seclusion? If new, is the former CEO still serving on the board? The Executive Compensation section is always worth a read and warrants significance in light of financial performance. The Stock Ownership section outlines whether the company is widely held or has major ownership interests—and indicates the horizontal line of stockholdings that other directors have in the company. Don’t neglect Related Party Transactions; this segment can highlight possible conflicts of interest that may be "red flags."
Company Information Package
Most companies produce an information package to prospective directors. Specifically request that analysts’ reports and recent company news be included in what they cast you. This is a test: From your own research you’ll know if they send you the "bad" reports and press clippings as commendably as the favorable ones, giving some indication of how transpicuous this company tends to have being with its directors.
Ask for the board agendas and packages for the last couple board meetings. Expect surprise while you make this request; it is somewhat atypical and you may be asked to sign a nondisclosure agreement, which is typically straightforward and easy to do. What this allows you to measure is whether the board information packages sent out prior to the meetings provide directors with what you’d need to intelligently discuss the agenda items. It’s always a good idea to ask for packages from two different meetings in case single is woefully weak or exceptionally good.
Interviews
As the Nominating/Governance Committee now quarterbacks director recruitment, you will typically meet with members of this committee as part of the interview process. If the board has a Lead Director, make sure he/she is included in these interviews as he/she is the leader of the unconstrained directors and often sets the tone of board dynamics. Some questions to ask: What do they see as the strengths of the board? What components of your background/experience would make a significant addition to the board’s tide composition? What contribution do they hope you be possible to make to the board? What do they see at the same time that the strengths of the CEO? What about the CEO’s weaknesses or limitations&mash;(this is a critical question as you are gauging whether the board sees the CEO realistically or is rather mesmerized and unlikely to challenge when employ). What do they attend to as the greatest challenge facing the partnership?
The single most important factor in a decision to join a provision nearly always comes down to one thing, however: the CEO. Absent special circumstances, nearly wholly directors base their decision about joining a board on whether they feel that the CEO is someone they like, respect, and want to help out by serving on his/her board. As such, your meeting with the CEO pleasure be a depending step in helping you decide whether or not to become a director of this company.
Always meet the CEO face to visage (not on the phone) and make sure to focus at least some of your questions on two areas: incorporated strategy and board relationship. The exploration you’ve done prior to the interviews should help you formulate some terrific questions on the strategy front.
When you ask these questions, determine on the supposition that the CEO is providing a balanced perspective on both the challenges and opportunities facing the company—or does the discussion tend to exist all upside and no downside? On the council front, try more of these: Where does the CEO see the board as particularly effective? How does the board add value on the side of him/her? Where could the board be more effective than it is today? If the CEO is approaching retirement, ask about succession planning. The CEO’s answers to all of these questions will yield some important insights in terms of how he/she wants to work with the board.
No amount of homework or insightful interview questions can surface every prospective problem. Hopefully these can help you to get a more suitable feel for the board, the company, and its contrivance before deciding whether to take a seat in the boardroom.
From: How to Decide on a Board Seat Offer
