Ten tips to becoming a valued board member
The role of a Board of Directors is to protect the best interests of the company or not-for-profit. Directors set and review policy and oversee the performance of the chief executive officer.
In spite of that oversight, there are still countless cases of companies going financially awry or charities sliding into public relations disasters. Atlantic Business asked three executives—each with decades of experience serving on the boards of private companies, government agencies, and not-for-profit organizations—for their advice on how to be an effective director.
Know what you’re getting into
Before you commit, ask yourself if you share the organization’s vision and strategy for what it does. Ask why you are being recruited: is it for your particular expertise (accountants are often expected to join the audit committee; lawyers get routed to governance) or to work as part of a team on a specific project? Find out how much time will be involved attending meetings, reading reports and responding to emails. If the organization is a not-for-profit, will you be expected to fundraise?
MM: “Find a buddy on the Board who understands the business better than you do and use them as a mentor to ask questions off-line”.
JF: “Invest time in building a relationship with the CEO and key leaders within the organization to allow you to better understand the opportunities and the challenges.”
RB: “You don’t need to know all the answers, but where you can really add value to a Board is to learn the right questions to ask.”
How to measure the CEO’s performance
As both a veteran Board member and a CEO for nearly 20 years (she headed the N.S. Gaming Corporation before moving to Credit Union Atlantic), Marie Mullally has strong views on the hot topic of executive compensation. Many Boards hire outside consultants to provide comparison surveys to help set the pay scale. She is cautious when reviewing data and seeks to “use the right comparisons”. For her, geography and the type of market in which the company plays (regional, national, global) are key factors. She says directors should consider executive compensation that is designed to both motivate and retain, and that reflects an individual’s value to the organization.
MM: “Measure executive performance based on results, not activity. The number of meetings or travel miles a CEO has logged are irrelevant if they can’t deliver on the business plan.”
The buck stops here
Know your legal responsibilities and liabilities and act accordingly.
Canada’s new Digital Privacy Act was proclaimed last year and organizations now have a responsibility to report all breaches of computerized data involving clients.
Ask if your company has Directors & Officers insurance to protect you from personal exposure if your organization gets sued for polluting the environment, a wrongful dismissal, product recall, or any other risk. Check to see what Directors’ insurance covers. The cost of re-issuing credit and debit cards to Winners/Homesense customers after the computer system was hacked was NOT covered 10 years ago. Today companies can buy a separate, cybersecurity policy in case of a breach.
Be aware of what you can and can’t say publicly. Respect the confidentiality of corporate decisions that may affect the stock price or expose you to allegations of insider trading (if you’re on the Board of a publicly-traded company).
RB: “To ask people to sit on a Board as volunteers with potential liability and not have Directors’ & Officers’ insurance is a questionable practice. I would say 90-95 per cent of all organizations need at least some sort of rider.”
Draw a line in the sand
Responsible oversight doesn’t include interfering in management decisions. Occasionally Board members are approached by a customer or member of the public to “fix” a problem. Direct them to staff to resolve it and avoid interfering in management decisions.
Our experts agree Board members should NEVER use their position to ask or demand favours from staff (such as free tickets or a summer job for a family member).
RB: “Nose in, fingers out.” (The popular saying advises directors to become involved enough to sniff out whether the company is being well run without reaching in to meddle in daily operations.)
JF: “Have in place a clear policy to deal with and minimize the impact of conflicts of interest. When conflicts of interest arise, as they inevitably will when Board members may have family or business ties with owners or staff, the solution is to be prepared.”
MM: “Recognize that this line has a tendency to blur if you are part of a Board on a not-for-
profit where there are too few staff. You may find yourself volunteering to write a report or help balance the books.”
Be the brand ambassador
As a Board member you are custodian of the company’s public image, approving and rejecting strategies that help shape it. Champion the values and mission of the organization. If you can’t promote the entity you believe in, don’t expect others to be customers and supporters.
RB: “While directors are passionate advocates of their organization, they should AVOID becoming its public face and corporate voice. Centre-stage rightfully belongs to the CEO and paid business leader.”
Ask the difficult questions
Diversity of thought and opinion can save a company from making costly mistakes and avoid “groupthink” in which Board members defer to the person who has been around the longest or is the most dominant personality. If the tough questions aren’t asked, an uncontested decision may return to the Board for a do-over that costs time and money.
JF: “Show up prepared for the meeting. Treat being on the Board like you would any other job.”
RB: “It’s easy to not rock the boat when you are a new member and everyone else has more knowledge. Yet maybe you are the one with the best insight as to how the policy might be perceived by consumers or the media.”
When the going gets tough
A good Board is like a healthy marriage, it must be able to survive conflict. Get acquainted with your organization’s bylaws: they are the rules and procedures you will rely on when there is no consensus or acrimonious debate.
Jeff Forbes recalls one tense experience serving on a Board at arm’s length from government when the Province attempted to overrule a decision. A joint presentation from the Board chair and CEO calling out the government for usurping the authority of the independent directors it had appointed led to an apology from the Province and “hands off” the original Board decision.
JF: “Be prepared for pushback and uncomfortable moments. If there aren’t any, the Board is likely not being very effective.”
Celebrating the successes and hearing from people who have been touched by your work with an organization can keep Board members engaged, empowered and focused for the tasks ahead. Make a field trip to the shop floor and talk to staff. Use 10 or 15 minutes during Board meetings to remind yourselves why you chose to give your time and energy to the enterprise in the first place.
Know when it’s time to go
Most companies and not-for-profits have bylaws specifying how many years or terms an individual can stay on the Board. Gone are the days (except on Boards controlled by family members who also own the company) when directors serve more than 10 years, creating so-called “zombie directors”. As the pace of change speeds up and new expertise is required, the turnover on Boards is becoming faster. Be prepared to step aside if the Board identifies a skill or competence it needs to recruit, or, if your area of expertise can be contracted out (e.g. fundraising, marketing). Smart Board members know it’s time to resign when the direction of the organization no longer aligns with their expectations. When you wake up at night thinking “I’ve got to get off the Board”, you probably do.