As an executive career consultant, I have several clients seeking to advance their careers or planning retirement within the short term. We discuss the next chapter of giving back plus still staying involved in corporate and not-for-profit settings as a board member. To put it into perspective, on LinkedIn there are over 6 million individuals with “board” in their profile and 20% of my LinkedIn connections.
Are you interested in joining a board of directors? Here’s what I uncovered through online research and reaching out to my network. Besides government agencies, there are primarily two types of boards to join including corporate for-profit and not-for-profit. There’s a different rationale for joining either type.
Before we go there, let’s start with how people join boards. It’s all about who you know and who knows about you. More than 80% of the board placements come through their network visibility and most Fortune 2000 corporate positions are arranged by board recruiter agencies. Your experience, integrity, and personal brand image established at speaking engagements, conferences, networking events, and online presence factors into your potential fit for the board.
Types of Board of Directors & Membership
According to Carter McNamara: “A board of directors is a group of people legally charged with the responsibility to govern a corporation. In a for-profit corporation, the board of directors is responsible to the stockholders — a more progressive perspective is that the board is responsible to the stakeholders, that is, to everyone who is interested and/or can be affected by the corporation. In a nonprofit corporation, the board reports to stakeholders, particularly the local communities which the nonprofit serves.”
From a high-level view, there’s no set membership number, selection criteria, term limit nor meeting schedule. Per USLegal, “Corporate boards have members, usually called directors, who are elected by the stockholders. In the ordinary course of events, a privately held corporation has board members selected by the consensus of the company’s founders without a formal election.” Wonder about the gender break down? The national nonprofit www.2020wob.com stated: “Fortune 1000 corporations did achieve 20% women directors in 2017, but nearly one-fourth of public corporations in the U.S. still have no women directors.”
Typically, there’s a chairperson or president, vice-chair or vice-president, secretary, and treasurer. I have encountered in my research anywhere from 3 to 31 members which impact reaching consensus on issues but most often there’s an uneven number to break a voting tie. In some cases, there are set terms for membership which can either be voted on or simply assigned. Understandably, there’s more rigor for corporate for-profit boards due to state and federal regulations.
Specific Responsibilities
Corporate and not-for-profit boards should have responsibilities outlined in their annual proxy statement, constitution, bylaws or declaration. If not, you might want to reconsider joining since it’s unclear what you would be signing up for. BoardSource provides the following guidelines for responsibilities:
- Determine organization’s mission and purpose
- Select executive
- Support executive and review his or her performance
- Ensure effective organizational planning
- Ensure adequate resources
- Manage resources effectively
- Determine and monitor organization’s products, services, and programs
- Enhance organization’s public image
- Serve as court of appeal
- Assess its own performance
I’m a Walmart stockholder and located their 8-page corporate governance guidelines on their web site. It details director qualifications, board responsibilities, committees, director access to officers, associates and outside advisors, director compensation, director orientation and continuing education, CEO evaluation and management succession, and annual performance evaluation. Highlights include:
- Majority of the directors should meet the independence required by the NYSE
- Nominees for director will be selected on the basis of outstanding achievement in their personal careers; broad experience; expertise in matters of particular relevance to the Company; wisdom; integrity; ability to make independent, analytical inquiries; understanding of the business environment; and willingness to devote adequate time to Board duties
- Each director shall be elected by a majority vote in an uncontested election
- Within 5 years of joining the Board, each new outside director will be required to own an amount of shares, restricted stock, or stock units equal in value to 5 times the annual cash retainer offered to each director at the time the director joined the Board
- Number of directors that shall constitute the Board shall not be less than 3 nor more than 20
- An outside director is expected to serve for at least 6 years
- The Board will meet at least four times per year
Compensation
A CEOWorld article explained that “total compensation for a board seat will vary depending on company size, public or private, the number of meetings and the responsibilities involved. This compensation is generally in the form of cash retainers, equity grants, and meeting fees.” If board members aren’t locally based, companies tend to compensate them for travel expenses related to meetings and retreats. For-profit board members typically receive compensation while not-for-profit don’t.
On the Harvard Law School Forum on Corporate Governance & Financial Regulation, Diane Lerner posted: “Director pay levels tend to be very closely clustered together, unlike the wider distribution of executive pay. For example, the 25th percentile of total compensation for the S&P 500 sample is $230,000, and the 75th percentile is $295,000 compared to a median of $260,000. This means the vast majority of S&P 500 companies pay Directors within $35,000 of the median.” What makes headlines are the large payouts including Twenty-First Century Fox Inc. average compensation per board member of $2.58MM (million) and Regeneron Pharmaceuticals Inc. at $2.17MM per board member. According to PayScale’s database, $60,000 is the average salary for a member of the board of directors with a $9,000 bonus and $12,500 for profit sharing. For being a chairman, PayScale notes the average salary is more than double at $146,810.
Time Allocation
Depending on the board type, the time commitment is varied. Not-for-profits tend toward a monthly meeting cadence with a 2-hour allotment along with ad hoc time for being a part of a project committee. I’ve been asked to be on 2 boards with causes I believe in but declined because of the time commitment. Sometimes it’s not the perfect fit.
For-profit varies with quarterly all-day meetings to just a phone call relationship in a board advisory position. One executive noted there was “one annual meeting and we would sit down with CEO to discuss business strategy and test the CEO on funding, tech, and sales.”
Your Board Benefits
- Personal Branding: Raise your leadership profile for your identification with a cause. In turn, you can highlight your passion through your online feed, executive bio, and resumé. As acknowledged by a CIO: “For a pure not-profit, there is no residual financial return. It’s my time for being philanthropic plus it looks good on my CV. Per the board, they encourage you to advertise your involvement.” It’s a win-win for both parties.
- Knowledge: Learn about how others think. A past President noted: “I’m amazed at the vast variety of opinions. We would bring in an industry expert and 5 members’ takeaways would be unique.” After a lengthy vetting process, one executive accepted an invitation to join the board. The hesitation was by the company since sometimes a board doesn’t know what it needs until it sees it.
- Networking: Choose the right board, you make contacts for life like joining a fraternity or sorority. I encourage my clients to volunteer or join boards now to network for other career adventures or have an exit strategy upon retirement. One board president serving on a finance committee has established a strong bond with individuals he wouldn’t have met outside of their common mission.
- Community Involvement: This supports the mission of most corporations that encourage annual employee giving back days. Every Fortune 500 company I worked for has planned employee volunteer activities for community benefits. My past assigned sales account base included not-for-profits such as Bloodworks Northwest, Seattle Children’s Hospital, and World Vision. My previous employer CenturyLink supported all three with gifts-in-kind, monetary donations, and volunteer manpower.
- Life-Work Balance: Provides community involvement and social connection. When you dedicate yourself to your family and career, boards provide an outlet for meeting your peers with like-minded views for a specific cause.
Key Learnings & Advice
I polled my business and personal connections and each one would continue to be on a board or join a new one. Below are observations not covered previously:
- Enjoy your triumphs on the board
- Look at the executive team and their profile on how they got there before making a commitment
- Prepare yourself for more aggression than you would expect
- Realize the company is using your board seat as a sales vehicle for investors
- You can make a difference plus feel great in the process
Whether it’s for giving back or helping drive a company’s mission, joining a board of directors can provide fulfillment outside of your everyday work life. Best to you in your career adventures.
