Executive Interview Coaching founder Richard Elstone recently chatted with Robyn Weatherley* to de-mystify how boards work and dive into some of the questions aspiring Board members may have.
Robyn is a Board and Company Secretary, advisor and published author in corporate governance, Board effectiveness and Board service. Her book Eyes Wide Open (H/C): A First-Timer's Guide to the Real World of Boards and Companydirectorship : Weatherley, Robyn: Amazon.com.au: Books, provides first-time non-executive directors with inside tips about Board membership and company directorship.
Richard himself found Robyn’s book extremely illuminating and has recommended aspiring NEDs read it before actively pursuing a portfolio career.
Here is Richard’s Q and A with her.
Many aspiring non-executive directors think the best way to get started is with a not-for-profit Board appointment. What are the pitfalls?
How long have you got…?? Kidding. NFPs can come with just as many pitfalls as the for-profit Boards do. The law doesn’t care how big or small the company is regarding your legal responsibilities, and you can’t ever contract out of the core Directors’ duties.
The thing you need to know about NFPs and smaller companies is that they need at least the same – if not more – of your time than a larger company, because they usually don’t have as many resources (or money to pay for them). So Directors generally do more stuff on NFPs. You usually come with a dual purpose!
They may tap your networks for resourcing, skills and potentially money - and sometimes, your own cheque book.
Mind you, there are some huge (fantastic) NFPs and charities now that have deep pockets and lots of capability, so it’s a case of doing your due diligence upfront and checking out the landscape.
What about the risk? If the charity goes under and you’re a director, even though you’re not being paid, are you liable?
If the Board allowed the charity to trade when it was insolvent, and all evidence points to the Board not doing its job properly, then yep, you’ll be liable for that – the Liquidator and sometimes the Regulator will come looking for a chat, you can guarantee it. Insolvency is a complex legal space and there’s a lot of context to it, but you really want to know your financial stuff before going on any Board, so you always know what solvency vs insolvency looks like.
What questions should you ask before accepting a NED role?
The big daddy one for me is defining your risk appetite. Because everyone’s different on this and it should steer you to which Board you land on. Some people I know run towards Boards and companies that are disasters! They love the challenge of turning them around. Others (more of the general Director population) prefer something more moderate!
Only you can decide this because it comes down to what level of risk you’re prepared to take for your reputation, asset base, future earning ability etc. I’ve made this easy to work out in my book which has some great checklists for each stage when looking at a Board opportunity.
The other big one (and there are others, don’t get me wrong) that’s often forgotten in due diligence is insurance and indemnities (boring I know but…).
A deed of access, insurance and indemnity is a key document you’ll want to ensure is on offer for any Board role, as this thing guarantees you various types of protections if something goes wrong and the finger’s pointed at the Board. It makes the company promise to provide these protections whilst you’re on the Board and usually afterwards too for a certain time.
Do read it and the Directors & Officers Insurance policy (with whatever beverage you need to make it more palatable!) Make sure you’re happy with what’s on offer – and how it then sits against your risk appetite. Some of these things aren’t worth the paper they’re written on – I say buyer beware.
You can get your own private insurance if it helps you sleep at night and the cool thing is the company can’t touch this in a crisis (and it’s tax deductible too!).
Do you suggest non-executive directors do a NFP to give them some experience or should they hang out for a paid Board role?
I don’t think being paid should ever be in the picture if you’re still doing your day job. When you’re starting out, if the opportunity is right in every other way, the fact that there’s no dollars in it for you should be a complete non-issue. Different if you’re a professional Director.
I always say that rather than let money sway you (if it’s on offer), it’s better to wait for the right role. People often worry that if they say ‘no’ to a Board offer, they’ll never get another one. Directors who are experienced will tell you that the offers come anyway. Better to have one amazing Board role in your career, than to have several awful ones that you lurched at just because they were there.
I always suggest to non-executives to request to see the last two to three Board packs before accepting. Would you agree?
Yes definitely – and then some! I spent a third of my book talking about due diligence and what to ask for. How much due diligence you do will come back to your risk appetite. Your due diligence has to be methodical and targeted.
It’s like any other job. You weigh it all up on balance, and then check it against your values, risk appetite and where you are in life. Board packs are a small microcosm of a good due diligence, but hopefully they are something of a mirror to what could be your new world!
What do you think about government Boards?
I’m a big fan for a few reasons – great connections abound which can lead to long-term gains in your professional career.
They’re wonderful for learning from some very experienced people and the diversity is usually really good. You learn heaps about how the world works too. You also get a substantial indemnity with these boards, as the risk often sits with the state (as long as you’ve not done anything illegal, or wilfully negligent etc). It’s extremely difficult to be sued as a Director on a government Board. They pay considerably less than commercial boards, but they can be a very strong contributor to a stellar board career (just be selective though – not all are equal!).
Thoughts on advisory boards?
Love them. They are usually very well-connected spaces because the people in them are entrepreneurial, and they love building companies. Risks for you should be minimal – you aren’t on the legal hook if things go pear-shaped. You’re giving advice only.
Just ensure you’ve got clear paperwork about your role.
I love advisory Boards – it’s like going to a dinner party and not having to do the washing up. You get to walk out the door and say, “thanks for having me and I’ll leave you with the hard yucky stuff.” And just on the odd occasion, you might jag one where some equity or options given to you in lieu of remuneration, can pay you handsomely at a later time if the company hits the big time!
Ready to take the next step?
If you’re ready to pursue a non-executive board role, Executive Interview Coaching can assist.
With expert coaching, we can help you communicate the value and impact you will bring to the boardroom during the interview process. We’ll ensure you have the skills to perform at your best in those highly competitive board interview processes.
To find out more, get in touch today.
Suggested further reading:
* All comments made by Robyn in this article are her personal views only and are not reflective of, nor connected to, her current or any previous employer.