Beyond The Welcome Mat: 5 Key Categories For Onboarding New Board Members

How do you set up a new director for success? “Onboarding” is the buzzword that refers to the process of integrating a new board member into the boardroom.

This is definitely a hot topic in governance circles these days. It was certainly an area of robust discussion at the recent Next Gen Board Leaders meeting held at the offices of Wilson Sonsini Goodrich and Rosati in Palo Alto, Calif., on April 5. This same group put out some excellent guidance that’s worth reading.

In the past, I’ve written about questions to ask before joining a board —but the concept of onboarding goes beyond this.

There are some boards that do a great job of onboarding new directors, usually by running a program that is developed and run by the general counsel with guidance from the chair of the board and the chair of the nominating and governance committee.

However, in informal polls I’ve seen at conferences, it seems that formal onboarding programs at public companies are not common. This may not be surprising given that companies typically add new board members fairly infrequently. As a consequence, creating a formal onboarding program may feel like an unnecessary burden.

This doesn’t mean that onboarding is unimportant. If a company doesn’t have an onboarding program, a new board member would do well to be proactive about getting the orientation he or she needs in order to find his or her voice in the boardroom faster.

All boards are different, and it’s everyone’s job to figure out how to help a new board member contribute at the level expected. Whether it’s the board creating an onboarding process or an individual creating his or her own new board member orientation, thinking about new board member orientation in terms of the five categories I outline below may be helpful.

1. Corporate Governance

In some ways, public company corporate governance is the easiest place for a new director to get up to speed. This is the least customized part of board member onboarding, so there are a lot of places to get this information.

Stanford Directors’ College is a great example of a robust, multi-day offering that focuses on governance and is good for both new and experienced directors (full disclosure: I’m on the advisory board of the Stanford Rock Center for Corporate Governance, the organization that runs Directors’ College).

Remember: corporate governance is not a “one and done” thing. Rather, it changes over time, so board members will want to stay current.

You can check out Woodruff Sawyer’s “2017-2018 Board Education Resource Guide ” for more suggestions for board conferences that provide insight on corporate governance issues.

2. The Industry

How can a new board member get acquainted with the industry of the company they are joining?

It’s true that some board members are brought in specifically for their expertise in an industry, such as a newly retired executive from the company’s industry or a closely adjacent industry.

For these folks, it’s important to continue to maintain their knowledge of the industry. Nobody enjoys hearing from the board member that talks about how things “used to be” five or more years ago.

Many times, however, board members join a company that’s in a new industry to them. Here are some ways new board members can get (and stay) up to speed:

• Read the company’s public filings and scrutinize their press releases and publications.
• Stay current on the public filings and publications of competitors in the industry.
• Review analyst reports on the company and its competitors.
• Ensure that management is providing a synopsis of what’s happening in the industry at least on an annual basis (sometimes known as a “competitor update”).

3. The Company

This category of orientation is about looking at the interior of the company (what you can’t see from the outside). For many, the start of this orientation happens before joining the board, when the board member candidate interviews with the CEO, other senior executives and many (if not all) existing board members.

A successful candidate will consider these interviews to be a two-way Q&A session in order to understand both the operations and the culture of the company.

For example, the opportunity should not be wasted to find out directly from a CFO or GC what the company’s strategic initiatives and major challenges are.

Some companies go so far as to have new directors actually work like a line-employee for a day or two, for example, putting on a uniform and serving customers at one of a public company’s stores or restaurants.

4. The Culture of the Board

New board members should make it a priority to attend board dinners, company retreats, and other social events.

Setting up face time—for example, getting a drink at the hotel the night before a series of board meetings—can give a newcomer an opportunity to get to know more about big issues, the dynamics of the company and the relationship between management and the board.

The idea of a mentorship for new board members is picking up steam as well—and not just for first-time directors. Every company and board has its own unique culture. A skilled mentor can go a long way to help a new board member integrate into the board more quickly.

At some companies, new board members will be assigned a tenured board member to be their mentor. But there’s also informal mentorship. New board members can reach out to tenured board members and get early feedback into how they’re integrating into the board.

I discussed this topic further in a recent post on board education training and compliance.

5. Personal Housekeeping

This category relates to the questions that board candidates need to consider as they become a new member (and tends to be more significant for those who are joining a board for the first time).

First-time board members may not know to ask about—but still need an answer to questions like:

• What is the personal tax impact of being paid in stock that you will not be in a position to sell for some time?
• Will joining a board negatively impact cash flow because of the tax hit?
• When is it appropriate to sell shares?
• How do 10b5-1 trading plans work?
• How do I protect myself from personal liability?
• Should I get indemnification agreements?
• How does D&O insurance work?

Sometimes new board members hesitate to ask these types of questions because they might feel that the questions are somewhat self-interested, and even at odds with the greater purpose of exercising fiduciary duties on behalf of shareholders. However, if these questions remain unanswered, they will tug at the mind of new directors—and in some cases can lead to falling into traps for the unwary.