Monday 28 May 2012

How to Win a Board Seat



Every year, approximately one-third of the 1,750 seats available on ASX200 company boards are made vacant. Most vacancies occur because the directors have completed their terms; three terms of three years is the usual benchmark.

Other vacancies arise when board members retire because they've accepted a new board appointment which is in conflict with some of the boards in their current portfolio. For example, a director would not be able to maintain a seat at a regional bank board if they then accept a directorship at a bigger bank.

Or the vacancy may occur because a director simply has too many boards to manage efficiently and properly.

Past practice has meant that the candidates who fill these vacancies will be similar to their predecessors - male, Anglo-Celtic origin, and similar professional, educational and personal backgrounds. However, more of these seats are going to women as a result of new best practice guidelines which encourage listed boards to reflect a better gender balance in their composition.

That said, there are still only about 550 positions on ASX 200 boards that are made available every year. And each one is hotly contested.

Winning a seat on an ASX200 company board reminds me of the school leaver or newly-minted university graduate who misses out on a job because they don't have any work experience. How can they get work experience when no-one will give them a job, they lament.

It's the same in board circles. The way to get a seat on a listed company board is to have a listed company board in your portfolio already.

In my previous post, "Waiting for the Phone to Ring....", I advise senior executives making the transition from a full-time career to building a new role as a professional company director to be patient, tenacious and diligent.

The traditional routes are to register with organisations that advertise board vacancies. One example is Women on Boards, a not-for-profit organisation which campaigns for gender diversity on boards across all sectors.

It's also useful to meet the key consultants in the board search industry. Most large consulting firms provide such a service; there are also a range of boutique agencies which specialise in board placement. But be careful to choose consultants who are truly experienced in board search to ensure your résumé is handled professionally.

The best way, however, is to use your personal network. If it's appropriate, let it be known that you will be pursuing a board career once you leave your current executive role. Your first board is the most critical when you're starting out as a company director because it signals to the market what type of director you will be and the type of industry you're interested in - financial services, health, mining?

The people in your personal network who will provide the best advice are non-executive directors, CEOs, chairmen, company secretaries and board search consultants. Telling your network that you're available for a board seat once you leave your current job is critical to finding your first board role. These are the people who already familiar with your experience and capabilities and are more likely to champion your next career move.

It's tempting to defer searching for board roles until after you leave your current executive role because your job is too demanding and leaves you too little time to network. But many executives in transition forget the caché that their job title and company often carries - and how quickly this is forgotten once they've left.

It's often more palatable for a chairman to appoint a new director who is the CEO or CFO of a major organisation rather than to hire someone who's been "retired" for six or 12 months as they "build their board portfolio". 

Making yourself out to be a good catch is part of the game in board circles, just as it is with applying for any new role.

The next steps to consider are:
  1. writing a director's résumé;
  2. preparing for an interview, and;
  3. conducting due diligence on your prospective board's company.
I will cover these in subsequent posts.














Monday 21 May 2012

An Interview with Professor Mervyn King




I first met international expert on corporate governance and sustainability, Professor Mervyn King, two years ago in Johannesburg when I was presenting at a conference. He was kind enough to meet me for a drink at my hotel in Sandton where we discussed a broad range of topics about corporate governance.
Our meeting coincided with the release of “King IIII”, the third iteration of the King Code of Corporate Governance in South Africa. Mervyn King was the chairman of the group which wrote the code.
Corporate law tells us that the board is accountable to the company but the international governance debate has moved to taking account of strategic stakeholders’ needs, interests and expectations in boardroom decision-making. So one of the key issues we discussed that evening was how to create a sustainable business, and how boards needed to be informed about stakeholder management.
Mervyn King was recently in Australia to present to the 2012 Global Reporting Initiative conference in Melbourne. He spoke to Boards and Governance about the board’s role in sustaining value creation.
“Good governance is about quality and not quantity,” says King, who has campaigned for decades to highlight the broader responsibilities and accountabilities of boards in an increasingly complex globalised economy. “It is not a quantitative, mindless, compliance exercise.”
In his books, and in particular in Transient Caretakers, King argues that corporate boards have long grown beyond their original purpose to take account of solely the interests of shareholders.
“Companies have never operated in a vacuum,” he says. “They operate in the milieu in which they are placed by their directors – and today, that milieu is a changed one.”
The stakeholder is increasingly important in boardroom decision-making, argues King. The growing acceptance of the triple context in which a company operates - financially, socially and environmentally - brings the role of the stakeholder into greater prominence.
“The primacy of the shareholder to the exclusion of other stakeholders and a single bottom line  was based on  false assumptions,” King told me. “These false assumptions of limitless resources and the earth having an infinite capacity to absorb waste were the premises on which yesterday’s companies were directed and managed.
“Today, stakeholders expect a company not to have profited at the expense of the environment, human rights, a lack of integrity or society. They expect the company to have adequate controls in place to monitor and manage material risks and opportunities. 
“Today they want remuneration to be linked to overall performance, which includes social, environmental and financial aspects. They want to be able to make an informed assessment from the company’s announcements and reports that its business will sustain value creation in our changed world.”
This theme also runs through South Africa’s Corporations Act, 2008 which requires listed and private company boards to establish “social and ethics” sub-committees.
The social and ethics committee must comprise no less than three directors of the company and it should be supported by a “social and ethics advisory panel” also appointed by the board. This composition of the panel must be broad and include representatives of the company’s employees and stakeholders as well as members of professions related to social and ethical matters. It names professions such as anthropology, psychology, education, environmental assessment, health, sociology, social services, law and theology.
The function of the social and ethics sub-committee includes monitoring the company as a good corporate citizen: is it promoting equity, preventing unfair dismissal, reducing corruption? It is also responsible for monitoring areas such as the environment, health, public safety and consumer relationships.
“The company, to be accountable and transparent, needs to communicate in clear and understandable language the “state of play” in a company,” King told me. “How else could the trustees of your pension fund discharge their duty of care to you to make an informed assessment about the sustained value creation of the business of a company before investing your money in its equity?”
One of the areas in which King III differs from Australia’s principles of best practice corporate governance is that it applies to all entities regardless of the manner and form of incorporation or establishment.
While the ASX Corporate Governance Council’s Principles are mandatory for listed entities to respond to under an “if not, why not?” regime, unlisted entities are not required to use them. However King III has been drafted so that any organisation, whether in the public, private or not-for-profit sectors, can apply its principles or explain why not.
“The exclusive approach to governance, namely the primacy of the shareholder and the single bottom line, is yesterday’s thinking,” King told me. “Today’s thinking is the inclusive approach to governance, taking account of the needs, interests and expectations of stakeholders in the decision making process but always aiming to make a business judgment call in the best interests of the company in order to maximise the total economic value of the company not its book value.
“In learning about the needs, interests and expectations of the stakeholders and by identifying the sustainable issues material to the business, management can manage and develop strategy on a more informed basis. The collective mind of the board can embed the sustainability issues into the long term strategy to give the company a competitive advantage in the changed world in which we live.
“We can no longer use the tools of decision making, such as the primacy of the shareholder and the single bottom line. We have to look at decision making in the triple context of finance, society and the environment taking into account the critical interdependent aspects of finance, human, natural, societal, manufactured and intellectual capital.”

Thursday 10 May 2012

Waiting for the phone to ring........

CEOs and other c-suite executives who announce their departure from their companies “to pursue a board portfolio” often believe that they will be overwhelmed with invitations to join boards. For most, it comes as quite a shock that offers aren’t made with the volume and speed that they expected or from the type organisations they believe to be an appropriate match to their skills and experience.

A senior company executive’s life is busy and demanding. In order for the executive to be efficient and productive, an executive assistant (EA) manages the diary, books flights, makes restaurant reservations and ensures a car and driver is ready. The phone never stops ringing; people are always waiting to be seen.

The EA is a lifeline, a diary at the end of the phone. I've seen CEOs and other well known executives walking down Collins Street in Melbourne or George Street in Sydney on the phone to their EA asking: "Where do I have to be next?"

Outside this environment, the former CEOs often find they are fending for themselves. Some lease an office and employ a part-time assistant; others share office space and secretarial support with like-minded people. “Of course, I look after myself these days,” is the clarion call of a former executive in transition to life as a company director.

For the most part, the executive must adjust to a new life of being self-sufficient: booking their own flights, catching taxis, typing their own emails, making follow up calls. Some former executives even confide to me that they’re worried they’ll have to return their membership card to the Qantas Chairman’s Lounge.
As Helen Coonan, a former senator and now non-executive director of casino operator Crown Limited, told The Weekend Australian newspaper: "Things like (having to drive) yourself everywhere. It's a big shock."

But the least understood challenge for most former executives - or former politicians - who are “building a board portfolio” is the wait: the wait for the invitations; the wait for calls to be returned; the wait between appointments. “You have to be patient and resilient because it never happens as quickly as you expected or wanted,” one ASX 200 director told me.

The yardstick is a minimum of two years – of networking and endless coffee meetings in hotel cafes, of waiting for invitations, of being interviewed by board nominations committees, of learning to cope with not being chosen and of dealing with the disappointment and frustration that can follow.
No longer the centre of attention the former executive can find himself outside of the sphere of influence, increasingly isolated and seemingly marginalised.

Making the transition from an executive career to a company director is a tough adjustment to make. My next post on this topic will offer suggestions and ideas for how a serving CEO can start planning for post-executive board career, and how those “directors-in-waiting” can make the transition easier.

Wednesday 2 May 2012

Are your Board papers representing your leadership capabilities?


When I teach executives how to write board papers I often start the workshop with the clichéd image of a student cramming for exams. Books and folders piled high on either side of the desk, the message is clear - this person is overwhelmed and unsure of where to start.

This is the image I want workshop participants to remember when they’re writing board papers. I want them to think about their audience which is probably the most difficult group in the organisational structure to write for, and to present to.

Many company directors serve on multiple boards. This means that every month or so they are required to prepare for the next board meeting by reading, absorbing and annotating their board papers. Whether their companies are providing board papers in hard copy or electronically, the impact of volume – and especially unnecessary information – is the equivalent of the student buried under a pile of books.

If it’s unclear why they’re reading the paper – is it for noting, for decision, for information? – the director will become frustrated or worse. One public company engaged me to run a workshop over four days with 30 executives after a director expressed his feelings about the quality and standard of management’s abilities in one very rude word written across the cover page of a returned board paper.

Writing a board paper is the ultimate test of being able to argue well, present facts accurately and logically, and to persuade an audience of seasoned and experienced business people to support a proposal.

Delivering a board paper that is poorly composed, dotted with typos, grammatical errors and spelling mistakes, over-written and lacking logic and supporting evidence is not the way for management to gain the approval and support they’re after.