I have met several executives and entrepreneurs over the years who, after finding out about my work to get more women in the corporate board talent pool and into board seats, ask me how they can land a board seat. I ask them why they want to be on a board. Many can’t really articulate their interest beyond believing board service is a natural end-point a successful career. Mostly I hear a lot of confessions. The average person is not entirely sure what happens in a board room. Let’s start there.
Board service is the highest form of leadership in for-profit and non-profit organizations. A corporate public or private (with external funding) board of directors or a non-profit board of trustees with fiduciary responsibility is put in place to provide governance on all enterprise-level policies. This includes strategic, directional matters such as investments, divestments, growth and other strategic, long-term goals. As the governing board, the directors are accountable for ensuring that the management team operates in the best interest of the entity’s key stakeholders groups. Stakeholder groups include, but are not limited to, stockholders and other investors, employees, customers, local members of the community, among others.
CEO Advisor and Boss
The board is ultimately responsible for selecting and coaching the CEO to ensure the longevity and continuity of the business while also maximizing shareholder value. Maximizing shareholder value means that stockholders make money back from their stock investments. In the USA, the board role of CEO advisor and boss may appear to be compromised; several CEOs serve as the chairman of their respective boards. For this reason, group-think and unfriendly coups are risks to oust a sitting CEO or to support him/her blindly. The board wants and needs the CEO to be successful. Should a CEO fail to achieve his/her metrics, the board is able to fire and replace the CEO in the interest of the stockholders.
The unethical acts by executives from Enron, Waste Management, WorldCom, and many others raised the public’s awareness of business ethics at the executive level. The impact resulted in government regulations across the globe to enact compliance requirements that hold board members and other corporate officers legally responsible the fiduciary and related ethical decisions.
In the US, the Sarbanes-Oxley (SOX) Act for financial reporting governance was enacted to provide legal guidelines that must be followed for financial reporting, auditing, and corporate executive judiciary responsibility in publicly-held companies. The board’s role is to establish the constructs for SOX. The legal compliance and organizational ethics and standards emerge in the policies, procedures, and strategies proposed by the board in the form of a corporate governance plan.
Non-profit and private-for-profit entities have and are continuing to apply best practices from SOX in an effort to ensure financial and auditing practices. Potential board members with existing board-level and/or corporate officer-level SOX accountability are considered more serious candidates to fulfill public board positions.
YOUR TURN: what is missing from this article? Do you serve on a board? Leave a comment about your board service below.