I’m directly connected to over 150 people with “board members” in their profiles on LinkedIn. And for the past year, I’ve been a board president of my condo association in Seattle. Are you curious about what it takes to join a board?
Let’s walk through the types of board roles, potential benefits, and how you can be in the consideration set.
Types of Board of Directors & Membership
According to Carter McNamara: “A board of directors is a group of people legally charged with the responsibility to govern a corporation. In a for-profit corporation, the board of directors is responsible to the stockholders — a more progressive perspective is that the board is responsible to the stakeholders, that is, to everyone who is interested and/or can be affected by the corporation. In a non-profit corporation, the board reports to stakeholders, particularly the local communities which the non-profit serves.”
From a high-level view, there’s no set membership number, selection criteria, term limit, or meeting schedule. Publicly held corporate boards have members, commonly called directors, whom the stockholders elect. On the other hand, a privately held corporation has board members selected by the company’s founders skipping a formal election.
Typically, there’s a chairperson or president, vice-chair or vice-president, secretary, and treasurer.
In my research on the topic, I’ve seen anywhere from 3 to 31 members. The number of members impacts reaching a consensus on issues, but most often, there needs to be an uneven number to break a voting tie. In some cases, there are set membership terms that can be voted on or assigned. Understandably, there’s more rigor for corporate for-profit boards due to state and federal regulations.
Wonder about gender breakdown? Women hold only 28.4% of the Russell 3000 company board seats.
Specific Responsibilities
Corporate and not-for-profit boards should have responsibilities outlined in their annual proxy statement, constitution, bylaws, or declaration. If not, you might want to reconsider joining since it’s unclear what you would be signing up for. BoardSource provides the following guidelines for responsibilities:
- Determine the organization’s mission and purpose
- Select executive
- Support the executive and review their performance
- Ensure effective organizational planning
- Ensure adequate resources
- Manage resources effectively
- Determine and monitor the organization’s products, services, and programs
- Enhance the organization’s public image
- Serve as a court of appeal
- Assess its own performance
I’m a Walmart shareholder and located their 7-page corporate governance guidelines on their website. It details director qualifications, board responsibilities, committees, director access to officers, associates, outside advisors, director compensation, director orientation and continuing education, CEO evaluation, management succession, and annual performance evaluation. Highlights include:
- Majority of the directors should meet the independence required by the NYSE
- Nominees for director will be selected based on outstanding achievement in their careers; broad experience; wisdom; integrity; ability to make independent, analytical inquiries; understanding of the business environment; and willingness to devote adequate time to Board duties
- Each director shall be elected by a majority vote in an uncontested election
- Within 5 years of joining the Board, each new outside director will be required to own a number of shares, restricted stock, or stock units equal in value to 5 times the annual cash retainer offered to each director at the time the director joined the Board
- The Board senses that a size of 7 to 17 directors is appropriate
- An outside director is expected to serve for at least 6 years
Compensation
A CEOWorld article explained that “total compensation for a board seat will vary depending on company size, public or private, the number of meetings and the responsibilities involved. This compensation is generally in the form of cash retainers, equity grants, and meeting fees.” If board members aren’t locally based, companies tend to compensate them for travel expenses related to meetings and retreats. For-profit board members typically receive compensation, while not-for-profit doesn’t.
If you map compensation against the S&P 500, the average annual retainer for an independent board of directors is $136,133. The top 10 highest compensated board of directors in 2022 include:
- Amazon
- Fidelity National Information Services
- Hewlett-Packard
- Incyte Corporation
- Northrop Grumman
- Oracle
- Regeneron Pharmaceuticals
- Roper Technologies
- Salesforce.com
- Twenty-First Century Fox
Time Allocation
Depending on the board type, the time commitment is varied. Not-for-profits tend toward a monthly meeting cadence with a 2-hour allotment and ad hoc time for being a part of a project committee. I’ve been asked to be on 2 boards with causes I believe in but declined because of the time commitment. Sometimes it’s not the perfect fit.
For-profit varies from quarterly all-day meetings to a phone call relationship in a board advisory position. One executive I spoke to noted there was “one annual meeting, and we would sit down with the CEO to discuss business strategy and test the CEO on funding, tech, and sales.” In the case of Walmart, there are at least 5 meetings annually.
It’s essential to ask questions regarding time commitment, and I recommend asking former members about their experience.
Your Board Benefits
There are tremendous upsides to joining a board.
- Advance in your career: Raise your leadership profile for your identification with a cause. You can highlight your passion through your online feed, executive bio, and resumé. As acknowledged by a CIO: “For a pure non-profit, there is no residual financial return. It’s my time to be philanthropic; it looks good on my CV. Per the board, they encourage you to advertise your involvement.” It’s a win-win for both parties.
- Enhance leadership skills: Learn about how others think. A past President noted: “I’m amazed at the vast variety of opinions. We would bring in an industry expert, and 5 members’ takeaways would be unique.” After a lengthy vetting process, one executive accepted an invitation to join the board. The hesitation was caused by the company since sometimes a board only knows what it needs once it sees it.
- Broaden your professional network: Choose the right board, and you make contacts for life, like joining a fraternity or sorority. I encourage my clients to volunteer or join boards now to network for other career adventures or have an exit strategy upon retirement. One board president serving on a finance committee has established a strong bond with individuals he would have met only in their joint mission.
- Impact of societal change: This supports the mission of most corporations to encourage annual employee giving-back days. Every Fortune 500 company I worked for has planned employee volunteer activities for community benefits. My past assigned sales account base included not-for-profits such as Bloodworks Northwest, Seattle Children’s Hospital, and World Vision. My previous employer CenturyLink supported all three with gifts-in-kind, monetary donations, and volunteer staffing.
- Earn compensation: Non-employee board director compensation programs include annual equity awards and cash payments. In the U.S., the average for-profit Board Director salary is $70,960 as of July 25, 2023; the range typically falls between $54,702 and $87,632. Non-employee directors usually must hold a minimum investment in shares of the company’s common stock equal to a multiplier of their annual cash and stock retainers.
How to Join Boards
It’s all about who you know and who knows about you. More than 80% of the board placements come through their network visibility, and board recruiter agencies arrange most Fortune 2000 corporate positions. Your experience, integrity, and personal brand image established at speaking engagements, conferences, networking events, and online presence factor into your potential fit for the board.
To be vetted, you must provide a board of directors resumé. It differs from a standard employment resumé in that the content focuses on your ability to put the organization’s interest first, act accordingly based on your current board interaction experience, and highlight your internal company governance ability.
Key Learnings & Advice
I polled my business and personal connections, and each would continue to belong to a board or join a new one. Below are observations not covered previously:
- Enjoy your triumphs on the board
- Look at the executive team and their profile on how they got there before making a commitment
- Prepare yourself for more aggression than you would expect
- Realize the company is using your board seat as a sales vehicle for investors
- You can make a difference plus feel great in the process
Whether for giving back or helping drive a company’s mission, joining a board of directors can provide fulfillment outside your everyday work life. Best wishes to you in your career adventures.