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Many financial officers aspire to become corporate directors. The chance to deal with the strategic and operational issues of another business is stimulating, while leveraging many years of front-line experience and transferring that as incremental value to another company is rewarding. Corporate boards deal with high-level strategic and management talent issues and these are challenging and intellectually fulfilling.
So, it is not at all surprising that a frequently question is “How do I become a corporate director?”
Networking with investors is the single best way to become a director. Those investors can be venture capitalists, private equity partners, wealthy individuals or activist fund managers. Direct approaches to these professionals are appropriate. They thrive on networking and are generally open to meeting if you provide a brief background with a good case for your ability to add value as a director. Of course, you have to match up a realistic case between your backgrounds. If you come from a small company, target investors in that segment. If you have large, public company experience, reach out to the larger private equity funds and activist investors. Put forth the specific skills that might add value to a board. Investors tend to look for related industry experience. It may be your retail industry experience, financial services, or manufacturing knowledge that resonates. Know your key strength and present that clearly. One very important and quite simple step is to research and know the current portfolio of an investor before you meet with them. Their websites will tell you what they are invested in. You may have a connection to a portfolio company and lead to a conversation that starts with “I see you have an investment in XYZ Corporation, I know the company (or executive) from my experience with…..”
Networking with current directors is also very productive. Most boards start a new director search by asking the current directors if they would recommend someone. If a director has worked with you in another setting you have a leg up. If your current company has an independent board, reach out to those directors and let them know you are looking for a directorship to round out your own strategic business experience. Look through all your contacts and see who you know that is serving on a board and reach out to them for coffee.
Lawyers are another valuable source of introductions to board directorships. Outside counsel are usually the corporate governance expert for a board. They may act as secretary for the meetings. In those roles they get to know all the directors and they know when a board is planning to undertake a search. Many times, outside counsel can be at the center of an effort to renew and refresh the board by bringing on new talent.
There are a number of important groups that conduct director education. The National Association of Corporate Directors (NACD) is the leader in the field. Their membership has been growing rapidly as companies and investors encourage directors to undertake continuing education. NACD puts on focused conferences around the country and their annual conference has thousands of attendees. They also have a director’s registry that NACD members can join and profile their professional strengths. There are local NACD chapters in most cities that provide excellent programs and networking. I can also recommend the director education programs at Weinberg Center for Corporate Governance at the University of Delaware and the Stanford directors college. These forums provide good networking opportunities for the aspiring director.
Personally, I have secured quite a few board positions thought activist investors. They seek out experienced operators that bring credible business improvement ideas for the target business. These investors keep lists of good director candidates and try to match up the candidates with the industry experience needed. It is usually best to have some kind of introduction to these professionals.
Serving on a not-for profit board can lead to stronger director credentials and an expanded network. These board opportunities can be especially valuable for a young finance professional.
Another tactic is to invest as a limited partner with a venture capital fund. The smaller funds obviously have smaller minimum required investments. But you can invest with them with the clear understanding that you expect to be introduced to their portfolio companies as a potential director.
When an opportunity arises, be prepared to brief the interviewers on what you will bring to the table as a director. Know how you rank on the key attributes of a corporate director. Business experience, professional and collegial demeanor at the board table, good communication skills, financial acumen, along with an accomplished career that has exposed you to strategic and operational challenges. Being able to ask tough questions and look at the details, but with a constant and proper professional touch is very important. As a financial officer you will have practical experience on the front line of industry. It will distinguish you and you should emphasize it. Your recognition of risk and how to manage risk will be invaluable.
One valuable resource for someone preparing to be a director is The Directors’ Handbook by Thomas J. Dougherty of Skadden Arps. It covers the core concepts and the most recent issues. The first three chapters span over 100 pages and cover: the role of the director, corporate governance and director due diligence. Straightforward and insightful, I refer to it regularly.
Your career, like mine, may be focused on small to medium-sized businesses and search firms are not likely be an important source of directorships. One large search firm placed me on a board, but generally the search firms are used by big companies. But if you have large, multi-national experience, you should reach out to the key firms and search professionals. Spencer Stuart is the traditional leader in the placing board members with very large companies.
Boards need the skills inherent in experienced finance leaders. Corporate financial officers have a broad view of operations and strategy and have usually seen many cycles of initiatives and results. They are grounded in accounting, the language of business performance. Most often the CFO has participated fully in the board meetings of their own company and prepared materials for, and led audit, compensation and governance committee meetings. Direct talent management experience, managing hundreds or thousands of employees, is also very valuable to boards.
Philip Livingston is Managing Director of 3K Limited Partnership.