I’m sort of a founder of the Colorado Chapter of the NACD (National Association of Directors).
After resigning from my last company and looking forward towards the next couple years – I committed myself to do a couple things one of which was to study Corporate Directorship seriously. I did this by:
buying a number of Corporate Governance oriented books on Amazon, meeting more than a few existing Directors and talking with them about what it was in their opinion to be a Director, taking a Corporate Governance course at Stanford (very fun – got to hear Charlie Munger be cantankerous) becoming a member of the NACD (excellent monthly newsletters) actively soliciting and then joining a Board of Directors (thanks for helping me here – you know who you are) and co-founding (along with Mike Platt) and forming a group we called the CDG or Colorado Director’s Guild. (we could not have done this without a lot of people’s help – who actually did the work to make it all happen)
It was the CDG (with about 200+ members) that morphed into the Colorado Chapter of the NACD (largely through the existing NACD Colorado Chapter leadership and specifically Tim Enwall’s efforts – awesome job Tim!)
So it was with interest and excitement and passion that I participated on a NACD/Colorado Chapter Panel a couple weeks back. Our discussion zone was VC Boards or something like that. A question I was fed prior to the panel was “what qualities make a good independent director”.
Here’s my answer – which I’m sure can be improved upon:
aware of the legal fundamentals
duty of care
A quick definition of this rule is “the exercise of sound judgement and diligence”. Said better it is defined as: A director must act as a “reasonable person” would under similar circumstances. So, a director must make a reasonable effort to make informed decisions”.
duty of loyalty
Essentially this is the “interests of the corporation above self” rule. Said better it’s defined as: A director has a fiduciary duty to act in the best interests of the corporation. The director must set aside personal, financial, and professional interests when making decisions for the corporations. Directors should avoid any appearance of self-dealing.
motivated
genuinely interested in being on a board. It’s not a title thing and should not be for the purpose of resume’ padding. It’s work. And you/tehy should be interested in working.
genuinely interested on what the role of a board member is. Have they studied or read about the profession (is it a profession?). What’s their interest in taking the role?
proactive
16 hours versus 6. Best practices suggest that a good board member doing the minimum will put in about 16 – 24 hours a month. I have worked with a board member that didn’t. She came to the meeting unprepared, unhappy, unsettled and unprofessional. She was disheveled, disruptive and disappointing. She was a nightmare example of a board member and she taught me a lot about how NOT to act.
Critically thinking about the company and it’s objective and strategy. You get it.
value add for the “stage”
early start up versus prepping for public offering. Again I think you get it. A board member is not a role that is one that lasts in perpetuity. In fact – I think turnover – perhps planned turnover - is healthy. Best practices supports this idea.
committee capable
able to and aware of serving as a committee member. This is part of being proactive and doing the job. Are they interested in the board charters? Do they understand the mechanics and schedule of a committee’s purpose?
Skilled at questioning
This is by far one of the most important and necessary skills. Excellent board members – not just independents are Black belt masters at the expertly timed and phrased question. I’ve seen questions rolled out in the middle of the board table – placed timely in the meeting that materially and effectively value-add the company to success and artfully move the conversation forward in a helpful way and with shareholder value building effect. I’ve also seen poorly phrased questions poorly timed bump and bounce onto the board table and explode like a cheaply made WWII movie hand-grenade. They explode – everyone gets frazzled – sometimes a few folks get hurt.
