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Independent board members are one of the most valuable resources for a private company. They are its conscience.
An organization that views its board as an instrument of accountability, growth and strategy realizes the value. Independent board members’ wealth of knowledge and experiences enhance a company’s capabilities and bring a range of new ideas to strengthen or transform the business while minimizing risk.
What qualifications, experiences and expectations should be considered when selecting an independent board of directors?
A checklist for the best candidates
- Independence and diversity of thought are critical — someone with no past or current relationship to the business, senior leadership or ownership.
- Superior candidates must be willing to professionally share contrasting business outlooks in a non-confrontational and respectful manner.
- Collegiality, character and a complementary fit to incumbent members are important.
- Integrity and the ability to earn trust and respect are critical. Go deep and broad to validate character and credentials.
- They must exhibit a direct, professional, concise and focused communication style. Demonstrated high emotional intelligence (EQ), knowing when to get involved, challenge or influence.
- An ability to correctly assess C-suite talent with limited interaction.
- In-depth leadership experience in two of four functional areas:
- Sales and marketing, including the state of evolving digital tools.
- Operations – experience in modern manufacturing and management tools, lean, Six Sigma and artificial intelligence and robotics.
- Technology and analytics – data-driven and innovation excellence.
- Financial – the ability to quickly digest and understand financial statements.
- Ten or more years of Profit & Loss accountability with an understanding of the relationships between the balance sheet and income statement.
- Curiosity, passion to serve and ability to learn quickly are critical.
- Proven conflict resolution, crisis management and ethical judgement skills.
9 things to offer prospective candidates
What information and expectations should you provide during the selection process?
- Annual time commitments can range from 50 to 100 hours, depending on travel, meetings and committee work along with strategic and competition reviews. Many businesses now restrict their C-suite executives to one external board position. Retired senior leaders are tending to limit service to two boards.
- It takes six to 12 months to educate a new director with a comprehensive onboarding process.
- The duration of service on the board is up to five years, and it can be renewed if the owner wishes. Either party can terminate service at any time. Mandatory retirement age is increasing.
- Directors are expected to serve on board committees and, if inexperienced, the committee chair will provide appropriate mentorship.
- Confidentiality is important, but independent directors have the responsibility and authority to investigate concerns of potential inappropriate behavior, the accuracy of information and any unusual business activities.
- Candidates cannot be bound by any past restrictive covenants. New directors must execute confidentiality and nondisclosure agreements.
- New directors will expect appropriate liability indemnification.
- New directors will declare that they have neither observed nor experienced any conflicts of interest.
- The best independent advice and counsel is not free. Compensation has been growing at 15% annually for the past five years.
The best independent directors can be a significant asset and offer value through their skills, expertise, network and mitigation of risk. They will also ensure superior success and lend credibility to a company.
What or who is the conscience of your company?