Boards are struggling to draw out strong performance from some first-time directors, a recent survey found.
According to respondents, boards have misgivings about new directors’ contributions to strategic discussions, meeting preparation, and areas of expertise and experience. Poor cultural fit was also cited as a common reason new directors are unsuccessful.
However, the survey of 176 public companies also found that many boards have not tapped fresher thinking on onboarding methodologies that can help optimize new members’ contributions.
More than half of the companies surveyed, 56.3%, rely on the corporate secretary or general counsel to lead the onboarding process, rather than the nom-gov committee or a board leader. Meanwhile, 71% of respondents said their boards don’t pair up first-timers with an experienced “board buddy” or mentor to lay the groundwork about the board’s norms and culture.
Both factors can detract from the success of a first-time director, said Jan Koors, senior managing director and head of consulting services for executive compensation and leadership consultancy Pearl Meyer. “No matter how much executive experience someone has, the thing they don’t have is the knowledge of the culture and the cadence of this particular board,” said Koors. “That’s where you need a mentor or a buddy to pick up some of that.”
The issue of not contributing is interrelated with the lack of a cultural explanation about the board, said Koors. New board members have a tendency to want to avoid speaking up too soon or saying something out of turn, she said. But increasingly, companies are asking boards to move and make decisions at a faster pace, and boards want new directors to “hit the ground running.”
“I think first-time directors have a tendency to want to learn on the job and boards need first-time directors to do their learning on their own time,” said Koors.
Relying on the general counsel or corporate secretary to provide board materials, meeting agendas and financial statements, and scheduling one-on-one meetings and site visits is one thing but expecting that individual to explain which topics might be a “third rail” for a company or how the board typically questions members of management is another, noted Koors.
“I actually think that puts the corporate secretary or general counsel in a really difficult position,” said Koors. “It would be hard for them to do anything more than kind of sugarcoat it. It needs to be a board member because it’s partly, ‘Here’s how we work with each other,’ but also, ‘Here’s how we interact with management,’ and I don’t think the GC should be put in that position.”
Similarly, these conversations should go over how to approach meetings with executives internally at the company and externally, including the auditor. They should also cover the groundwork for how the new board member should approach a disagreement with the CEO, for instance.
Koors said committee-level onboarding should also be part of the process for first-time directors. As a compensation consultant, she often meets with new board members joining the comp or human capital committee. She explains the most recent benchmarking study and how the company’s incentive plans work and takes questions.
“You should be able to lean on outside advisors to the company to participate and help with the on boarding as well,” said Koors.