For companies to become drivers of change, they need to have the right leaders in the right roles within the right structures. Tackling the importance of finding the very people at the top in the boardroom is Paul Smith, Founder and CEO of Future Directors Institute. In this episode, Dr. Diane Hamilton talks to him about addressing the big macro challenge of transforming the boardroom as increasing demand for a new type of company governance is becoming more felt by the day. Paul brings his recently launched book, Right Seat, Right Table, and shares with us a peek into how outsiders can get a seat in the contemporary boardroom. Find out more about what Paul has to say about changing boardrooms into a more diverse environment with future directors who are empowering.
I’m so glad you joined us because we have Paul Smith here. He is the CEO of Future Directors Institute. He does all kinds of work with the board of directors. He’s got a book out. It’s going to be an interesting show.
Listen to the podcast here:
Transforming Boardrooms: The Right Leaders In The Right Roles With Paul Smith
I am here with Paul Smith. He is the Founder and CEO of Future Directors Institute. He likes to do things a little differently and has unquestionably on the mission to help others fulfill their potential for positive change. He’s a corporate executive turned social entrepreneur and non-executive director. I’m interested in what Paul is working on. He’s in Australia and New Zealand, the USA and Asia. He’s all over the place, but right now I think you’re Down Under. Paul, where are you now?
I’m in Melbourne.
It’s nice of you to be here.
Thank you for having me.
This is very interesting to me because I’ve talked to a lot of people. I do a lot of board of advisor work and I know a lot of people who do a lot of board of directors’ work. They had laws change here in the United States, in California where they want a certain number of women on board of directors. I’m interested in all these different board and director type of things that are available for people. I’ve got a lot of questions. I wanted to get a background on you and how you got interested in all this.
There are several streams that brought me to establishing Future Directors. One was my personal journey in and around the boardroom. My first exposure in the boardroom was in my mid-twenties. I was working in London for an investment bank and they were going through a rebranding exercise. I was working for the branding team and we had a lot of concepts we’re bringing up to the boards. We’re working with the board and the board was all that traditional board of directors, older, very much white and extremely male and all financial people. There was a lot of shaking of heads and not understanding what we were trying to bring there. I didn’t know at the time what it meant. I remember that very clearly in my mind. I joined the board, my first board. I’ve been a board director for almost a decade and I was the youngest one by distance twenty years. Despite all the credentials of the people on this board, they were quite directionless. Even though I hadn’t had any formal governance training, I thought what was coming since that we have policies, the strategy, training and all those things.
It led me to be named as chair of that board within nine months and that accelerated things. I was working in an investment world again and working with listed companies or publicly-traded companies and seeing the disconnect, not between them but also the company I was working for. We were a listed company and our own board, the disconnect between our customer base, our consumer base, our employees and who was on the board. What it led me to believe is that in order for boards, companies, organizations to become the drivers of change, as governments increasingly become stymied by polarized ideology and vested interests. It’s obviously rife in the UK, the US and Australia. New Zealand, there are not so many different places. It is handed over to companies and other organizations. We’ve seen from the CEO round table that a lot of big corporates are starting to take a stance on social issues and environmental issues.A future director is someone who is empowered and but also empowering others and shaping the future from the boardroom. Click To Tweet
In order to do that, they need the right leaders in the right roles, within the right structures at the very top. For us, that’s the boardroom. That was pretty much why we started teaching directors to address that big macro challenge. We started out like, “I was young when I started. There are plenty of other awesome young people out there. How can we help them?” It morphed from not next-generation younger people but into outsiders, people from very different backgrounds, different cultures, very contemporary skillset beyond the norm. That’s been the evolution.
You’ve touched on a lot of interesting subjects. I was grateful that you sent me Right Seat, Right Table: An Outsider’s Guide to Securing the Ideal Board Role because you’re talking about these outsiders of what they traditionally thought they didn’t want. There were a lot of old white guys at the table who all had financial strengths and different things, but it wasn’t diverse enough in some respects. I have seen so many directors that have been more like culture experts and different things that you never used to see in the past. What strengths do they like to see on the boards now instead of strictly financial knowledge?
We were running a program and that conversation came up and it’s the evolution of the board. Boards used to be very much risky and compliance-focused. Now, they’re becoming increasingly strategically-focused. As the stakeholder widens out, the priority of stakeholders widens to include customers, clients and employees. What you’re finding is a drive and a need for people with customer and employee experience. You mentioned culture, but also marketing, communications, technology and data. Technology is an enabler, as well as a product. You’re getting all the modern contemporary skills. Interestingly, this is what’s driving the acceleration of the outsider to a degree because this is a recognition from many boards. That’s the skillset they need.
The skillset doesn’t fit within the traditional board director. You’ve got all these other visual labels, gender, race, culture or whatever it happens to be. Interestingly, the feedback from most boards, it is the skills and the thinking they want. That’s why that next-generation stuff is driving hard right now. Again, what you’re looking for in the boardroom is cognitive diversity. You want people to view the world differently, will ask different questions and look at things from a different angle. That’s only going to come from having a diverse boardroom.
A lot of the skills you mentioned are what I excel in like marketing and technology, culture and different things like that. People like me often aren’t the EBITDA spreadsheet readers. Do you want everybody to know everything about everything or do you want the marketing people to stick strictly with marketing? The EBITDA people stick strictly to that or should we all know about everything to some extent?
That’s an interesting bit as well. We’re coming from a space of having a specialist generalist, someone specialized in knowing a lot, although apart from maybe the numbers and the legal people, that’s why you have a lot of ex or current CEOs in the boardroom, which are across many things. Even though they may have come up through one particular discipline. What you’re moving towards now is generally specialists whereby they have a particular skillset like you have, but they have to be across everything else. It’s the role of the director where you do have to have at least some general knowledge across, strategy with financials. We’re not going to evolve.
That’s the thing. In your role, you’re talking about marketing communications and technology, you will have the strategic skills and the risk skills in terms of risk identification and seeing the roadmap ahead because you would know the strategy. You have to think about what are the potential road bumps we’re going to come up again, the occupational risks. The financial stuff in terms of being able to read, balance statements and profit loss. You can do training on that and learn and evolve that. We’ve worked with people who have come from the more human side, you could say the social sciences, that have learned the numbers side so you can get comfortable.
Not every board director is involved in every single conversation, but you do have to get comfortable with that stuff especially as you further up in terms of the complexity opposite of big corporates as well. It’s the same in a nonprofit. You still need to be there because one of the biggest things you can’t do as a board director allows the organization or the company to try those and solve it. If you don’t know what that means, you’re a little bit in trouble. We’re talking about a basic level here, which people of a certain type who have the capacity, the aptitude to be a board director, can learn that skill enough whereby they can contribute with that level, but knowing that the real strengths are going to be in other areas. Those things are the more important things because we have AI coming in and other things like that. The compliance in the numbers side of things is going to fall away as the main responsibility of the board, which is why you’ve seen this evolution towards more strategic concerns rather than compliance concerns.
There are many things that boards can do. There is so much to be learned. You mentioned you can teach some of these things to people. Is your book meant for that or do you suggest board members attend special training? Where did they learn to get more well-rounded in all the areas where they’re not strong?
Especially with training, the book is designed to essentially help people decide whether the outsider be empowered to say, “I can belong in the boardroom.” It’s as opposed to telling, “I always thought that the boardroom was for this type of person, but thanks to the book, I now know it’s for me as well potentially.” It allows you to build that roadmap. It’s basically a practical how-to guide of going out and securing that first board role or if you dropped into one by accident almost. It tells you how to go out and do it intentionally. It also talks about from a human skills perspective, what things and who do you need to be in order to be influential?
That’s the definition of a future director in our way is someone who is empowered but also empowering others, influencing and shaping the future from the boardroom. That’s the ultimate destination. In terms of those, it does recommend that you go out and get governance training. That’s fundamentally one of the biggest problems we have in the board world is that most board directors around the world are untrained, especially in modern governance. Most people think boardroom, they think listed company, big companies, the S&P 500 and all the different stock exchanges.
However, that’s a microcosm in the board world, every nonprofit in the world, there are millions upon millions, probably 50 million, 200 million board directors in the world. Most of them are voluntary. Most of them will only ever have one or two board roles in their entire lifetime and yet they’re making decisions or decision making, which is influencing dollars, people and livelihoods. Yet they don’t get the training. It’s not their fault often. It’s their inaccessibility of training. There are lots of things out there. You don’t have to go and do expensive governance training because most courses are tens of thousands of dollars and it’s all through the corporate director. You can go and do an online course to up your financial knowledge.
Do you have one that you recommend that people who are reading might like?
It’s different for different jurisdictions. If you are a complete novice when it comes to numbers, I recommend the Khan Academy. I don’t know if you’ve heard of the Khan Academy. It’s a fantastic backstory in terms of this guy on the East Coast or West Coast, who had a relative on the other and who was in school and wasn’t very good at math. He did a little video for her. It’s developed into this massive platform of free online video tutorials. If you are an absolute novice when it comes to numbers, it’s a starting point, but then there are lots more. LinkedIn Learning, Coursera and Udemy, all those places have got these courses which you can go and do. I’m about to start a machine learning course purely from a board perspective. You think about where the world is going into the technology, as a board, you need to be across that to the side of things. As a board director, it’s not about a lifetime of learning and needs. You’ve got to bring in these new skills, not because you’re going to become an expert in it. It’s so you can check and test questions that are coming to you from management.
Don’t companies ever pay for you to go through that? Some of these companies pay quite a bit to have board members in terms of stock and payments. Is that part of the deal, if you start with someone, they pay for your governance training?
If you’re in a paid board role, definitely, yes. You can probably expect some training. It probably will happen at a group level. If you want individual training, a lot of the people who will be going at the corporate level will probably have an element of training already or at least experience in these things. As we see this younger next generation outside that is coming in, who aren’t coming from say the C-Suite, yes, training would become an even stronger part of it. The problem comes in the voluntary space when you’ve got nonprofits or nonprofits that don’t have a budget. It’s trying to find. At the moment, there’s a big gap in terms of accessible governance training, which is accessible in terms of geographically accessible but also accessible in terms of price. It’s something that Future Directors are working on at a global level to bring that to a much wider audience.
I know a lot of people have suggested if you’re interested in getting board experience to start with nonprofits, is that necessary to start at a nonprofit? How often are people picked up from a big company to be on board unless they’ve had that type of experience?
You will hear a lot that cut your teeth in a nonprofit and you work your way up. I don’t particularly believe in that proposition. However, it’s normal for several reasons. One nonprofit board, because they’re voluntary, tends to be less risk-averse when it comes to new people, untested people. Even though it’s just a mindset, it’s a numbers game, but there is way more nonprofits than there are corporate or paid board roles. I tend to classify them as voluntary versus paid roles. It’s easily 20 to 1, if not more, if you count all the other community and school type of things as well.
Generally, a lot of people starting out have day jobs and a lot of nonprofits operate, especially at a governance level outside of office hours, evenings and weekends. It’s the availability of people especially if there’s a bit more junior in that role. That’s where you see a lot of corporate boards have got professional board directors where their full-time job is sitting on a number of job boards. There are some logistical reasons. There are some risk reasons as well as some pure numbers of reasons why the nonprofit world or voluntary board roles would be the natural easier first step for people.One attribute that makes a good chair is being inclusive, trying to get all the views on the table to drive things forward. Click To Tweet
Did you say that the board positions require you to work nights and weekends more? I want to make sure I understood that.
Yes, a lot of nonprofits will operate because obviously, they understand that it’s voluntary. People necessarily are living. They’d have to have meetings outside of work hours. That’s not a car blank statement, but it’s normal especially the smaller end, which is the bulk of those volunteer roles are smaller. There’s only many percentage-wise from a numbers game of charities and organizations like that are large enough that they pay their board directors but also operate during work hours. They may have a blend of that. If you’re someone reading this and thinking, “I’ve got a day job or run my own business,” you have to see how you can balance that with a board role. It’s increasing the employers that are encouraging their people to get board roles because you learn new skills. You’re developing networks. You’re also taking on a lot of responsibility. It’s also your employer’s brand in the marketplace especially if you are in that nonprofit space.
We’re talking about nonprofits versus regular companies. If you’re looking at trying to do this as making a living, what pay are you looking at as a paid board member? I know it’s different based on the location and size of the company, but a lot of people don’t realize that sometimes you get paid in stock and sometimes you get paid cash. How does it work?
It’s like I’m talking about median house prices, the middle point and there’s a huge variation across things. We could talk about startups and scale up especially private-held companies or even the listed companies. You’re probably going to get a blend of stock and a director fee. I don’t have the data for the US, but I suspect it’s not too dissimilar to Australia and New Zealand. You’re talking in the mid to high five figures. The top end of the spectrum, we’re talking about top 100 companies, private or listed companies, if you’re the chair of one of those boards, you could be earning tens of millions of dollars.
Here’s a full spectrum. Let’s say you’re an advisory board member so you don’t have the legal responsibility. Advisory board members used to come in with particular technical skills. It’s a great place to stay if you are already employed or have your own business, you’re an entrepreneur, you have a particular technical skill. Advisory boards are a great place for you. You don’t have the same onerous governance requirements or the legal requirements, but you are involved in inputting, in decision-making and it’s playing on your technical skill. You can be paid very healthy to be on an advisory board. You’re talking from several thousand dollars per meeting up to hundreds of thousands of dollars depending on the type of organization.
That’s tough to find the advisory board positions that pay super well. I found a lot of companies will give you stock options and different things. It varies. What’s interesting you mentioned not having the fiduciary responsibility in the board of advisors versus directors. When you join a board, they should hope to offer the insurance for you to be covered. You still have to think about that. I remember going to a meeting in Texas not too long ago when I was speaking for a women’s group and they had the women up on stage. I had asked one of them about how often she was sued because she talked about women on boards and all that. She mentioned that all it takes is one person to have one share of stock and they can sue you. They get sued quite often, but you have this insurance like a doctor has insurance if something happens. It’s supposed to cover you. Do you ever hear of any situations where people are not covered and they lose personally because their coverage doesn’t cover what they thought it did?
No one in my community because we basically tell them in due diligence to make sure you get copies of all the direct liability insurance. If they don’t have it, you either insist they get it. It’s not that expensive depending on the organization or you avoid that board like that type. There are instances but again, at a corporate level, the board not only has insurance but individual directors can seek their own insurance depending on the liability, the coverage within the corporate board and the overall coverage for its members. I would always say, whatever you are doing, doing your due diligence before joining a board, making sure what are the risks to you personally as opposed to the risks of the organization, the company and the board generally. Most of the risks are reputational-based.
If you do something illegal, jails in there and obviously in between, in terms of getting sued as an organization, getting sued personally, potentially that side of things. Insurance is critical as is your own independent legal advice. One of the biggest mistakes that board directors can do and it’s come out in Australia. We’ve had investigations from the government into misconduct in the banking sector. One of the things they need was the board took legal advice from the in-house counsel, which was a big mistake because you always need to go external, whether you’re on board. I’m not saying if you’re 30 something and you’re joining a nonprofit board that you should suddenly go and talk to your lawyers and spending dollars and dollars. It’s about being sensible. This is more about when you’re getting into the higher echelons, although it’s good to have in mind.
I did talk to my lawyer about a couple of different things and he was saying to avoid banking and healthcare in general because of all the lawsuits. Do you agree with that?
Yes and no but that’s a lawyer’s mindset. I get that. It’s being careful. The work that we do, it’s about not being negligent. There’s a fine line between negligence through ignorance and negligence on purpose. This is the interesting thing about the board world and the fact that it’s been a relatively closed world for such a long time and it’s opening up. What we hear is all the scare stories and yet they are minute by comparison. This is the other thing I want to get across to people is that we often think that people in the boardroom must know everything that’s going on. They must be at the top of their game. It’s all captains of interest in the industry, etc.
One thing you realize as you investigate the board world more and more, because they’ve got great labels doesn’t mean they know what’s going on most of the time. They have just as many blind spots as other people. They have potentially greater experience and better connections. You can’t assume that everybody knows what’s going on all the time. That comes across in why we have so many scandals and prompts them to the top end. Often the other thing is taking on too many board roles because they’re professional and they want to have out their lifestyle. They take on ten board roles.
Are you saying the board of advisors in addition to the board of directors or just board of directors?
It depends. Each board is different. I’m thinking of the governance board and board of directors. If you’re a professional board director doing nothing else, maybe you’ve got something else going on, but that’s your job. In this day and age, 5 or 6 is probably the most. If they’re large-listed companies, probably only 2 or 3 because they’re like part-time jobs. A small nonprofit could be the equivalent of a day in a month in terms of time, but it’s like everything else. There’s a spread between these things.
How much time would you expect for a big company to spend as a board member?
If you are a normal board member, I’d say at least a day and a half, two days a week equivalent, these board meetings or any one part of it. You’ve got preparation, reading papers, relationship-building with your fellow board of directors and also key stakeholders. There are ambassadorial type of things that you might be doing, site visits and a whole bunch of different things and subcommittees that you might sit on as well. If you were to say a chair of a large company, you could be easily doing hockey a week on that one role. You’re talking about 1 or 2 days a week, probably at that level, down to maybe 10 to 20 hours within the smaller end school or a nonprofit or potentially a startup.
Before we get off with what happens with the legal ramifications, I’m curious about what happens to the people like on the Enron boards or that are on those boards when these go under. I never followed up to see because you have like the top of the cream of the crop sometimes that you think are on this board. It looked good and they all bleed. You could take a poke of blood out of your finger. What happens to those boards?
Assuming they’re not in jail, most of it comes down to reputation and their reputation being damaged but you don’t hear it. They move on. We’ve had similar stuff and you see it everywhere and board directors are like Teflon. Nothing sticks to them that long and if they have to end up in jail, therefore, they can’t act as a board director once they come out. That’s extremely rare and cheesy in the private sector.
How often have you seen that people going to jail?
It’s not that much. It’s usually the illegalities. It’s usually the founders of the owners of the business who also sit on the board, which is why it’s more in the private sector so you don’t hear about that much. Most of them from the reputation of Enron’s, but also the companies that have gone under and they haven’t seen what’s coming, like the Kodaks of this world, who are going apart or Nokia that have come and gone. The other brand, Toys“R”Us is a perfect example. They didn’t see that we’re moving into an online world. Most of the boards probably happily ensconced in other ones because of the way they could spin it if they’re a massive learning experience and therefore I can bring this learning to the next board role. You don’t see anybody completely losing their reputation whereby they can never get another board role because they’re very well connected and it can be spun to say, “I learned a lot in that experience. I will never make those mistakes again even if they do.”Maybe one day we'll live in a truly meritocratic world where we actually do hire the right person for the job. Click To Tweet
Do most people put their homes in LLCs and other things to protect their assets?
It’s like anything else. If you’re a business owner, you protect your personal assets. If you’re a corporate board director, you’re protecting all your assets as well. If you’re joining a nonprofit, a school or something like that, you don’t have to go to those men, although it’s sensible practice anyway. That’s a lot of paperwork to get through. It depends on whether you’re doing this as a one-off thing because you’re helping out a friend or within your network or you see this as something that will build to a great career and we tend to work within that.
I know a lot of people have umbrella policies and all of that in addition. You think there’s so much you can do to protect yourself. It’s interesting to look at all of the ramifications. Some of the people on boards are doing different things than other people like there are committees. Let’s talk about these committees. Have you headed committees and what kinds of committees that are there on these boards?
The standard board structure is you have the master board, I suppose you could call that for want of a better word. You have these subcommittees which are topic-specific. The standard ones that most will have that risk in audit governance, nominations committee. On the side, the nonprofit world, you might have a fundraising or marketing subcommittee. Essentially what they used to be would be subgroups whereby you have a small subset of the board who potentially are technologically-specific in that area. The risk in the audit would have more numbers orientated people in there, but obviously, you still have a blend.
Those committees are increasing including management and staff members in there. What I’m encouraged by now is you’re getting third parties coming in to join those committees, but they’re not voting board directors. They don’t sit on the mainboard, but they sit on the committee. That’s like a standard structure. The advisory boards work in and amongst that as well as other specific things. You might have a bank that has a volunteer advisory board, which may also be called a subcommittee. A lot of this language is interchangeable but that’s generally what they mean by committees when we’re talking in the board world.
Do you have a favorite thing you do on the board that you specialize in? Is there a committee you would like to always try and be on or what do you prefer?
Personally, this is going to come across horribly, but I prefer to be the chair of the mainboard. It’s something I’ve inclined to do. I like to be inclusive. I’m a good communicator. These are some of the attributes that make a good chair. That you are trying to get all the views in the table and drive things forward and you’re creating a culture of inclusivity. When it comes to subcommittees, the chair, you’re contested on most of them. I’m interested in people in general in getting the most out of them. When I sit on boards, I’ll go wherever that is happening. I’m trying to bring in processes and procedures about getting the best out of the skills and experiences in the room. I don’t have one particular committee. I suppose answering that question, nominations would be my definite go-to because that’s all about hiring and firing the CEO but mostly finding new directors.
How do you find people? I’ve seen a few websites that remind me like LinkedIn where people put their information and they’re looking for board positions. I know you can go to those kinds of things, but I know there’s a lot of word of mouth. Let’s say you were looking to find a board member right now, how would you go about it?Anywhere, diversity brings better performance. Click To Tweet
We help people find board roles, but if it’s the other way around and you’re board, what would normally happen is you’d go see the right board. We’re trying to find some people who know someone. That would be the easiest way to do it. What I would do is first understand what’s the role and draft up if you don’t already have it some comprehensive role descriptions and some expectations. Also understand what skills we’re looking for, both technical and human skills. You’d want to do a bit of a board matrix and have a gap and needs analysis.
Once you’ve defined exactly who you’re looking for and what they have, then the best way is to appetize. Your company may have a list, a database, you might have a social following. There are plenty of websites around the world that are places to promote board roles. There are communities for that as well. If you’re part of an industry association, you can promote it through there. If you’re looking for particular skillsets, for example, if you’re looking for a marketing person, since you come outside the industry, you could go to marketing associations and promote the role. The issue is there is no one-stop-shop. There’s no one place where every single board role is advertised. Wouldn’t that be wonderful?
Aren’t you surprised there isn’t an easier way? They are more of a monster.
They’re like the monster style things. There are groups that do it, but there’s always some payroll there because they’re trying to make money. A lot of boards are starting to promote by these websites at the moment and stuff like that. In Monster, there are another ten competitors as well. Do you spend one or do you go to the biggest one? Because of the way the boards have mostly been recruited through networks, word of mouth and referrals and that are still the majority rule. They’re only starting to reach wider and cast the net wider. We have social media as well now. We have so many different avenues for boards over there when it comes to recruiting board directors. The reason it’s still very much through networks is that trust is the main currency of the boardroom. People want to know that you can be trusted and you’re getting the job done and they can work with you. That news is why it comes through networks, word of mouth, referrals and connections rather than go to market, to people we don’t know and no one knows. It’s still that human safety first. I need to know I can trust your mentality which recruits in the board role.
Do you recommend that people put on their LinkedIn that they’re actively looking for board of advisors or board of director’s positions? A lot of people I do not talk to are looking for those positions, but they don’t want their company to know they’re doing it on the side. They don’t want that out there so much. What do you recommend?
First, I would recommend what’s your ability. If you are employed by a company, you need to find out contractually what you are allowed to do. A lot of people go off and get a board role and their employer finds out and they say, “You’re not allowed to join the board without permission.” By the way, there’s a conflict of interest there. If you want to do this properly, the recommendation is to talk to your employer and make sure you articulate very strongly your motivations and why you want to do it. If you’re looking to get out of doing a job and create some portfolio career, then that’s like leaving your job for another job. You want to be careful there. Essentially, if you were say wanting to stay in your job, I would go through the motions of very strongly articulating why you want to do it. What are the benefits for you as well as for them? Then go forward from there. If you’ve done that, the more visibility you can have on your desire to do this through LinkedIn and talking to people in your network, the better because if you don’t tell people, who are going to know.
They’re looking for different people than they used to. You look at generational diversity quite a bit. You mentioned you were quite a bit younger than everybody else on the board. If you’re trying to sell products to Gen Z and everybody’s 70 years old on the board, how realistic is that? Let’s talk a little bit about generational diversity and also the male-female thing. In California, they got a lot of attention for trying to get women on the board. I’ve talked to a few men that are not happy about it because they felt like they were being pressured. I’m going, “I am a female, what a bad idea it was.” They think that they should be able to pick based on whatever, but if you don’t give people a chance, it’s the same thing with any job. I don’t know why a board would be any different, why that would upset them. What do you think that’s all about?
I’ve got some strong views on this and I won’t hold back. Boards like to bleat about meritocracy. We want the best person for a job and in an ideal world, that’s true. However, because board who decides on meritocracy is the people in the boardroom, if they’re a whole bunch of old white guys, meritocracy for them will probably be some masculine type and that will lend them towards either property men. That’s why I’m a big believer to a certain degree in quotas as a stick until people see the carrot, which is the benefit to diversity.
That’s still there, especially gender diversity, people see it as a social engineering exercise rather than a performance exercise. Diversity is a performance exercise. There’s so much data out there now about the benefits of a diverse board room however that’s made up. I’m a big strong believer in quotas, but short-term quotas or at least target. Maybe one day we’ll live in a world where it is true meritocracy where we do hire the right person for the job, and obviously companies are bringing in like AI whereby you take out people’s skin color, gender and age from species and it’s all judged on the whole bunch of different things. Even the institute courses that boards will be a long way behind that. I feel very strongly, but I also believe that what we’re doing now is we see a rebalance in our society. It’s where we do have that almost positive discrimination. Middle-aged old white guys have got to put up with it and realize that we are suffering potentially the sins of our forefathers, who have had a very patriarchal dominated by the male-biased world.
We see an overcorrection in a rebalance, but we have to go through. If you look at what’s happened in countries like Africa post-apartheid, you’ve seen a rebalance which has switched the dial massively the other way but will come back eventually. That’s not ideal but it’s often the reality of things. It’s not to say that most boards are still not in recruitment. Women are not like literally the default board of directors now. It’s still very slowly happening. All the white guys are complaining about that and ranting about this. It’s a big strong feeling for me. There are still massive board opportunities for them out there. Some of them may be closed off, but they’ve been closed off for women, people of color and young people for centuries.
It’s challenging for even based on the job descriptions I’ve seen though, for women to apply or younger people to apply or anybody who hasn’t had a certain level of experience to apply and to have that experience. A lot of white men are the only ones who’ve had that job. You must’ve had this X, Y, Z experience. Have you seen the job descriptions for the boards?
It’s funny. I re-read Catch-22. It’s fantastic and it got me riled up. That’s obviously world-related, but I can see the connectivity between that who’s in control of the corporate world and stuff. What you’ve got now though which is encouraging are investors. If you think about corporate companies, listed companies, the majority of the shareholders are pension funds and big institutional best foods, they are starting to say, “The most important thing for us is long-term performance.” We now believe like most that diversity brings better performance. They are pressuring boards to push for this. There’s a lot of the pressure for the California stuff, which was the government that we actually invested in it.
A lot of big investors, especially the California Teacher’s Pension Fund, which is one of the largest in the world, have been pushing diversity targets and pressuring through voting. You’re now getting to the point where directors themselves are on the track of being voted out by shareholders because they’re not bringing more diversity in the boardroom. The moment the trigger is female gender, but that’s going to continue to branch out. There are these extrinsic trends, external pressures coming in from shareholders and investors who are saying, “We don’t care what you think. We want diversity because we know by and large if you do it right, you can relate to better performance.”
As you’re talking about generational diversity, the last board position I read said you had to have several decades of experience with Fortune whatever company. I’m thinking that’s definitely saying no young people. They’re weeding them out.
Most corporate board careers will stop and can at the 40s now, but it used to be 50. PWC, PricewaterhouseCoopers, they do an annual global corporate director survey and boards young is defined as under 50. That shows you that most of the workforce, most of the customer base these days, most of the leadership are under 40 in terms of executive leadership, political leadership but beyond a few, presidents and prime ministers are under 50. It shows you how far behind boards are in general. When they asked for decades of experience, it’s a risk. They’re saying we need people who have been through a lot, but the problem is what everybody’s been through is very rarely going to be recreated in the next several years.Trust is the main currency of the boardroom. Click To Tweet
We’ve been perceived the future, let alone predict it’s going to happen the same way. That’s something that boards need to stop getting away from is thinking instead of measuring everything by years of experience, they have to measure it by experiences and the perspective that people will bring to the board. It’s not about this. What I call it is it’s about blending the wisdom of experience with the wisdom of inexperience. Often, you find boards stacked full of people who have a very particular way of doing things and it’s like, “This is the way it’s always been done.” Unfortunately, in this world, we can’t think like that anymore.
You need to blend that experience and the ability to identify a lot of risks of having gone through those different cycles with people who are coming from a very different space. I’m not talking about graduates from university for one year and on the corporate board. However, if you are fast-moving consumer goods, a company with a target market of Gen Z, I would like to have a Gen Z or Millennial advisory board advising the board on these issues. How do we do that as opposed to relying on management, which most boards do when they go or thinking about my kid. The problem is you see your kid very differently than your customer base, even in this day and age.
There are ways in which you can bring in generational diversity, which is not straight into the boardroom. Say a subcommittee or an advisory group is a great way of blooding people. There are many amazing young people out there who have founded multimillion-dollar companies who are going up the corporate ladder and have done an amazing thing out there. We’re not talking about every single young person in the boardroom. It’s a special few. They are there. They are ready. They are all willing. They are learning. They would add tremendous value if you set the expectations that they may not know everything.
The other end, you’ve got the old people, who say gender, we’re not the stereotypes here, who have no clue about technology. Do you drop them from the board because they haven’t got a complete set of experiences? No, you understand that’s something they may not bring to the table. How would you fill those gaps? What we need in the boardroom is that shift in mindset around what it means to be able to drive who you need to be a director because otherwise, the boards are going to be struggling.
How long do people usually sit on boards?
As a career or like a particular board as a term?
A particular board?
Increasingly, the term of board directors is getting shorter. The average time would be ten plus years. You’d start and be on there and you wouldn’t leave. Increasingly, especially in the corporate space, boards are now voted on every single year. In Australia, it’s every three years. In the UK, North America, it’s every year, especially in the corporate space. Terms are usually set at one year. You finding people being that maybe 3 to 6 or maybe nine years. Like politicians, you need to give people enough time to do stuff. They’re not having to campaign to be reelected all the time. They want to get some work done. The boards need to be looking to work the medium to long-term but management is looking at short-term and increasingly, the CEOs have shorter tenures. The average tenure of a CEO now is three years. Boards need to be the ones who are looking at that, medium to long-term. If you were starting out, I would say you want to be committing at least three years. You won’t have the expectation that you will commit to at least three years on the board. Anything shorter is you’re not giving enough time to them. It’s not enough time for you to have a real impact. I’d say a minimum of three years, ideally at least six.
Do you have to stick to ones within your country? Do you mostly stick to Australia? You were on a board meeting before this in the United States, weren’t you? You’ve got to go to different boards all over, don’t you?
It depends on the rules governing the organization. This board up meeting I had with a global entity. It’s a UK incorporated organization in terms of the entity, but they spread it in every single continent. Some certain boards need a certain percentage of local people, but increasingly forward to getting geographically diverse as well, especially technology-enabled meeting side of things. Most boards are very local in terms of country or region-specific. It depends on the rules governing the organization, but also the business itself will keep its marketplaces, one town, you’d have many people from that town. If it’s an entire region like the Asia Pacific, obviously you might have a board from all of Asia Pacific.
If somebody is reading this and they want to put together their resume to be something to send to a potential board, what would you tell them to put and how would they set it up? Do you have sites that you can recommend? Do you tell them how to set it up? I’ve seen examples out there. I’m curious what you would suggest.
This is where Dr. Google comes in. There are so many board resume templates. They so much help in terms of what to do. The only thing I would say about your resume or CV when it comes to the board world, especially if you’re starting out, is the one you may have used to get a day job, your executive job, rip it up. It’s largely irrelevant because the problem is, you’re not going to do an operational role. You aren’t going to do a governance and oversight role. The skills you might do in terms of the doing of the job are not the same skills that you’ll bring to the oversight that happens within the boardroom.
One of my favorite sayings to one of our speakers in our programs is that EQ is more important than IQ in the boardroom. Another bit about the way you operate, the way you think, the human skills, your brain as well as the technical stuff. The layout for the CV focuses more on your why and the value you’d bring to the boardroom as a director. The achievements that you might have in your corporate history or executive history is more about how that relates to acting and behaving as a board director, the experiences that would allow you to bring that perspective and ask those questions.
You basically have your governance and committee topics upfront, but you also have your character traits or your core competencies, they call it. The core competencies are far more human skills-focused than they would be technical skills focus. The other thing I say to people listening around the resume is that you don’t send the same resume to every single board you apply to. It has to be tailored to the company that you’re applying to. It has to reflect as much as possible keywords, challenges and opportunities within that company.
The only way you’re in no doubt is having prepared and done your research. Too many people see an ad and they respond with a template that they’ve already put together. It’s the same in the executive world. That’s why you potentially won’t get it. You’re deeply connected in a network to someone like ticking boxes. The more research you can do into the role of the company and have that reflected and also the gaps on the board and what exactly are they looking for. The more you can reflect that in your cover letter and resume, the easiest as you will pass through the filters and get the stuff.
I love that you’re democratizing leadership and all the work you’re doing is fascinating. For so many people who don’t know all the ins and outs of this, your book was fascinating. I hope people will take a chance to check it out, Right Seat, Right Table. I know a lot of people reading probably want to know how they can reach you and find out more. Is there a website or something you’d like to share?
FutureDirectors.com is where you can find us. The book is available on Amazon, Barnes & Noble and all the usual places or from the website. We’ve got programs. We’ve got diagnostic tools if you’re starting out, which can identify what are the certain things you need to look out and take it from there. The website is the best place to go or if you want to find me on LinkedIn, just look for Future Paul Smith. Paul Smith is quite a common name so just add the Future to the name and you will find me.There is a fine line between negligence through ignorance and negligence on purpose. Click To Tweet
Future Paul Smith, thank you for being my guest. This was so much fun.
Thank you so much. I’ve enjoyed it.
It was my pleasure.
I’d like to thank Paul for being my guest. We get so many great guests. If you’ve missed any past episodes, go to DrDianeHamilton.com. We’re on iTunes, iHeart, Roku, you name it. You can find us everywhere. If you’re looking for more information about Cracking The Curiosity Code, The Curiosity Code Index or anything to deal with curiosity, it’s all there as well or you can go to CuriosityCode.com. I hope you enjoyed this episode and I hope you join us for the next episode of Take The Lead Radio.
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About Paul Smith
Paul Smith likes to do things a little differently and is unquestionably on a mission to help others fulfill their potential for positive change. He is a corporate executive turned social entrepreneur and non-executive director. He has been a board director and chair for almost a decade and has trained hundreds of boards and directors from Australia and New Zealand to the USA and Asia.
Paul recently launched his first book, Right Seat Right Table, which brings together what he’s learned— from his own experience and the experience of hundreds of directors across the world—about getting into your ideal boardroom and making a bigger difference in the world.
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