By Vanessa Jolly, General Manager – Board Recruitment
We often get asked by executive managers whether they should pursue directorships concurrently with their executive career.
The function of a board is to govern, and this involves: setting and testing purpose, strategy and culture; monitoring company performance; appointing and monitoring the CEO; and setting the risk appetite for the company and monitoring risk and compliance management. Increasingly the role also involves stakeholder engagement.
Boards work as collective decision-making entities where each director contributes their specific skills and experience to the board’s performance of its functions.
By comparison, the key function of management is operational. The focus is on developing and implementing detailed strategy, implementing culture in practice, administering operations and projects, delivering operations within budgets, and ensuring that risk is managed within the parameters set by the board.
Why consider a directorship?
There are a number of reasons why you might consider board membership as a positive career step. These include an opportunity to:
- learn first-hand about governance and governing (the board’s role) as opposed to managing (management’s role)
- work at the strategic level of an organisation as ultimately the board’s role is to test and approve company strategy
- contribute and hone your skill set in your own professional area as well as your leadership skills
- gain a different perspective regarding management and what a board expects from management by literally sitting on the other side of the table
- expand your knowledge in areas such as finance, law, human resources and ethics (as well as the particular industry in which the company operates)
- build new networks both through your peer directors and at board level generally, and
- build a base for a non-executive director roles post your executive career.
Being a director can be challenging as well as personally rewarding. Sitting on a board has the potential to help you develop not only your professional skills but also personal awareness and behaviours and can be a useful addition to your résumé.
Some key considerations
However, there are a number of key considerations you should reflect on before taking on a board role.
- Do you have the time? Most board roles will require a commitment of around 25 to 35 days per annum – double that if you are the Chair. And this is without factoring in a crisis. During the height of the COVID-19 pandemic many boards were meeting weekly, some more regularly especially where cash flow was an issue.
- How will you best manage any conflicts of interest with your executive role? Many boards will be seeking you for your industry or sector skills but will this be compatible with your executive role? You should also carefully check that your current employment agreement doesn’t preclude you from taking up a directorship.
- Have you considered the personal liability? Directors are ultimately responsible for their company’s performance and actions. The Corporations Act places a number of significant duties and responsibilities on directors. Other federal and state legislation also imposes liabilities on directors. Before taking a board position, you should undertake careful ‘due diligence’ of the company including checking indemnities and Directors’ and Officer’s insurance held by the company.
Some useful steps
Doing a course in governance, developing a board-focussed résumé, making contacts at board level, and telling relevant people about your aspirations are advisable if you are seeking a directorship.
Directors Australia are non-executive director recruitment specialists. If you are a company seeking directors, click here. If you are a seeking a role as a director, click here to join our directors’ database and be considered for suitable board opportunities.