Threading the Needle
Serving effectively as a public company director is a complex, ambiguous job. Becoming a public company director can be just as complex and unpredictable. A once quiet and obscure world in which trust among long time colleagues, often fellow CEOs, determined how the CEO shaped his board, is now a noisy and crowded marketplace, full of competition.
Moving from a desire to serve as a director to active candidate to seated director requires stamina, hard work, and a great deal of finesse. Though there is no playbook in these circumstances, the candidate can do a number of things to raise the odds of successfully navigating the “fit” issue.
Preparation, Preparation, Preparation
A recent survey of both current and prospective directors by consulting firm CEO Perspective, led by Dr. Dee Soder, showed a striking disparity in perception: 41 of 50 candidates said they were ready for a board interview, while 27 of 33 sitting directors said candidates needed to improve.
Not a Routine Job Interview
These are peer to peer interviews, with all of the delicacy that entails. They are also not being interviewed for their execution skills, but instead for their ability to keep ‘nose in and fingers out’ of the details while remaining engaged and collaborating with top management and other board members.
The candidate’s goal is to present him or herself as a fellow professional with useful experience and skills that can serve the company’s needs and work well with the incumbent group of directors, while exploring dynamics and personalities to determine if the situation is comfortable. Not an easy task when the various interviewers acting for the board have different and possibly varying goals.
Incumbent directors are seeking to evaluate the generally intangible concept of “fit”, though many other descriptors may be used. This a tricky area, as all of us as humans have a hard time assessing the “fit” of people who are fundamentally different from ourselves, and yet we all want boards to be populated by accomplished professionals with diverse views, skills, and backgrounds. Far from sinister, it is a natural human impulse to seek to protect the existing group’s turf.
To my mind, “fit’ is about learning whether the incumbent board members can both trust and respect the opinions of the potential new director. Sometimes the “fit” issue is about assessing the degree of control the incumbents may be able to exercise over the new director. Generally, boards of directors do not like surprises. The candidate, therefore, bears a greater burden in demonstrating “fit”, which is where preparation can be very helpful. Set forth below are a few key ideas on which to focus interview preparation.
Understand the Interview Process
The process will likely involve a series of conversations. The chair of the Nominating Committee, the Chairman, or the CEO may take the lead in arranging interviews with various parties. As a general rule, the candidate should want to meet as many of the board members as possible, to build sponsorship in the event of being selected, and must meet the CEO, the board chair, and key committee heads, one on one if possible.
The nominating and governance committee generally manages the process, but the full board should be involved once the committee narrows its selection to the top one or two candidates. Shareholders vote on the new member at the subsequent annual meeting. Beware of situations in which the Nominating Committee Chair seems to have too much influence; he or she may be leaving the rest of the board behind. Similarly, be very wary if there is no plan for the candidate to meet the key leaders and the majority of the board.
Study the Decision Makers
In these collaborative decisions, in which the board is generally seeking a unanimous decision, the successful candidate does not so much win as fail to lose. The incumbent directors are likely to defer to each other should one of them have a concern or feel a lack of “fit” with a particular candidate. Thus the last candidate standing wins the nod.
The incumbent directors may have different views as to the characteristics of a good addition. Be sure to review each director’s background, experience, and length of tenure in an effort to understand the individuals and the dynamics. Thanks to social media, it is now both possible and easy to research the personalities involved; in the goldfish bowl that is a corporate board room, the complexities of dealing with varied personalities are magnified.
Get the Facts
You will of course review the Company’s 10ks and 8ks as well as analyst and annual reports to understand the company and develop your point of view and value proposition. Consider its business, its position, competitors, and potential problems. Consider how the composition of the board corresponds to stated objectives, and evaluate what might be missing. Look beyond the typical sources to current news, industry publications, and set Google Alerts on the industry’s key players. Study company locations and facilities.
Get Behind the Facts
Why are they interested in you? Are specific skills needed? Boards often establish a matrix of the skills, demographics, diversity, experience, and personality type that they are seeking, and you may be able to learn quite a bit by asking about how they organize their board composition matrix, even before the interviews commence. That said, “fit” issues, both positive and negative, can easily trump the matrix.
Manage the Conversation
This interview is not about your strengths as a manager, but is instead a discussion among peers about the company and your readiness to help oversee it. Focus on how this particular board sees its chief responsibilities regarding serving as stewards for shareholders in building value, helping to clarify and refine strategy, addressing CEO succession and management compensation, safeguarding corporate integrity, and ensuring that the enterprise continues to thrive through prudent risk management.
Though each party is doing respectful due diligence in this process, the central issue is your ability to provide value to the board, and not vice versa. What the incumbents want to know is why you are interested in their board. What is it about the company that intrigues you? What issues does it face where you could be useful as a board member? If you even think about offering such faux pas as “It is a logical next step in my career” or “now that I am retired I have the time to devote to it” you will likely quite rightly be eliminated as an amateur.
Study of the company and its people should lead you to be able easily to envision and describe how you can contribute. Find a way to demonstrate that value added, whether using anecdotes about other situations or developing particularly apt questions. As the incumbents may be struggling to assess a broad array of candidates in a short amount of time, brief stories can help build bridges to developing confidence, and make you particularly memorable as a candidate.
According to research done by Dr. Dee Soder of CEO Perspective, the inability to summarize one’s value is not only very common but highly detrimental. The executive with many accomplishments needs to be able succinctly to state the two or three that relate to the particular board’s needs and easily provide relevant highlights that show your value and discerning judgment.
Lead with Your Ears
Most candidates will be highly successful people. The challenge in the interview, however, is to create the impression that you are not merely smart and accomplished, but WISE and balanced in your perspective. Listen more than you speak. Beware of babbling brooks and information overkill. Incumbent directors frequently complain about candidates’ verbosity, so keep your comments brief and to the point.
Pose Questions Effectively
Prepare questions about the company that demonstrate your knowledge of it, and, beyond that, use open ended questions as a way of leading the conversation. You might ask how company sees the risks it faces, or where its most attractive opportunities lie. Prepare to discuss these complex issues deeply as well as diplomatically.
Demonstrate that you understand and welcome the rigors of board service by inquiring about how board meetings are managed, how committees function and which may need your participation, and how critical issues are brought to and addressed by the board. If the circumstances warrant it, query the board’s use of its own independent advisors. Explore the ways in which directors interact with each other, with the CEO, and with senior management, and how this particular board walks the fine line between oversight and interference.
Boards have their own cadences for adding directors and they often advance the process in a deliberate, iterative way. Remain relaxed, as boards do NOT want directors who express a sense of neediness about the role, or about anything else. Embrace the time it takes, as it may well help you discern your own answer to the intangible fit question. Are these people with whom you would be willing to share a foxhole?
Take a Breath
Should you be invited to join the board, remember that once you accept the seat, you are becoming a fiduciary for the enterprise. While it may sound simple, your ability to serve the shareholders and all stakeholders will depend to a great extent not on your own individual actions, but on those in which you take as part of the board as a whole. Take time to consider the foxhole question above, as your trust in those around you, and your ability to make your voice heard by them, become all important once you become a director.
Cover the Downside
Before you accept election by the shareholders, you may want to request a copy of the board and the company’s liability insurance policies, and understand how the D&O policies work. You will also want to check the bylaws and the laws of the state in which the company is incorporated to see how indemnifications works, and most particularly, whether the board chooses counsel, and how costs of counsel are paid. Regardless of whether any litigation succeeds, you do not want to assume the burden of paying counsel.
Interviewing successfully for a board seat is a subtle matter of both substance and style, of depth and demeanor, gravitas and grace. While the process can take many twists and turns, and you will often not know what is really going on, it is, however inadvertently, a pretty good proxy for board service itself. All you need to remember is to keep your senses on alert: ears and eyes open, noses in, fingers out, mouth generally shut but for certain carefully considered comments.