Critical Steps For A Public Company Director

Congratulations—you’ve been nominated to serve on the Board of Directors of a publicly owned company! 

You’ll initially be elected by a shareholder vote, or possibly you’re filling in due to a death or unexpected resignation.  Regardless of your roadmap to Board membership, you have a serious fiduciary responsibility.  Remember, too, that you will be renominated for re-election by a shareholder vote, possibly as often as each year.  It’s time to learn as much as possible.

You are likely to be sent to a Director School experience, which will run anywhere from a half day to a full week of instruction.  A lawyer will explain the legal duties of a Board Member, such as the Duty of Care, the Duty of Loyalty, and the Duty to Act in Good Faith.  The Board Committee structure will be explained, along with the normal duties of each Committee.  The regulatory environment will be explained—a survey of the various regulatory agencies who can impact a public company, the most important rules and what is “hot” in the current year.  If you are serving a non-profit, the duties are notably different such as IRS expectations.  You will also learn about watchdogs that follow public companies, that rate them or provide suggestions on how the companies’ shareholders should vote on issues at their annual meetings.  Discussion may also be presented about political realities and the circuses they sometimes involve.  Conflict of interest and transparency should be hallmarks of any curriculum for Board school.

Membership in a directors’ organization may also be in your future, to encourage your continuing director education.  Directors can obtain certifications from a director’s organization whose requirements for such certifications have been met.  Though no such certification is required for public company board service, many directors do seem to be interested in obtaining them, possibly to showcase themselves, as a certain amount of the networking at directors’ organization meetings is about finding a first, or an additional, board seat!  Candidly, why wouldn’t you seek the highest level of education for a Board seat?  Check out reviews from other Board members, and leverage your network to learn what providers they recommend.  If the organization has been in business for two decades or more, their collective wisdom is likely very high.

Educate yourself. Seek out a thorough training course, which would include explanations of the liability exposure you incur as a Director.  Public companies will maintain E&O and D&O insurance coverages and likely include a review of the coverages in places as they are renewed each year.  You will want to understand the exposure and the protection provided by the insurance.

After the training and an initial board meeting where one tries to digest all the prepared info and the meeting discussions…and then reflects on all of that, wondering what you’ve got yourself into, it will be best to take a step back to a macro view of what is to be done.  You were elected to the Board by the company’s shareholders, initially either directly or by their representatives (the current Board Members).  It is those shareholders that you represent, not the regulators, not the watchdogs and certainly not the press, lobbying groups, or politicians.  It's best to never lose sight of who you represent and what those people are counting on you for.  Sure, shareholders want their companies to be legally compliant because they want the companies to continue to exist and to minimize any compliance costs.  Indeed, a portion of every Committee and Board meeting will be devoted to compliance. 

Also, be thinking about what committees may be assigned to you; you may be asked (as is common courtesy) for at least one committee where your expertise can shine.  Serving on the executive committee is rare for a new Board member but not impossible.  That is where urgent decisions are made such as when alleged executive malfeasance and other issues may be debated as the news and industry media are now shining a light on… you…and your next move.

At Insurex, we know that shareholders expect to see profitability and growth, and well-run Boards ensure that sufficient time is spent on achieving sufficient profitability.  Founder-led companies are superb at achieving increasing profitability and growth.  The key question for a Director is…how do I best help the company produce the kind of results that Founder-led companies produce?  For now, a giant first step, as elementary as it sounds, is simply accepting that a Director’s primary responsibility is to the shareholders.