It’s not too early for law students, and even pre-law students, to consider someday becoming a director of a for-profit company, and to begin to maximize their opportunities.
Those interested might:
● First, review the functions of a board, which include: selecting, setting the compensation of, monitoring the performance of, and sometimes firing, senior officers (notably, the Chief Executive Officer, or CEO); consulting with senior officers on corporate goals and strategy (though not about all details of implementation); ensuring compliance with statutes and regulations; and, setting and maintaining the “tone at the top” of the company’s culture.
Reading resources range from primers, to perspectives from business consultants, to practical legal discussions (including my own).
(Boards, and individual directors, are generally featured peripherally rather than prominently in best-selling business books, which more frequently focus on founders and/or CEOs.)
● Second, law students might take courses in Business Associations, Corporate Governance, Business Planning, and Corporate Compliance.
Also very useful: Corporate Bankruptcy, whose intricacies will be relevant not only to the fortunes of one’s own company, but to protecting its interests before and during any insolvencies of its suppliers and customers.
● Third, examine the core governance documents posted on the websites of major corporations (usually behind a link to “Investor Relations” or “About Us”).
You can find a company’s articles of incorporation, its bylaws, its stated (but non-binding) governance guidelines/principles, and the charters of the standard committees of its board (audit, nominating/governance, compensation; the sometimes-mysterious executive committee; and, possibly, a corporate social responsibility or ESG committee).
● Fourth, note the personal characteristics that these documents (particularly the governance guidelines/priniciples, and the charter of the nomination/governance committee) identify as desirable in board candidates.
In my summary, many such lists include:
-intelligence, judgment, and decisionmaking skills;
-reputation and recognition in one’s business or profession;
-civic and community relationships;
-professionalism, collegiality, interpersonal skills, and management skills;
-good character, high ethics, and personal integrity; [and]
–conforming to the values of the corporation. . . .
● Fifth, consider what experience, expertise, and perspectives you could to add to a board—including your sensitivity to cultural issues that might otherwise (as, notably, in 2017) embarrassingly elude a company’s management.
In her essay collection, Be Board Ready: The Secrets to Landing a Board Seat and Being a Great Director (2019), Betsy Atkins, an entrepreneur who has served on more than twenty boards of publicly-traded companies, advises candidates for directorships to “be crisp in distilling your career into three major digestible, thoughtful points. . . . For example: What is your industry background? What is your functional expertise? What stage of a company are you a best fit for?”
The authors of Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors (2d ed. 2022, by Brad Feld, Matt Blumberg, and Mahendra Ramsinghani) echo, “To be considered for a board seat, even for an early-stage startup, you need to bring something to the board that isn’t already there. You should have enough operational experience and be senior enough in your company to have functional or industry expertise that’s additive to the board.”
(Not all of that experience is necessarily posititve. In their chart of relevant characteristics of board members, those authors warn boards to “Beware” of a candidate who “Has never been sued.”)
Under pressure from legislators, shareholder activists, institutional investors such as pension funds, and (for corporations whose shares are listed on it) the Nasdaq stock exchange, companies are increasingly attentive to (and usually define very broadly) board diversity.
The country’s largest public pension fund, the California Public Employees’ Retirement System (CalPERS), in its Governance and Sustainability Principles (2019), advises corporations (in which it does, or might, invest its millions of members’ pension funds) that:
“Board diversity should be thought of in terms of skill sets, gender, age, nationality, race, sexual orientation, gender identity, disability, and historically under-represented groups. Consideration should go beyond the traditional notion of diversity to include a more broad range of experience, thoughts, perspectives, and competencies. . . .”
According to CalPERS:
“Collectively, director attributes should include expertise in at least the following areas: accounting or finance, international markets, business, human capital management, industry knowledge, governance, customer-base experience or perspective, crisis response, leadership, strategic, planning, and competence managing multifaceted risk—including expertise and experience in climate change and other environmental risk management strategies, where material to business model or operations.”
Similarly, the Corporate Governance Principles (2021) of the California State Teachers’ Retirement System (CalSTRS) indicates that the “skills and experience needed [by a board] include, but are not limited to, financial and/or accounting, industry expertise, business management, governance, customer service, leadership, risk management, including climate risk management and cyber-risk management, and strategic planning.”
● Sixth, consider what industries or market sector(s) you might be interested in counseling, and serving as a director, in; and, as the CalPERS and CalSTRS statements suggest, try to identify—and especially, to predict—risks that they are likely to confront.
In 2023, the SEC required boards of publicly-traded companies to disclose annually “management’s role and expertise in assessing and managing material risks from cybersecurity threats.”
A rule proposed by the SEC in 2022, but not yet adopted, would require disclosure of “[w]hether any member of the board of directors has expertise in climate-related risks, . . . in such detail as necessary to fully describe the nature of the expertise.”
Ram Charan’s Owning Up: The 14 Questions Every Board Member Needs to Ask (2009) observes, “The most important lens for tracking risk is financial. . . . But [boards should] look, too, at strategy and operations, politics and geopolitics, reputation, and corporate culture. . . Some boards may want to add other categories or risk [such as those related to] information technology and intellectual property.”
Use books, mainstream media, blogs, law firms’ “client alerts,” the press releases of companies and trade associations, and other sources to help you identify emerging (technological, cultural, demographic, political, and/or legal) risks, threats, and opportunities (including “disruptive technologies”) that might create what one legendary high-tech entrepreneur called “inflection points.”
● Seventh, Olga V. Mack’s Get on Board: Earning Your Ticket to a Corporate Board Seat (2019) recommends that anyone interested in a directorship “[b]ecome known as a thought leader by writing and speaking on a few key topics that are important to the success of a company.”
Similarly, Be Board Ready suggests “regularly posting blogs or articles that illustrate your knowledge and areas of expertise. Start by identifying topics that are discussed in boardrooms today.”
Even better: Write on topics, such as those referred to above, that you believe boards should be addressing but are not yet aware of, or concerned enough about.
● Eighth, read accounts of group decision-making, particularly in crisis (but not necessarily in financial) situations; and, familiarize yourself with the seemingly standard (even if, for the boardroom, somewhat limited) guide to this process.
● Ninth, review discussions, in caselaw, commentary or otherwise, of boards’ responses to (and possible partial responsibility for) corporate crises.
As I have noted, easily available online are a number of revealing internal investigation reports prepared by or for boards themselves, including: Independent Directors of the Board of Wells Fargo & Company, Sales Practices Investigations Report (2017); and Report to the Board of Directors of General Motors Company Regarding Ignition Switch Recalls (2014) (also known as “the Valukas Report”).
Also of interest might be Covington Recommendations for Uber (2017) (also known as “the Holder Report”).
● Tenth, despite continuing questions about the formality and extent of a requirement in this regard, acquaint yourself (through taking a Law and Accounting course or through independent reading) with at least the basics of how to interpret balance sheets, income statements, and cash-flow statements.
You might even review some of the quarterly (10-Q) and annual (10-K) reports posted on the websites of major corporations.
● Eleventh, several of these authors recommend that aspiring directors serve on a company’s advisory board; in a more informal advisory capacity; on nonprofit boards; and/or in community organizations.
(For a fascinating account of a shadowy but extremely high-powered and influential advisory group, see Ann Finkbeiner’s The Jasons: The Secret History of Science’s Postwar Elite (2006).)
According to Betsy Berkhemer-Credaire’s The Board Game: How Smart Women Become Corporate Directors (2013), which includes profiles of the paths of more than fifty women to the boardroom, “Most women directors were recommended for their first corporate boards by directors who saw them in action on nonprofit boards.”
● Twelfth, as I have proposed, you might form an official student group—or even a more informal “reading group”—to discuss these issues, perhaps over Zoom and/or with the aid of guest speakers (such as, alumni who are and/or who counsel directors and boards; and, representatives of organizations dedicated to helping candidates increase diversity on boards).
That exercise itself would fulfill two of the universal pieces of advice for potential board candidates: Gain Leadership Experience, and, Network.
