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Professional Directorship


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Nora Denzel Utah D&O Conference 2019

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Professional Directorship

  1. 1. © NACD 2019. All rights reserved. Professional Directorship What Boards and Companies are Looking For D&O Summit November 2019
  2. 2. The Focus on Boards Has Never Been Higher What are you hearing?
  3. 3. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. S&P 500 has ~5,100 Board Seats WhatpercentageofS&P500 boardseatschangedin2019? –A. 8% –B. 14% –C. 22% –D. 30% 432 new directors
  4. 4. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. S&P 500’s class of 2019 New Directors 27% had no prior board experience came from outside CEO, COO/Presidents 2019 Snapshot 65% Source: Spencer Stuart, 2019 Board Index
  5. 5. © NACD 2019. All rights reserved. 6 62% 40% Executive Leadership Finance 27% 3% 2% 2% Technology Investment Human Capital/ Talent Development Marketing Entrepreneurial 20% Top Skills in new directors last 12 months Prevalence of skills of new directors over last 12 Months (Russell 3000) • ability to continuously learn (curiosity) • ability to add value in other areas • ability to collaborate Balanced with Softer Skills: Jason Baumgarten, Spencer Stuart …It really comes down to the person: Are they a broad business-thinker, first, who has happened to accumulate specific experience and skills in those areas? “
  6. 6. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. The Class of 2019: 432 new directors 80% Caucasian/ White 345 20% Minorities 87 48% White Men 207 40% Women 187 60% Men 259 Source: Spencer Stuart, 2019 Board Index
  7. 7. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. Average Board Composition in 2004 WOMEN 2004 Board Composition Men Women 85% 15% Men Women 84% Men 16% Women Source: Harvard Law School 85% 15% MINORITIES Caucasian
  8. 8. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. Board Composition Men Women Board composition shows progress not parity 2018 78% 22% Men Women Source: Harvard Law School 81% 19% MINORITIES Caucasian
  9. 9. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. What about Age? Average Age of Incoming New Directors Average Age of Sitting Board Member Average Board Mandatory Retirement Age 58 63 75
  10. 10. — 1.5M in the US alone — Some at large scale: • $98B UnitedWay • $2B SalvationArmy • $3B Red Cross • Be thoughtful about choosing: 1. Your passion project 2. Learn about governance 3. Shows character 4. Contacts with other board members Non-Profit Boards
  11. 11. — Independent board members are not required — 3 main types: — Family Owned — VC-backed start up — PE firm owned — Ownership and information disclosure are main differences from public companies — Many times it’s specific expertise, not governance, needed Private Company Boards
  12. 12. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. 13 How to Find your First Board Seat YOUR FIRST BOARD SEAT 1 RESEARCH • Understand what boards do • Decide if board work is right for you • Assess why you’d like to serve on a board 2 PREPARATION • Understand what you offer a board • Join a non-profit board or private board • Update LinkedIn • Narrow your search 3 NETWORK • Network with current public board members • Get the word out • Attend board events • Target directors in y0ur area of differentiation
  13. 13. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. Know what works What sources do you use to recruit new board members? Public databases Source: PwC Annual Corporate Directors Survey 2012 2% 4% 11% 55% 67% 92%Other board members’ recommendations Search firms Others Management recommendations Investor recommendations
  14. 14. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. KeyTakeaways 1. Boardcompositionwillevolveovertimetomirrorourworld 2. Understandwhatyouofferbeforesearching 3. Networkingwithsittingboardmembersiscrucial
  15. 15. ELEVATE BOARD PERFORMANCE© NACD 2019. All rights reserved. APPENDIX
  16. 16. Reference List 1. Identify potential board education sessions, a suggested list of sources of information: • SiliconValley Directors’ Exchange (SVDX) – organization to connect board members and senior level executives to share information on various board- related topics • NationalAssociation of Corporate Directors (“NACD”) — o NACD Board Leadership Conference (offered annually in the fall) o NACD Master Class (offered throughout the year in various locations) o Annual Director’s Institute on CorporateGovernance (offered in-person in NYC and via Web cast and simulcast in other locations) • The Conference Board Governance Center — • CorporateGovernance Crash Course (not specifically designed for directors but helpful for executives with limited experience with the broader issues of governance) • Directors’Colleges offered by a number of higher education institutions examples: – UCLA Anderson School of Management’s Director Education (Los Angeles, CA) – Stanford University’s Director’sCollege (Palo Alto, California) YOUR GOALS FORTHIS PHASE: 1. Decide if board work is right for you 2. Understand what boards do 3. Assess why you’d like to serve on a board 1 RESEARCH PHASE
  17. 17. Reference List (Continued) Various governance-related magazines also host annual programs and periodicWeb casts: – NACD/Directorship – NYSE/Corporate Board Member Research various board candidate accreditation and certification programs: – NACDGovernance Fellow program: – Boardroom Bound: – Board of Directors Network, Inc.: – OnBoard Bootcamp: –The Board Connection: – BoardSource (specifically targeted for nonprofit boards): –Women in the board room : –Watermark Institute: Reference Book: — Becoming A Public Company Director,Tracy E. Houston, M.A. YOUR GOALS FORTHIS PHASE: 1. Understand what boards do 2. Decide if board work is right for you 3. Assess why you’d like to serve on a board 1 RESEARCH PHASE
  18. 18. Board FAQs • How much time is involved in board work? It depends (all boards are different): • An advisory board will typically have 3-4 all-day meetings /year • A non-profit, if it’s a ‘working board’, you may spend 10 hours/month serving on the board and other related activities (fund raising dinners, telethons for donations, etc.) • According to NACD, a public company board director, on average, will spend between 250 and 300 hours/year.That time will vary depending on what happens in the given year (for example if your company is being bought, if you are involved in replacing the CEO, if an activist joins your board, etc.) – The 250 -300 hours does NOT include committee work or travel time. • Non-US boards tend to meet more than 4x a year (as US boards do). RECOMMENDATION: Read the company's proxy statement to see how many times the board met last year, also ask in the interview process how much time you should expect to spend if you join • How much money will I be paid to serve on a board? It typically depends on the size of the company: • In general, the smaller the company, the less compensation — The total compensation (cash and stock awards) will typically average ~$100,000 for a company with less than $500m in revenue — For a company that has more than $10B in revenue, the median compensation (cash and stock) is ~$250,000 — Private company boards will typically offer stock only and the amount varies — Advisory boards will vary, ~$100k for 4 meetings/year, however, if you are working full time, make sure your company allows you to get paid. (I never took money from another company while I was a full time employee at one company). • RECOMMENDATION: Be sure you understand the compensation elements of your service before you join. Also, if it’s a private board, understand the tax implications of when you exercise the pre-IPO shares of stock. 1 RESEARCH PHASE
  19. 19. Board FAQs • Are there term limits on boards? – Sometimes, and on average you’ll spend 10 – 15 years on a board, so choose wisely. – If the board you join has term limits that should be noted in the Proxy statement or the materials that are being used to recruit you with. If not, ask! • • What is the most important thing for me to look at when joining a board? – For public companies, it’s the proxy statement of the company I am considering. It’s a yearly supplement to the Annual Report. – The proxy will give information on the number of meetings that were held last year, the other board members, board compensation for the prior year among other things. – You can find the proxy statements (Form DEF 14F) at / • What about liability? – Most boards have liability insurance. Policies are called Director and Officer Insurance, commonly called D&O insurance. RECOMMENDATION: ask to review a board’s D&O policy and have it reviewed by a lawyer. If your lawyer has issues, make sure you understand them before deciding to join. 1 RESEARCH PHASE
  20. 20. Board FAQs • If I make a mistake and want to come off a board I don’t like, how do I do that? – In general, it’s a very bad career move to join a board only to ask to come off it quickly, so make sure you research properly before joining. – If you feel you have to come off, talk with the chairman. It’s typically easier to come off when the board does their yearly election, you’ll tell the chairman you’d like ‘not to stand for re-election. RECOMMENDATION: Know when your term ends, and a year before talk to the chairman about not standing for election when your term is up.This will give the board time to fill the spot in a less-disruptive manner 1 RESEARCH PHASE
  21. 21. Board FAQs • I am working as aVP of Engineering now, can I serve on a board? – You need to check with your company first before joining any board, especially a public one. Most companies have a limit on board service while one is working there. – For example, while I was an executive at Intuit, my joining of a public board first needed CEO approval and I was restricted to one board while employed there. – In addition, you and your company need to ensure there is no conflict between what the board you are joining does and your company. • If I no longer work full-time, how many boards can I serve on? – With each board occupying at about 250 – 300 hours/year, it’ll be up to you how much time you can spend on board work. – Some boards have imposed limits for the number of other public boards one can serve upon. – For full time board work, 3-4 boards seems to be the sweet spot. RECOMMENDATION:One thing to note is calendar conflict is very likely when you serve on multiple boards with the same fiscal year.When choosing boards, find companies that have different fiscal years! • I noticed you serve on a Non-US board, what are the advantages/disadvantages? – In general, non-US boards will meet in person 6-8 times/year vs. 4x for US boards. In addition there is the travel time associated with non-US boards that typically make them prohibitive when one is still working fulltime. – I serve on non-US boards because I like learning about the governance in different countries. 1 RESEARCH PHASE
  22. 22. • N ON - PR OF I T BOAR D WOR K 1. On Board:What Current and Aspiring Board Members Must Know About Nonprofits and BoardService, by Nanette Fridman. 2. Board MemberOrientation:The Concise and Complete Guide to Nonprofit BoardService, by Michael Batts. 3. The Nonprofit BoardAnswer Book: A PracticalGuide for Board Members and Chief Executives, by Boardsource. 4. DoingGood Better: How to be an Effective Board Member of a NonprofitOrganization, by Edgar Stoesz. 5. Joining a Non-Profit Board:What you Need to Know, by F. Warren McFarlan. • F OR - PR OF I T BOAR D WOR K 1. BoardSeats for the Rest of Us: A PracticalGuide for Non-CEOs to Obtain a Board of Director’s Position, by David R.White. 2. Becoming a Public Company Board Member (Board Member’s Handbook), byTracy Houston 3. The board of Directors for a Private Enterprise, by Dennis J. Cagan 4. The Board Book: An Insider’sGuide for Directors and Trustees, byWilliam G. Bowen. 5. Women on Board: Insider Secrets to Getting on a Board and Succeeding as a Director, by Susan Stautberg and NancyCalderon. 6. Into the Boardroom: How to GetYour First Seat on a Corporate Board, by D.K. Light. 7. EarnYourSeat on a Corporate Board: 7 ActionsTo Build YourCareer, ElevateYour Leadership, and ExpandYour Influence, by Jill Griffin. A Reading List 1 RESEARCH PHASE
  23. 23. GreatWebsites • Free resource for women getting on boards created by a woman, Gerri Elliott who served on the boards of Whirlpool and Bed, Bath & Beyond • Free website for women on boards byTracy Houston –I link to her on LinkedIn, she has excellent blog posts there about getting on your first public board and 3 good e-books about interviewing for a board position, getting your materials ready, etc. • Free site that matches women with boards. It’s a non-profit run by a successful entrepreneur, Sukinder Singh Cassidy. It’s like LinkedIn but someone has to nominate you and put you in this data base. • https://www.NACD.comWebsite for National Association for Corporate Directors, has some free resources for prospective board members 1 RESEARCH PHASE
  24. 24. DevelopmentActivity Examples 1. Excel at your day job: Having solid references and a solid track record in your day job is table stakes for a board position later on 2. Get the right experiences: Seek out experiences that provide both depth and breadth of perspective and responsibilities (CFO, Senior Executive, Subject Matter Expert in an area, etc.) 3. Be proactive about networking: Develop relationships that provide guidance and visibility and participate in both formal and informal women’s networks 4. Get educated: There are programs (i.e. NACD Board Leadership Conference, Directors College, Board Member Magazine) aimed at improving your ability to contribute to corporate oversight activities and become a valuable director 5. Look beyond the F500: Join the board of a smaller public company, a private company or seek out a seat on a non-profit board or a business school/university advisory council. Don’t’ assume that F500 companies are the only board positions where you can make an impact 6. Raise your profile: Speak at conferences, play an active role in industry associations, be present on professional online networks Source: 2013 Jana Rich Russell Reynolds Associates 2 PREPARATION PHASE