Right Seat Right Table

An Outsider's Guide to Securing the Ideal Board Role

Paul Smith

• Publisher: Future Directors Institute
• Year: 2019
• Edition: 1
• eBook ISBN:
  9780473464554
• Topic: Business
• Subtopic: Corporate Governance
• Index: Business

PART I

An Introduction To The Boardroom

CHAPTER 1

Boardroom Basics

What is a board director anyway?

Before you start this journey, it’s important that you know what will be expected of you as a director. Because the topic has been covered extensively elsewhere, including in our training programs at the Future Directors Institute, I won’t go into too much detail here. But I’ll give you enough so you’ll know what you’re getting into.

There are two types of directors on a board. Executive directors are employees of the company or organization and are responsible for management and operations. Non-executive directors have no responsibilities for the company or the organization’s operations, but they do play a key role in its strategic direction, risk management, and financial stability.

We are going to focus on becoming a non-executive director. Depending on the type of entity being served, a board director may be known by different names: trustee, member, councilor, and governor are a few common titles. For the purposes of this book, we’ll use the term “director” to encompass all similar roles, no matter what the naming convention is.

The strategies and methods illustrated in this book will work for you regardless of the type of board you wish to join. People following these strategies and methods have secured paid roles on listed company boards as well as volunteer roles with small nonprofits. They’ve become advisors to startups and joined school boards and philanthropic foundations.

Why do boards exist, and what do they do?

Boards, or governing bodies, have been around for thousands of years. The Greeks and Romans had governing groups creating their laws and defining the direction of civil society and the economy. More recently, entities such as the British East India Trading Company in the 17th century gave rise to today’s corporate board. These company boards were established to act on behalf of the owners and to be responsible for their financial interests. It was and still is all about trust, hence the term “trustee”.

Today, the typical duties of a board of directors include:

1.Selecting, appointing, supporting, evaluating, removing, and remunerating the manager of the organization. There are many titles for ‘manager’. Typically, the manager is the CEO, the executive director, or the president.

2.Providing strategic direction for the organization. The board has a strategic function in deciding the purpose, vision, mission, and goals of the organization, most commonly in collaboration with management.

3.Establishing a policy-based governance system. Each organization is regulated by the government and oversight bodies, such as stock exchanges, but the board has a responsibility to develop the policies, rules, and frameworks for how the organization will function, guiding not just the board’s own actions but the actions of management.

4.Governing the relationship with the CEO and establishing systems for their interactions, including setting objectives, measuring performance, and reporting needs. Typically, board members meet with each other and key members of management on a regular basis, and the board is kept informed of what’s going on in the interim through different forms of communication.

5.Exercising fiduciary duty to protect the financial interests of owners or members. These might include physical assets, intellectual property, and the human capital (employees). The board is responsible for ensuring that adequate financial resources are available for the organization to conduct its business and achieve its strategic objectives.

6.Monitoring and auditing the organization. The board is responsible for the audit process, hires the auditor, and ensures the audit is done in a timely manner each year.

Currently, there are no universally recognized or observed governance standards. Many groups have their own set of policies and standards that impact the extent to which the above duties are managed by the board or by management.

Are there different types of boards?

“All boards are the same, and all boards are different.”

This is the book’s first lesson, and in my opinion, one of its most fundamental lessons.

What do I mean by this? The only thing common to all boards is that they are a group of human beings. Therefore, by extension, they are also all different because each of us is unique, and the boardroom is a unique combination of personalities, experiences, ages, genders, backgrounds, skills, biases, and gaps.

Most organizations within the private, nonprofit, and public sectors have some type of governance body, but that body can vary significantly in size, structure, and function. In general, the processes and the level of integrity and ethical judgment are (or should be) the same, regardless of the type of board. However, boards operate slightly differently in each sector.

Private and corporate sector: This sector is largely profit-driven, and governance roles with these organizations are often (but not always) remunerated. The sector covers a broad range of organizations from publicly listed companies to small businesses and family-owned operations. It also includes the increasingly popular sectors of startups, B corps, and social enterprise, whose companies may not be solely profit-motivated.

Board appointments are usually made by owners (or voted on by shareholders), but the board of directors leads the process. The appointment process is highly competitive, particularly for businesses that are national in scale or publicly listed on a stock exchange.

Nonprofit sector: These boards support organizations that may serve the community. They cover many sectors, including human a...

Table of contents

• ACKNOWLEDGEMENTS
• INTRODUCTION
• PREFACE
• PART I
• PART II
• PART III
• EPILOGUE
• AFTERWORD
• ABOUT THE AUTHOR