Rita Foley

Operating executives are responsible for delineating results and do so while focusing tactically on creating sales, controlling costs and maximizing customer service to drive financial performance within the context of the corporation’s strategy. They design the strategic plan for the corporation; implement controls to monitor risks and set limits for appropriate risk taking; and select the key managers, develop capabilities of the key managers and design the organization.

Corporate directors, on the other hand, provide oversight of the company’s progress. They ensure that the corporation’s strategy recommended by management is appropriate, that it is adequately funded and then approve it. They must fully understand the risks of the organization, both apparent and hidden, and ensure that succession plans for key executives are in place and that they are appropriate.

Directors provide oversight in two primary ways: through decision-making and leadership. While state corporate statutes do not define the specifics of the term “oversight,” the following tasks are generally included:

• Selecting the CEO, setting the goals for the CEO and other senior executives, evaluating and establishing their compensation and making changes as appropriate;
• Developing, approving and implementing succession plans for the CEO and top senior executives;
• Reviewing and overseeing the corporation’s risk management profile and programs;
• Understanding the corporation’s financial statements and monitoring the adequacy of financial and other internal controls as well as its disclosure controls and procedures; and
• Monitoring and approving major changes to the corporation’s performance: its operating, financial and other significant corporate plans, strategies and objectives.

The board is also the guardian of the corporation’s integrity. The board encourages senior management to establish the proper “tone at the top” by setting clear expectations for the corporation’s ethical behavior and conduct for its business in compliance with the law.

Precisely because board members are free from having to worry about execution, they should probe and think strategically. Directors’ focus should be long term. Board members can throw out what may seem to some people as a wild idea and to others a philosophical question. Those ideas and questions in the boardroom might just be what are needed to allow the company to make bold moves.

A board colleague recently related how on one of his other boards, the directors decided to hire a CEO with no experience in that given industry. They determined that hiring someone with a services background was exactly what they needed to transform this traditional equipment manufacturer. Management teams that are so focused on near-term results and meeting existing customers’ needs sometimes are the last to see disruptive technologies or innovation.

The work experience that a director brings to the board, linked with the core values of a director’s role—informed judgment, general oversight and dedication to the corporation’s best interests— serve the interest of the company and its shareholders tremendously. A director who exercises independent judgment and strategic probing for the overall benefit of the corporation serves a critical link to the betterment of businesses.

Rita Foley serves on the boards of PetSmart and Dresser-Rand and is co-author of the forthcoming book, Reboot Your Life.

As you rise up the corporate ladder, it can get lonely up top. You are working ten-hour days, and every minute of your time is consumed. Where are you getting your coaching, your space for strategic thinking or your external stimuli? Most of your companies put money aside for some form of yearly training for each employee. But, as you approach the higher echelons of your corporation or organization, you’re expected to be the pro and the one training others. And so you should. But some of the best training you can offer a high-potential executive so that he or she becomes an even better role model or trainer-and an even more effective leader-is the experience of being a corporate director.

As leaders of any company, you are expected to lead you business in innovation and new strategic directions. You also need to ensure that you are growing the breadth and depth of your organization and therefore have a good succession plan and do so while providing good financial results and ethical oversight. These are the very same mandates for a board director. My guess is that many of you have to present to your boards. You learn from being on the other side how board members think and how they look at strategic decisions and investments.

We all need external stimuli in our lives. By being exposed to the different issues of another company, you find that the underlying themes are often the same. You learn about best practices and how others handle similar opportunities or challenges.

You also lead from watching and participating in the conversations of a group of highly successful and effective heads of organization, who come with different experiences and perspectives. Boards usually include members from different industries, functions, geographies, and increasingly, different cultures.

On top of that, the simple act of taking a day out of your day-to-day frenetic schedule gives you time to think and reflect, which makes you a better leader. Board service also teaches you to stay at the strategic level and not to micromanage those who should be doing the work.

Board service may also present you with a nice transition for retirement. When you retire from your thirty-plus year career, your mind doesn’t retire. Serving on a board allows you to stay involved in the business world or current issues of interest. You’ve just spent years of building expertise in your given area. It’s nice to be able still to share all that knowledge, perspective and yes, war wounds on behalf of shareholders in helping a company grow successfully. The remuneration is not bad either, but that is not why you should choose to do board service.

Some enjoy board service so much that after retirement they create a portfolio career around serving on a couple of boards. You will find that these same people frequently serve on not-for-profit boards at the same time.

All of this assumes that you are qualified to serve on a board. In order of desirability, the pecking order usually goes as follows: sitting CEO, recently retired CEO, CFO, president of a company, president or SVP of a large division (global is better), then a SVP or head of a desired function, such as marketing. Depending on the board’s needs, you will also see smaller numbers of members from the professional ranks of law, academia, or government (in the ladder, retired of course) and others.

Can board service be a good career enhancer? Absolutely. Serving on a board broadens your perspective and your experience. It exposes you to best practices all of which you can take back to your day job. It helps to season you as a leader. Along the way, you meet really interesting people and are exposed to challenging problems and exciting opportunities. It is not for the faint of heart. But it is for those who want to make a valuable contribution to growing our businesses and society. It can be ever so rewarding.

Rita Foley leads the Director Service Practice for Crenshaw Associates.