How would I go about becoming a member of a board of directors of a company?

July 18, 2006 8:18 PM

How would I go about becoming a member of a board of directors of a company?
posted by Izzmeister to Work & Money (9 answers total)

a) Own a large hunk of stock in the company.
b) be a board member (or trustee for non-profits) of one or more similar sized entities.
c) For non profits, give them a lot of money.
posted by MonkeySaltedNuts at 8:24 PM on July 18, 2006 [1 favorite]

Response by poster: I know about Boardroom Bound.

I am looking to expand my horizons and would like to become a member fo a board of directors, Ideally of a Bank.

would buying 5% of the banks stock be the easiest way there :) ?
posted by Izzmeister at 8:27 PM on July 18, 2006

Response by poster: I am able to buy a 5% stake in a small local bank - if that will get me a board seat...
posted by Izzmeister at 8:28 PM on July 18, 2006

It may...my advice: call the bank, ask what is required to be a board member. They will likely tell you what % of shares must be held to hold a board position. It depends on how the company is held (i.e., privately held with stock offered to select people, or publicly traded on an exchange).
posted by criticman at 8:31 PM on July 18, 2006

Typically you are invited to be on a board of a privately held company. If it is a publicly traded company then I would go ahead and read their incorporation papers or whatever is apropriate to find out their procedures for nominating and appointing board members.
posted by fshgrl at 8:41 PM on July 18, 2006

oops, I meant b) above to be:

b) be a board member (or trustee for non-profits) or high officer of one or more similar sized entities.

keeping in mind that things are somewhat relative - if you are in the top 30 officers of a mega corporation then that might help in becoming a board member of a company of a company 1/50^th of the size of mega-corp - that is if they think your job gives you skillzs that would make you good in oversight.

And I forgot

d) be an important (ex)politician/lobbyist with a lot of contacts

Gerald Ford might not have been much of a President, but after his retirement he was a board/trustee of a zillion companies - from defence to hotel-porn.
posted by MonkeySaltedNuts at 8:59 PM on July 18, 2006

What do you have to offer the board? As fshgrl said, these opportunities are by invitation, and that applies for most publicly traded companies too, they just formalize it with a rubber stamp election process. Typical candidates come from other boards, or executives from other industries. For a bank, community leaders are often chosen. If you are a community leader and large shareholder who knows? You have to get to know the current board members though, as typically they run the selection/nomination process. As a shareholder you can nominate yourself, or have another shareholder do it, but with only a small stake you can't ensure a successful election. Thus you need to win the board's confidence so that they recommend you. You will then win the rubber stamp election.
posted by caddis at 11:07 PM on July 18, 2006

Caddis has it - most board positions in for-profit companies are an exchange for one of three things - money, operational expertise, or fundraising (i.e., investment) contacts. So the main question is which of these do you have to offer?

If you're interested in gaining experience with board functions so that you have some familiarity with how it works, I would start with nonprofits, whose procedures can be a little simpler, though they would still strongly prefer someone who can a) put them in touch with money or b) give them expertise in an area they might not be able to pay staff to cover.

I've done it (twice, actually) and it's a hell of a learning experience. And strange as it may sound, having been VP of the board of a dinky nonprofit had absolutely helped me succeed in my dealings with the CEOs of the two venture-backed companies I have worked for and the VP level of traded multinationals.
posted by mikel at 3:52 AM on July 19, 2006

Best answer: Since passage of the Sarbanes-Oxley Act of 2002, which significantly increased the duties and responsibilities of board members of public corporations, and limited their shelter from criminal and civil actions, the bar has been generally raised for board membership, in favor of people with significant financial and operating knowledge of business. Being a board member now entails more work and responsibility by far than it used to, and carries greater personal liability; generally, fewer people are serving as directors of multiple companies, and I think the trend will be greater turnover (shorter average terms) for outside directors, in this post-Sarbanes-Oxley era.

As for the idea of buying a seat on the board of a small regional bank, I'd say that such a move would only make sense if the investment required were one you would be willing to make, irrespective of any opportunity of becoming a board member. Small regional banks have been pretty good investments through most of the last 15 years of historically low interest rates and low inflation, but whether any particular investment in that sector will be a winner depends heavily on local factors in the bank's primary market area. Your success in serving on such a board is likely to depend far more on your expertise and compatibility with other board members, than on the fact you have a minority share interest. And depending on your state if it is a state chartered institution, a board member who is also a stockholder of a bank may be subject to significant personal reporting and regulatory requirements, designed primarily to prevent minority shareholders from swinging the operational policies of the bank unduly.

I agree that it would be useful to begin building experience as a board member in the non-profit area. It is easier to become a board member of a non-profit, and the governance issues are generally not as onerous. In the private sector, you might also consider approaching venture capitalist firms in your area, who often deal with small firms looking to deepen their management structure and board affiliations in order to improve their appearance to venture capitalists. Also, many private firms who do not have the full boards of publicly traded companies, still put together advisory boards to broaden the base of experience available to the owners of the business. Such advisory boards are often put together as part of transition or succession planning activities, where a new owner or investment group feels it will need additional help and advice in developing strategies for the business, and serving on such advisory boards can give you experience in dealing with strategic issues facing management, without exposing you to all of the responsibilities of being a board member of a public company, or other regulated business.
posted by paulsc at 5:07 AM on July 19, 2006