Article

From CEO to NED (non-executive director)

By Vanessa Jolly and Glee Mitchell, Board Recruitment Specialists

Many non-executive directors were once CEOs who have transitioned from the executive leadership teams to the board. Indeed, former CEOs are often sought after for boards. But how easy is this move? Does this automatically occur and, if not, how should CEOs go about obtaining a board role? More importantly, what are some of the traps along the way?

A fresh mindset

There are a number of reasons why board roles are an attractive proposition to current and former CEOs.

While the role of the CEO is to manage on a day to day basis, the role of a board is to govern and take a more strategic view. This involves:

  • approving and testing the company’s strategy
  • ensuring that the desired company culture is defined and lived in practice
  • allocating resources at a high level
  • monitoring company financial and operational performance
  • setting the risk appetite for the company
  • overseeing risk and compliance management
  • appointing and evaluating the performance of the CEO
  • accounting to shareholders and other stakeholders, and
  • representing the company as required.

Unlike executive positions, boards work as collective decision-making entities where each director contributes their specific skills and experience to the board performing its functions. The boardroom is built on trust in each peer director’s capability and willingness to effectively contribute.

Being a director can be challenging as well as personally rewarding.  The role of a director provides an opportunity to take a strategic view and contribute valuable skills and experience honed as an executive. Former CEOs also bring deep industry and executive management experience and networks which can complement other collective board skills.

For some CEOs, taking on a directorship while still in an executive role also has many benefits.

Defining your director value proposition/becoming board ready

The first question any aspiring director – whether a former CEO or otherwise – should ask themselves is what sort of board do they want to be on? Anyone seeking a board role should have a clearly articulated statement about the type of board role they are seeking and how they can value add to a board.  A directors’ resume is also critical and differs from an executive resume.

Companies and organisations in a wide range of sectors have boards including ASX listed companies, private companies, SMEs, family businesses, APRA regulated financial service institutions, superannuation companies, government owned entities and not for profit organisations.

Traditionally, directors have been recruited through word of mouth and networks. However, over the last decade increasingly boards are using more open and objective processes to draw in a wide pool of suitable skilled candidates.  The recruitment process is also likely to be informed by the board carefully assessing not only the ‘skills gap’ it is seeking to fill but also the personal attributes or fit of a director.

Some first-time directors start their board careers by sitting on a not-for-profit board where there is more demand for directors and they have the opportunity to assist a worthwhile cause or activity. This enables a new director to gain board experience as well as contribute to the work of the organisation.

However, others transition directly into a commercial board role utilising their strong professional or industry skills.

Doing some formal training in governance or directorship, and telling relevant networks about your aspirations are advisable if you are seeking a directorship. You never know when a board is quietly considering its next appointment.

Champions and mentors can also provide vital introductions at board level as well be an excellent sounding board for a directors’ resume, provide background on a board and its directors, and even running through a board level interview.

Other considerations before joining a board

Directors are ultimately responsible for their company’s performance and actions. The Corporations Act places a number of duties and responsibilities on directors. Other federal and state legislation also imposes liabilities on directors.

If you are contemplating taking a position on a board, you should undertake a careful ‘due diligence’ of the company including information regarding matters such as its strategic plan, financial position, governance, and risk management as well as indemnities and insurance held by the company. Understanding the dynamics of the board is just as critical.

Be clear about the time commitment and other expectations of the role and ensure that you are able to meet them.

Tips

Be patient and realistic in your expectations and use a variety of strategies to seek out board roles.

Be prepared for the interview – how will you be able to transition from being an operational manager to governing as a director?

If you are looking at developing or updating your board resume, a template for a directors’ resume can be downloaded from our website.

 Directors Australia specialises in non-executive director recruitment. Candidates interested in director roles can register with us via our website so that we can consider them for suitable opportunities as they arise.    

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