In recent years, U.S. companies have been facing ever-increasing compliance and regulatory requirements, which has led many of them to see more value in having lawyers in their boardroom.? At the same time, corporate Board of Director positions have become increasingly appealing to many attorneys for a number of reasons, so a lot of lawyers have started to see more of their colleagues and peers appointed to these high-paying roles.? Board work provides a unique opportunity for professional development with a time commitment that is significantly less than that of a full-time role, so in addition to being useful for career advancement, board positions can also serve as a significant source of supplemental income.? While there are a lot of benefits to serving on a Board of Directors, there are also some risks.? In addition, the process of getting appointed to these coveted positions can be overwhelming if you don’t know where to start, so we’ve created this guide for lawyers who are interested in exploring the possibility of seeking a board position.?
What Are the Benefits of Joining a Board?
There are many possible benefits to serving on a Board of Directors, including:
- Board service can provide incomparable learning opportunities and tremendous networking prospects because it provides an opportunity to work with experienced business managers who have a wide variety of skillsets and areas of experience.
- Board members often have an opportunity to be involved in overarching and instrumental decisions about important issues facing an organization, but they don’t have to focus on the day-to-day execution of those decisions.? This offers a unique opportunity to gain business knowledge and new perspectives without committing to a full-time role.
- Positions on boards of for-profit corporations also may include significant financial compensation even though board members only meet a few times a year.
What Are the Different Types of Boards?
Not all board roles are the same.? Service on the board of a non-profit organization is typically very different then service on the board of a for-profit company, and public company board experience differs significantly from roles on boards of private equity backed organizations.? ? ?
- Public company boards: the Board of Directors of public companies usually focuses mainly on providing oversight, not hands-on work.
- Privately-owned company boards: these board roles are more hands-on than public company boards, because private equity owned organizations and other private companies typically look for more direction from their board than do publicly-traded companies.
- Non-profit boards: members of boards of non-profit organizations typically work on a volunteer basis, as these roles generally are not paid.? Non-profit board members also tend to do more hands-on work than members of boards of for-profit corporations, and often the time commitment is significant.? Also, some non-profit organizations expect their board members to assist with fundraising and/or make personal financial contributions. ?
What Responsibilities Do Board Members Assume??
Before you agree to join a board, it’s important to understand what responsibilities you are taking on, and what will be expected of you.? In most cases, when accepting a board appointment you should be prepared to take on a role that includes:
- Overseeing the organization, but without meddling in the day-to-day operations
- ?Ensuring that the company has the resources needed to succeed.
- Evaluating the organization’s business strategy to ensure it is sound; board members don’t determine the company’s strategy but should ensure there is a sound strategy in place.?
- Ensuring that the risks the organization is taking are reasonable and measured.
- Confirming that the company is operating efficiently.
- Verifying that the organization has a process in place to identify and address risk (i.e. ensuring there are not improper incentives for executives who are making strategic decisions, confirming that the appropriate checks and balances are in place, etc.)
- Evaluating pending deals and asking probing questions to confirm that the deals the organization is considering are reasonable and are tied to the overall business strategy and approach.
How Can You Best Position Yourself for a Board Appointment?
It can be hard to get appointed to boards, and your first board position is often the hardest to obtain.? To help increase your chances, consider following the tips below to situate yourself as well as possible.?
- Put on a “business hat” in your current role; tackle strategic initiatives and take on non-legal projects to gain experience in as many different areas as possible.? Also, seek out opportunities to present to your company’s board, and be sure you perform at your best each time you’re interacting with the board.?
- Identify the skills you will bring to a board.? Each member of a Board of Directors should have a unique skill(s) to contribute to the board; whether it’s finance, legal, compliance, HR, etc. ?When advocating for yourself, don’t focus just on your skills as a lawyer, but also the other skills you can bring that would fill in any gaps in skillsets on the board.? In addition, if you have a unique skill, or if you have experience with a specific industry, seek out board positions at companies that would benefit most from your niche skillsets and/or industry experience.?
- Make networking a priority.? Relationships are key to obtaining board positions because it’s very common for board roles to be filled based on professional connections.? Make sure to let people in your network know you’re seeking a board position, and don’t be shy about advocating for yourself.? Once you’ve joined your first one or two boards, be sure to keep in touch with your fellow board members even after you no longer are serving on a board with them, because your best chance of getting new board appointments may come from a referral from someone with whom you have already served on a board.
- Look for ways to gain experience with corporate governance, and then try to make yourself known in the corporate governance world and promote your corporate governance work to members of your network.?
- Focus on seeking board positions with organizations that are meaningful to you, because if the organization you are serving has a cause that you are passionate about, your passion is likely to be demonstrated in your work.? Consider reaching out to target organizations directly and ask if they are seeking board members.?
- Seek out formal instructional programs that train professionals to be prepared for board service and then help identify board positions for their members.? Also, ask your current company or firm if they have any resources dedicated to helping their employees get placed on boards.?
- Develop a reputation as someone with whom others want to work.? Board members spend a lot of time together, so it’s important that potential board colleagues see you as someone with whom they would enjoy spending time so that they will be more likely to want to have you join them.?
- If you’re looking to join a for-profit corporate board, think first about getting on a non-profit board where you can develop a skillset that translates well to for-profit board work; for instance, take on a leadership role with a non-profit board, and then take the organization through something big such as an Executive Director search or a capital campaign.? Also, look to join non-profit boards with a strong corporate governance structure, which is most likely to be found at well-established organizations (i.e. large hospitals) and then take on a big project such as serving as the board’s finance chair or serving on the audit committee, work on complex policy issues, take on extensive risk analysis, or take the lead on initiatives or programs that involve a large amount of money
- If you are seeking a position on a non-profit board, fundraising ability may be instrumental, so try to gain experience and opportunities to showcase your fundraising skills.
What Traits Make Board Members Successful?
Experienced board members have attributed their success to a number of traits, including:
- The ability to bring people together.
- Having a niche skillset or expertise in a specific industry.
- A tendency to think independently.?? This is especially important for large, public company boards, where the most desirable board members are those who will not automatically bend to the will of the majority.
- Working well with others.
- A willingness to ask difficult and probing questions.
What Are the Risks of Joining a Board?
While there are a number of benefits that can come from board service, there are also risks.? Before accepting a board appointment, you may want to consider the following potential downsides:?
- Consider your reputational risk.? Once you join a board, your professional reputation may, rightly or wrongly, be tied to the company’s behavior.? If the company engages in a controversial activity or takes a firm position on a contentious topic, you may find that your professional connections associate you with the company’s viewpoints even if you were not at all involved in the company’s actions or decisions.? ?
- You will be held accountable for having read ALL OF THE MATERIALS that get sent to you, and often board members are sent a very voluminous set of documents before board meetings.? Be sure that you read everything sent to you, because you will be held accountable for having done so.?
- Other board members will observe your work, and your work ethic, firsthand.? If you join a board, be sure you are going to participate fully, because your reputation could be harmed if you take on board responsibility and then don’t attend meetings or otherwise “show up” for the role.
- You can be sued for your work as a board member.? Board members have a fiduciary duty to the company and its shareholders, and if the company’s stock price drops, shareholders and other stakeholders may seek to hold you accountable.? If the company has comprehensive D&O insurance that covers your work, that may help defray some of the potential costs of a lawsuit in certain situations, but being involved in a lawsuit is still stressful, distracting, and time consuming, even if insurance is covering the monetary expenses.? Also, D&O insurance likely won’t cover any damage to your reputation.? It’s also possible there won’t be insurance coverage, or that you'll have to engage in a lengthy legal fight with the insurance carrier to attempt to secure coverage.? ??
- While the chances of criminal liability are not high, it is possible, so be sure you do your due diligence before and during all board work.?
- Your in-person attendance at board meetings will be expected, and that often requires travelling and extensive preparation work, so be sure you have the capacity to take on the time commitment.?
- Board work includes a duty to act in the best interest of others, and for some people that can be a stressful and daunting prospect.? In addition to D&O insurance, you may also have negotiated for indemnification, but that may not be enough to relieve the stress that comes with the duty to act in the best interest of others or the exposure to potential legal liability.?
- Business conflicts of interest may arise.? Other organizations for which you work, as well as other entities with which you are affiliated, may be disqualified from doing business with the organization for which you serve on the board due to potential or perceived conflicts of interest.
What Are Some Helpful Tips For New Board Members?
Once you finally land a coveted board position, you will probably be eager to do well in the role.? Below are some suggested tips to give you the best possible chance at success.?
- Early on in your board career, make it a priority to listen and learn.? When you join a new board, don’t try to make dramatic changes early in your tenure, but instead learn as much as you can about the company and the industry, including the company’s business model, strategy, finances, industry, and key players, as well as the company’s strengths, weaknesses, opportunities, threats and competitors.? Wait until you have this knowledge before suggesting drastic changes.
- Evaluate your own skills and experience to figure out where you can be the most helpful and add the most value.
- Find a mentor who has been on the board for longer than you, and have them get you up to speed on everything they think is important for you to know.
- Don’t be afraid to ask difficult or probing questions, but be sure you have full information before offering solutions.?
- Make sure there is no ethical conflict of interest between the organizations for which you serve as a board member and the other businesses with which you are involved.
- ?Be sure to research the level of personal risk you are taking on; for instance, are you given D&O insurance, and if so, is it a comprehensive policy?? Is the company offering you indemnification?? ?
- ?Make sure your current employer is aware of your board activities, and that they approve any potential board service in advance of you committing to take on a board position.?
What Special Considerations Apply to Lawyers Serving on Boards?
Historically, most board positions have been filled by experienced business leaders.? While many lawyers have also successfully served on boards, there are some unique considerations that apply to attorneys serving on boards.?
- In addition to the potential business conflicts noted above, lawyers also need to be mindful of the potential for legal conflicts of interest. ?Also, keep in mind that there may be a conflict even if there is no attorney-client relationship between the attorney and the organization.? For example, Rule 1.7 of the ABA Model Rules of Professional Conduct says that a concurrent conflict of interest includes a conflict with the lawyer’s responsibilities to a third person or a personal interest of the lawyer.?
- Lawyers are trained to think with a “legal hat,” but for board service most attorneys should instead put on a “business hat” and lead with the business issues, not legal issues.? To be successful in a board role, most lawyers will need to demonstrate that their perspective is broader than just the legal perspective and that they understand the business issues and the business needs.
- It can be hard for some attorneys to “turn off” their lawyer instincts, but lawyers on boards are not in their board role to do legal work.? Legal issue spotting is often appropriate and helpful, but it’s best for attorneys on boards to limit their legal work to issue-spotting and let the attorneys representing the organization handle anything else. ?In addition, it’s best that attorney board members clearly communicate the limited scope of their role so that the other board members, and senior managers, understand the limited scope of their role and responsibility on the board. ?Also, be sure that other board members and business managers don’t assume that all board meetings are covered by the attorney-client privilege simply because there is an attorney in the room.
- All board members should be able to communicate clearly with business leaders, which means that lawyers should avoid speaking in legal-ease when performing board work.
- All board members, including attorneys, should develop knowledge of the relevant industry.? Lawyers who spent most of their career working at a law firm representing clients in a variety of industries may have a steeper learning curve than other board members who have worked day-to-day in the organization’s specific industry.?
- ?If a lawyer provides advice on the legal implications of business decisions in connection with a board role, or if their legal advice is solicited, there are associated risks.? In these situations the attorney-client privilege may attach, but it’s best for the attorney to be clear about when they are acting as counsel to the board, not a member of the board.? This is important for a number of reasons, including whether the attorney-client privilege applies, and also in determining whether there may be insurance coverage for the situation, either for legal malpractice or for D&O liability.
- Attorneys who work for a law firm should be mindful of whether their board service could lead their law firm to be viewed as supporting or having an association with the organization for which the attorney serves as a board member.?
- Keep in mind that D&O insurance that covers an attorney’s work as a board member may not cover their work as an attorney if a potential claim arises from a time or event in which they were acting as an attorney in advising the board.? Along these same lines, a professional liability insurer may argue that a lawyer’s work on a board is not covered under their malpractice policy due to the attorney’s nonlawyer role in the organization, so this could present a gap in coverage.
?While there are some risks associated with serving on a board, there are many upsides as well, and as a result many attorneys seek board positions.? If you’d like to position yourself for a board appointment, it’s best to be patient and plan well in advance.? It usually takes a long time to develop the necessary skills and contacts to serve on a board, especially a for-profit corporate board.? If you aspire to serve on a public-company Board when you are in your 60s, it’s helpful to start following the advice outlined in this article when you are in your 20s and 30s to give yourself as much time as possible to prepare.?
