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Five questions to ask about your next board role

Deciding whether to take on a new board role can be a complex process involving due diligence, commercial sensitivity and canny detective work. But there are ways to make the process more effective, in order to gain the clearest picture possible, according to Elizabeth Jameson, FAICD, Managing Director of national governance consultancy Board Matters and author of Developing Your Director Career.

“If you had five questions to ask, they should all be about qualitative considerations - namely the quality of the chair and the quality of the board as a whole,” says Jameson. “You want to know the extent to which the chair may lead in a way that encourages people to speak up and to challenge and not just be passive and compliant. The last thing you want to do is join a board where groupthink is the preferred norm.”

A checklist

For directors seeking a checklist of what information to gather when seeking a new role, here are five questions to ask.

  1. Are the CEO and the management team willing to be challenged by the board and what are their skills and competencies?
  2. What sort of language do company leaders use? Does it relate to self-interest or to the wider interests of shareholders and other stakeholders?
  3. What is the risk appetite of the board?
  4. To what extent does the board have real decision-making authority?
  5. What is the future expansion growth strategy and is disruption taken into account?

Of course, the questions to ask will differ markedly according to whether the board is that of a listed company, or a startup board or a public sector entity board, says Jameson.

Consult current board members

It is wise to consult as many current board members as possible about the state of the board and the organisation as a whole, Jameson recommends. Past serving board members who have left recently can be another source of information. But there are other insiders who can provide useful intelligence.

“Most aspiring board members are aware they should talk to the CEO and the CFO and different members of the management team when conducting due diligence. But my personal favourite is the company secretary,” says Jameson. “That’s because the company secretary straddles two worlds. To me they are the conscience of the board when the board is not there.

“They know all the moving parts – and where all the bodies are buried.”

Directors seeking new opportunities are advised to gather two types of information - both quantitative and qualitative. Quantitative data can relate to obvious questions how the business is tracking financially, whether there are any legal compliance issues and what risk management framework is in place. However more subtle information has equal value. “I am big fan of qualitative due diligence being more important than the quantitative,” says Jameson.

Different sector boards

“In the public sector, a lot of agencies are really good businesses and the boards offer really good experience for directors. But your main question will be to what extent does the board have real decision-making authority and to what extent does the authority rest with the minister or relevant department?” says Jameson.

It is always important to find out about future expansion strategy and risk appetite. For instance in a startup board, you need to be seriously prepared to lose the shirt off your back. “You need to decide if you are a match for that risk appetite and can contribute or whether that is at a level that will not sit well with your own risk appetite,” says Jameson.

“Sometimes you may find the risk appetite of a company or board is much higher than your own or vice versa,” she adds. “If you get a real buzz out of being part of an early stage growth company with lots of risk, then fine but you do run the risk of the whole thing falling in a heap. But if you are more cautious and conservative and that does not sit well with your risk appetite, then that is not the boardroom for you.”

Disruption is another area that can put boards under pressure. “When you do due diligence about a company’s strategy in this day and age, you need to ask what are the threats and how is the board and management team proposing to deal with threats including even the need to disrupt itself. That should certainly come up when you do your strategy due diligence.”

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