Congratulations, you have been asked to join a board of directors. But what now? Before making the final decision to join a particular board, you need to examine nine essential areas?
Joining a board can be a rewarding experience, both personally and professionally. Whether it’s a for-profit or a for-purpose organisation, a directorship can give you tremendous opportunities for professional growth and networking. But before you accept the role of a director at a company, there are nine things to consider.
Understand your fiduciary duties
- The duties and responsibilities of a company director are stipulated in the various Companies Acts.
- Please become familiar with your duties and understand your responsibilities.
- Your fiduciary duties remain the same irrespective of a paid directorship or a voluntary one.
- You must be familiar with your country’s Companies Act and any other acts that cover the industry you will be entering.
- Also, make sure that there are no conflicts of interest between your current role and the new director role.
Become aligned with the mission of the organisation
- You must understand the purpose of the organisation you are about to join.
- The mission statement of the organisation should be clear in your mind.
- You will be able to transfer your passion and enthusiasm only if you are fully engaged with the organisation’s mission.
- You will be able to provide oversight and leadership to the team when you feel fully invested in the common goals you are trying to achieve.
Understand the sector
- It would help if you got a clear understanding of the business you are about to advise.
- What is its business model, competitive moat, reputation in the market, and any risks involved?
- Intimate knowledge of the company will keep you in good stead when deciding to join a board.
Review the annual reports
- An easy way to quickly understand an organisation in-depth is to read its annual reports for the last three years; this will provide you with up-to-date information on the organisation’s financials, the management team’s performance, the business, and its regulatory environment.
- If it is a publicly-traded company, you can read analyst reports, listen to the quarterly earning calls to understand the near term strategy of the organisation and get more context of the competitive landscape and CEO performance.
Speak to the sitting board members
- Before accepting a position of a board member (NED), feel free to reach out to the existing members of the board to discuss their experiences and where they see the organisation now and in the next five years.
- This is an excellent opportunity to understand the challenges and the opportunities that lay ahead of the company over the next few years.
- Ask them if there was a performance review of the board in the last year and the recommendations.
- You can also use this opportunity to understand the culture of the organisation.
- This will also help understand the relationship between the board and the management team and how receptive the management are to the board’s recommendations.
Understand the structure of the board
- Being part of a board involves a significant time commitment. There is a lot of work that is required throughout the year.
- If you can understand how the board is structured, i.e. how many board meetings you have to attend in a year, how many sub-committees the board has, how many sub-committee meetings in a year, etc., you will be in a position to understand the time commitment that is required.
- Before accepting the role, you will need to be fully prepared for all board meetings, so please consider the time burden.
Examine the board’s diversity
- Before taking up a role as a director on a board, a more recent consideration is understanding how diverse the board is.
- Diversity can come in many forms.
- Is there sufficient female representation on the board?
- Is the organisation meeting its ESG goals?
- Try and understand the board’s commitment to diversity and inclusion.
- It is well documented that a more diverse board makes better decisions.
Figure out where you fit in before you join a board
- If the nomination committee has performed its job well, you are being invited to be on the board for a specific skill that you bring to the table.
- Try and understand what gap you will fill within the board to add maximum value for that particular expertise.
- For example, if you are being brought onto the board for your fundraising experience, you would then be able to lead the fundraising sub-committee.
- Another example could be if you are a chartered accountant, you could be the head of the finance sub-committee.
Review the terms of reference
- Before you join a board, please take the time to review the terms of reference and be comfortable that you will perform all the duties to the best of your ability.
- This document will also help you establish the ‘line in the sand’ and assist you in making sure that you do not get involved in the organisation’s day-to-day running.
- Serving on a board will help you improve your managerial skills, improve your personal brand, give you opportunities to network and learn from fellow board members.
- Still, it also comes with significant reputation risk and time commitments.