So you want to serve on a board? Read this first
Herman Singh speaks from personal experience when he says: "Directing is only for the brave".
I often meet individuals who are at an early stage in their careers who tell me that their ambition is to serve as directors on a few boards. I even know a few people who have a made a career solely out of doing this. This is as quite glamorous and exciting and the hopeful individuals ask me to recommend them to boards should I come across them. But nothing could be further from the truth. This is the advice that I share with each of them!
I have served on the boards of a few dozen firms over two decades and also on their Risk and Audit and even their Remuneration and Investment committees. These have been both listed and privately held firms and firms with head offices in Europe, South Africa and even the Middle East and Mauritius. I have learnt a number of hard facts along the way and after over 200 board meetings I have come to realise that these 10 points are probably the most important items that should be seriously considered before you consider a board seat:
1. Liabilities abound: Firstly you carry a lot of legal liability, both commercially and criminally, if you hold a board position. Being a responsible director involves a lot of compliance and doing the right things! That’s not easy in complex businesses and with convoluted shareholders agendas. You had better be up to speed on the relevant legislation for the jurisdiction in which you serve. (I specifically resigned from a board of a firm that was shortly going to list in the US specifically because of the onerous obligations from the US Securities and Exchange Commission and other regulators.)
2. It’s not a get-rich-quick plan: Serving on boards is not a path to wealth because you are managing OPM (Other People’s Money). The director’s fees and other compensations are significantly below being commensurate with the responsibilities borne and the risks taken on. In general, it’s more lucrative to consult to a firm than to be a director so always explore that former option first.
3. It is very time consuming: The board meetings take up a huge chunk of your diary if you consider everything from the pre-reads to actual board meetings and signing many legal documents. That can really stuff up your time management if you have more than two or three boards to attend to.
I once sat on 10boards at one time, as part of my executive responsibilities for my employer, and that’s like having three full-time jobs on the side while you have a full-time job.
4. Share trades become a minefield: The rules around how you trade shares are quite onerous and complicated. As a general rule, I don’t hold shares in the firms on whose boards I sit. This removes a huge chunk of the compliance burden for the director. You will need to inform your broker which boards you sit on so that they don’t trade shares on your behalf by accident during embargo periods.
5. Disclosures require transparency: You need to make a lot of disclosures about your interests and possible conflicts. This is really important in the eyes of the stock exchange rules for listed firms but also for unlisted firms. Are you comfortable to disclose this information about your private holdings? Often the rules also cover your spouses and other family members. It gets really complicated and is a minefield so proceed with caution.
6. Detail, detail, detail: Debates can be long and draining. And that’s tough when you don’t have an economic interest in the outcome. This is not a job for you if you don’t have an eye for detail and process. Failure on either point can land you in jail. That’s probably why so many CAs and lawyers hold these posts. Getting budgets approved, signing off on audit reports and dealing with risk mitigations are not activities for the faint hearted or those not comfortable with financials, risk registers and strategy.
7. Fiduciary Rules!: Once you are on a Board, your fiduciary duties include acting in the best interests of the firm. This includes your activities outside of the firm and being mindful of the non-disclosure obligations. Social media is a huge no-no here – refer to the dad who sent a selfie from a board meeting to his daughter saying how ”bored” he was (a bad “dad joke”) only for her to share on social media and for him to have to resign. It could have been so much worse!
8. It’s a short flight: Board seats get reviewed regularly so your long-term tenure is never guaranteed. Over a few years it’s mandatory for you to be rotated out anyway. That’s a lot of insight and wisdom that you have built up that can no longer be used.
9. Hold the door: If you can’t speak truth to power and hold your line then this is not a role for you. These are roles reserved for blunt, tough individuals who are able to hold the line and ask the tough questions. You serve the firm and not the shareholders! That’s a huge inherent tension on any board and one that is rarely dealt with well in my experience.
10. It’s all about the questions: Dealing with excos is tough. So is being aware of what you don’t know. That combined with having the necessary empathy and mindfulness make for a rare combination. Don’t expect full disclosure in the board packs. Be prepared to ask the deep and incisive questions so you had better gain deep insight into the industry fast.
But if you are still keen on doing this then you should know that there is almost no qualification that can prepare you for it. Directorship training is all about process. The real value you add comes from your work experience, the way you think and who you are as a person.
It’s only for the brave indeed!