Serving as an outside director of a publicly held company
is not what it used to be. Granted, the directors' fees are higher—an
average of more than $150,000 in total annual compensation in the case
of the 200 largest companies—but the demands are also much greater.
In the wake of Sarbanes-Oxley, new SEC regulations and stock exchange
rules, the job of corporate director is now much more time-consuming than
it used to be (assume 25 hours per month and more if you sit on the Audit
or Compensation Committee), and carries more risk as well. Nonetheless,
the cachet of serving on a public board is still very appealing for many
people.
Here are the six things that successful board candidates
should bring to the table, according to Kerry Moynihan, Board Services
Practice Leader and Managing Partner of Christian & Timbers, a global
executive search firm that conducts public board searches:
1. Be an expert in an important business function,
preferably finance.
Notes Moynihan, "The days in which outside directors were selected
based upon their club memberships or personal friendships with the CEO
are long gone. Today, well-managed companies want to add deep expertise
to their boards in the areas of finance, mergers and acquisitions, strategic
growth, taking a company through difficult times and more." Companies
want to find directors who have held high-level executive positions at
other corporations that have faced similar challenges. Of course, financial
expertise (a higher standard than financial literacy), is one of the most
important skills to offer, and is now required of at least some of the
members of the Audit Committee under Sarbanes-Oxley.
2. Be recognized as someone who offers honest advice
and fair criticism.
In prior years, CEOs looked to the board, composed of friends and colleagues,
to affirm management's actions without serious challenge. But now the
best companies have firmly rejected this model and want their outside
directors to serve as honest curmudgeons. Moynihan says, "CEOs who
understand how important it is to have a truly independent board (both
in getting management to perform at the highest possible level and in
demonstrating to outsiders that true checks and balances exist) want their
directors to question everything and assume nothing."
3. Be a leader in your own company.
Board nominations are increasingly the result of focused, professional
search, notes Moynihan. "Now that CEOs are no longer simply scanning
the country club membership roster for names, the task of identifying
and recruiting new directors has become professionally driven. Executive
search firms bring the same precise research techniques to board search
that they do to executive search. They look for executives from companies
that are similarly positioned and who have guided their companies through
similar challenges, whether finding strategic partners, dealing with a
shrinking market, expanding overseas, developing new product lines or
more," Moynihan explains.
4. Heighten your profile by being active in industry
associations and professional groups.
Executives who are active beyond the confines of their own company are
more likely to come to the attention of search firms. "They also,"
notes Moynihan, "will offer a broader level of expertise and experience,
thus increasing their attractiveness as board candidates. Even if someone
is not yet a CEO, they should demonstrate a gestalt understanding of business
issues and capabilities beyond their specific functional expertise."
5. Be personally financially secure.
"Though directors' fees are now reaching levels that are significant—$150,000
per year is not unusual among the largest corporations and even smaller
companies will be moving into that level as the added responsibilities
of Sarbanes-Oxley and other mandates are implemented—management needs
to feel that this amount will not make a significant difference in the
life of the director," explains Moynihan. "Management today
wants and needs directors who can take difficult stands on issues, challenge
the underlying assumptions of the business and stress-test the strategy
with the CEO, who can disagree without being disagreeable. People who
are financially secure are better positioned to do that. And, of course,
no company can afford to have the judgment of any of its directors called
into question as a result of personal financial difficulties."
6. Become familiar with the latest corporate governance
regulations.
The new NYSE regulations, Sarbanes-Oxley legislation and increased scrutiny
of major investors such as CALPERS have all combined to create an environment
where ignorance is not acceptable. Groups such as the NACD and the Center
for Corporate Governance at the University of Delaware, as well as publications
such as Corporate Board Member and The Corporate Board are all contributing
significantly to an increasing body of knowledge and professionalism among
directors. Take advantage of the learning opportunities they offer.
About Christian & Timbers
Christian & Timbers is a top global retained executive search firm
whose clients span the Fortune 100. In addition to executive search, the
firm provides clients with a variety of value-added services including
competitive benchmarking, compensation analysis and best practices in
leadership transition, talent management, retention and succession planning.
For additional information on Christian & Timbers, visit www.ctnet.com
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