Serving on a public board can be both a challenging and rewarding experience for self-employed individuals. The roles and expectations of board members have changed dramatically in recent years. Now more than ever, companies are seeking board members who reflect the same cultural diversity as their shareholders. To help you succeed in your new position, here are 6 tips for first-time board members:
1. Do your homework. Prior to your first board meeting, take some time to learn everything you can about the company. In addition to reviewing standard documents such as the company’s annual report and proxy statement, be sure to browse the company website and do an internet search on the company name. In many cases, the company may send first-time board members a packet containing basic company information, orientation documents, bylaws, the company mission statement and its articles of incorporation. If these documents are not provided, be sure to ask for them.
Before the first meeting, board members will receive a confidential board package containing a meeting agenda, meeting notes from past board and committee meetings, financial information and other pertinent documents. Make sure to study these documents carefully and make notes as needed.
2. Demonstrate your knowledge. Take advantage of any opportunity you have to meet directors and other executives. These meet-and-greets give you a chance to personally quaint yourself with your new colleagues. This is also an excellent opportunity for you to be inquisitive. Ask your colleagues questions that showcase your unique knowledge while simultaneously expressing interest in them and the role they play in the organization. Take some time to discuss with the executives any strategic matters that they work with on a regular basis. This may include financial, operational, marketing, sales, economic or even regulatory issues. You will want to be knowledgeable about these company matters before your first board meeting.
When you have an opportunity to meet with the company CEO, make sure you ask them about the strategic challenges and opportunities the company has experienced. Express interest in meeting the Chief Financial Officer (CFO) or the Chief Accounting Officer (CAO). When meeting with them, try to become familiar with key accounting concepts and policies, especially those that are unique to the company and may differ from other businesses in the industry.
3. Scope out the competition. The best way to measure how well the company stands against its competition is to discreetly ask around. When possible, survey clients or customers you may come in contact with about how they feel about the company. Speak with a member of the Nominating and Governance Committee about whether or not you should meet with any other executives or directors prior to your first meeting.
If you are not already familiar with them, check out your fellow board colleagues. This can easily be done online by reviewing the most recent proxy statement issued by the company. Other places to check include annual reports and company websites where each colleague works. Try to identify their background and area of expertise. Figure out which members are recent additions to the board and which have been around for a while. Check to see if any of them serve on boards for other companies. For those that have LinkedIn profiles, take a look at their connections. All of this information can help you develop a clear understanding of who you are working with.
4. Buy into the company. Even if board policies do not require you to buy stock, doing so is still a good idea. Make sure you research company policies and SEC regulations on board member stock purchases. Once you become a shareholder and have a personal stake in the company, it becomes easier to think like a shareholder. You become personally invested in contributing to decisions that will drive the company to even higher heights of success.
5. Identify why you were recruited. Board members are expected to have more industry knowledge and experience than ever before. For example, Coca Cola’s board of directors comprised individuals like Bobby Kotick who have a proven record of success. The best way to identify what the company expects from you is to figure out why they recruited you. Do you have expertise in any particular area? What specialized experience or knowledge do you have that sets you apart from your colleagues? Once you have identified which qualities make you unique, take a moment to consider how your expertise relates to the other board members. This will help you develop a clear idea of what your role will be.
6. Know the tax laws. Taxes are an inevitable part any type of employment. For the self-employed, it is especially important to stay abreast of tax laws that may affect you. For example, according to Internal Revenue Service (IRS) regulations on self-employment income, “fees and other payments you receive for performing services as a director of a corporation are considered self-employment income. It does not matter whether the fees are for going to directors’ meetings or for serving on committees.” These tax regulations can be especially important for self-employed individuals serving on a board of directors.
Joining a board of directors can seem intimidating at first, but it does not have to be. Follow these 6 simple tips and you will be well on your way to success.
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