Women on Boards: Preparing Women to Serve on Boards of Directors

I attended the second annual Women on Boards event earlier this week put on by Sharp Up Swing. It was an amazing event and a well-attended event with over 80 people there (I was one of only two men at the event by the way). It was extremely informative for those women looking for board opportunities or information on boards. There was a Panel of very accomplished ladies including Kate Paul the CEO of Delta Dental, Stephanie Allen a Principal of the Athena Group and Kathy Cunningham the Past President of the National Association of Corporate Directors in Colorado. It was facilitated by Christie Doherty who is the President of the Women's Vision Foundation, as I said a very impressive group of ladies. They discussed not just corporate boards for publicly traded companies but also advisory, private company and non-profit boards.

Here are some of the highlights that I thought were different from a lot of corporate board topic events that I normally attend:

• Lessons Learned: Most of the women like many of the board members we speak with got involved in their first publicly traded company corporate board of directors without doing a lot of due diligence or fully understanding the nuances and liability that went along with it. This turned out to be a great learning experience but one they would rather not repeat especially when you have a horror story like one of the ladies where she got an inquiry from the SEC.
• Corporate Board Liability: Know the D&O policy. Read it yourself and understand it. Realize that if the company goes bankrupt the policy will not be valid. They also pointed out something that most people don't think about, that insurance companies do not always pay claims and often try and get out of paying claims, who would have thought? Some other great ideas were to speak with the outside counsel of a corporation, ask for and make sure there is some indemnification by the company and whatever you do never take or keep notes. Some great ideas here and most of this discussion was around the difficulties with liability, how to mitigate liability and a lot of the downside of being on a board from a liability perspective.
• Change and an Existing Board: Change is hard to bring to a board and it takes time. What we would call the culture of the boardroom, which we agree can only be changed if there are new members that are added that bring a different perspective and it could take years to implement that change. There was a lot of emphasis put on the "pay it forward" idea of if you are a minority or a woman than you have an obligation to replace yourself with a similar person of gender or ethnicity. In addition, they thought that if a minority board member can get on a Nominating Committee they should feel that minority candidates would be preferred in recruiting new members. In many ways we agree with this being a minority owned company ourselves and as ABA's mission is break the traditional way boards are built and if you go by the statistics they gave us, by adding women and minorities to a board dramatically increases many of the metrics that reflect positive shareholder value including share price increases, etc. However, our proprietary ranking system, which scores a potential board member before they would ever go on a board, gives credence to strategic thinkers and board leaders regardless of ethnicity. Our feeling is that if you can find a strategic thinker who has proven board leader skills (we don't want board members we want board leaders) they will benefit the board, the CEO and management team and ultimately the shareholders/stakeholders and if they happen to be a minority you had better grab onto them quickly.
• Getting on Boards: Networking is the key to getting on any board and like many things in business today it is all about who you know and who knows you. They suggested getting experience and networking by joining a non-profit board. By showing your leadership there and by networking with other individuals in those board positions you can put yourself in a position to be considered for a board seat through someone you have gotten to know through your networking and non-profit board activities. Even if you have to start on Volunteer Committees, Advisory Board or even Chamber Boards you can position yourself as a leader there and develop those relationships that can be beneficial in the long run in getting on a board.
• Board Orientation: There was some great discussion and ideas around orientating board members to a new board position and how important it was to learn all of the relationships of the board members to each other.

As with many ideas around boards we also found a couple of things that we didn't agree with completely as well:

Advisory Boards: As with most of the information that we have seen around our core area of expertise their advice around advisory boards was for the most part wrong. They recommended that an advisory board be far less formal and that there was no need for compensation. Trust me when I say I almost had to go to the hospital from biting my tongue. Our research on this traditional model of building advisory boards shows that this is exactly why so many of them fail. Their experience is that these advisors agree to serve out of the goodness of their hearts and that you really don't need to compensate them. We agree that advisors do not serve on our advisory boards for the money. However, it is very hard for a CEO to hold them accountable in helping them if they are not compensated in some way. Even if I pay a high level executive a small stipend then I can feel comfortable expecting them to attend every meeting and hold them accountable to certain performance metrics. If I don't I am hoping they can make time for me and at this level they won't. Corporate Boards of Directors have to be there because they are officers of the corporation so they are far less likely to disband. Advisory Boards on the other hand can come and go and if you build a very high powered group and no one manages it or it lacks any accountability structured into it then it is far too easy to let it go and if you really do have some high powered people on that board they are probably not going to think to highly of the CEO or the company if that happens. Our data (and our process) suggests that any truly successful board (whether Corporate, advisory or non-profit) will need three primary things - Accountability, Transparency and Efficiency.

Evaluation process: We were happy to hear that the panel at least agreed that board evaluations were important, something that we have been advocating for some time now but have seemed to be one of the few. What was somewhat alarming though was the time frames in which they thought these evaluations should happen. We are firm believers in evaluating the effectiveness of the Board overall and the individuals on the board (whether a Corporate Board or an Advisory Board) once a year. What was communicated form the panel was that a once a year evaluation is a "what have you done for me lately attitude" of board membership. YES they are right, as a shareholder, stakeholder or employee I expect everyone to be evaluated every year and if there is a non-performance issue then it is addressed. This is called accountability and we feel is a major component to board success and is a key metric in ensuring that every individual in the organization is required to provide ongoing and continuous value, including the board members. With true board leaders this should not be an issue, where we have seen pushback on this idea is with members who are just there to fill a seat. For them accountability and transparency can be a very scary idea and this is what sets the precedent for the rest of the organization. We have found this is the best way to change the culture and thus a company from the top down.