By Stuart R. Levine
Published In, Forbes
Last year, according to the 2015-2016 NACD Public Company Survey report, directors, on average, spent 248 hours on board-related matters – or approximately one full month a year.
Committee Chairs require significantly more time to do the job well. This trend has been increasing since 2007. Strategy has always been one of the most important agenda items for boards. However, more recently, directors are being called upon to participate in the ongoing creation and monitoring of strategy. This role requires more engagement and active participation from the board — not just holding strategy meetings once a year, but making strategy an ongoing agenda item on a regular basis in order to identify new opportunities and to manage risk.
Let’s put the importance of a director’s job within another context. According to Commonsense Corporate Governance Principles , if you serve on one of the 5,000 public company boards, these companies represent a third of the U.S. private sector jobs. These employees, in addition to other shareholders, are relying on the directors of these public companies to get it right for their family’s financial future.
One of the great fundamentals in life is preparation. I learn a lot about business by studying nature. Last night while talking to a neighbor at a party, she asked about how to become a better gardener. She was having difficulty getting her perennials to re-bloom each season. I shared with her one of the great fundamentals of gardening for me. When I plant, I first focus on preparing the soil. We live in an area that has sandy soil. If you want to increase your chances for successful blooming in this area, you have to spend extra time understanding how to create the right environment to enrich the soil in order to yield results. I always plant with potting soil, combined with other key ingredients, whether I’m planting a bush, a tree or a flowering plant in the ground, so that the roots get a good basis for growth.
This metaphor has applications for serious business and governance work as well. It comes in the order of preparation. Participating in a board room setting with nine or so people rigorously working your way through an agenda, becomes a very “intimate” collaborative experience, requiring mutual trust and the sharing of ideas in an open and non-threatening manner. In my years of experience, it becomes very clear who has prepared to participate in strategic and operational discussion and who has not prepared.
The CEO also has a huge responsibility to board members and shareholders to effectively prepare before a board meeting. Effective CEOs who want to maintain open and trusting relationships with their board, generally set a rule of sending materials five days in advance of the meeting. This provides for appropriate time to digest the material and have conversations prior to the meeting. Best-practice for a CEO is for them to reach out individually to each board member for a 30-minute call prior to the board meeting. This helps to prepare the “soil” for a fertile discussion. Not only do they solicit input from the board book that has been distributed, but it sets the groundwork for the CEO to share those three to four issues that are most important to them. These conversations should not be viewed as tedious. This interaction provides both the CEO and the board member an opportunity to ensure alignment and most importantly, that there are no surprises. Most CEOs probably do not do this, and it is a highly recommended best practice.
The Chairs of each committee also have a heightened sense of responsibility to ensure that their meetings are effective and use committee time in the most meaningful ways. In general, these schedules are tight and are the testing grounds for financial accountability, sophisticated governance and compensation issues. Chairs have an obligation to interface effectively with committee members. If you aspire to be a committee chair, it’s imperative that you understand the responsibility of the audit function to interface with independent auditors. This requires direct communication and hard work. For example as the Comp Committee Chairperson, this requires interfacing with both the internal compensation leadership and the independent compensation consultants. You need to have the time and commitment to take on this important role.
The next time you are attending a board meeting as a director, or even attending a high-level organizational meeting, remember that not being prepared is reputational risk . Your commitment to the work will be a gating factor on your being referred to another board or advancing in your career. Boards and organizations are looking for people who are willing to do the work and contribute to shareholder or member value. Your ability to prepare and think through strategic issues is critical.
The dirty secret is that 75% of board placements are still done by personal referrals by people who trust and respect you and know that you will do your homework. So preparation and strategic thinking – not only reading the board book and showing up– are your responsibility. Participating in strategic conversations is the definition of board service.
The bottom line is serving on boards, is not just showing up. It requires a commitment of intellect, time and the capacity to continuously learn.