“They’re expected to pick up all the liabilities of the company… The moment you sign your consent form you are on the hook. There’s no point signing then doing your due diligence – you have to do it first.”
Usually between acceptance of a board position and the first board meeting, directors will get access to confidential information about the company. Sometimes would-be directors are provided with some information before they sign under confidentiality agreements to help them make up their minds, but receive a lot more when they formally join a company.
Incoming board members also get access to board papers, which they must read carefully. They can be hard to understand in parts, Garland McLellan says.
“There will be things in the papers – people will make references to ‘project x’, or ‘following our earlier discussions on x’. It takes a while to get up to speed on things like that. You should read the minutes, then ring the CEO or chairman to talk through what isn’t clear.”
Gillian Franklin, the managing director of Heat Group, and who also serves on the boards of the Australian Formula One Grand Prix and the Melbourne Theatre Company, says before the first meeting she asks for the minutes of at least four or five previous meetings.
“And I always receive copies of the financials and the company’s strategic plan,” she says.
“I make sure I have a comprehensive understanding of the cash flow in particular. This is especially important for companies that are in trouble and require rapid change.”
Franklin says before the first meeting she makes sure to know the key players, both internally and those who are external stakeholders, as well as the environment and competitive landscape, the company’s strategic plan and risks, as well as the expectations of her when she walks in the door.
“As part of the appointment process I always talk to the chairperson at length about what they expect I will be able to contribute to the board.” When she’s appointed, Franklin says she typically meets every board member one-on-one, and asks them what their role is on the board as well as what they expect her to contribute.
Mansell says meeting with key executives can give incoming board directors a feel for the morale of the business as well as its strategic imperatives. “You want to meet whoever you can in the business, to be asking questions, particularly at the senior level to start with,” she says.
Meeting with key shareholders is often also part of this process, but it’s a part of the induction that must be handled very delicately, according to Garland McLellan.
“As a single director you have absolutely no power, and you also cannot act and represent a single shareholder or group of shareholders: you have to represent all of them. You can’t have any partisan interests. So you have to be very, very careful as a director meeting shareholders.
“But, you would often try to do it. Particularly if there are large institutional funds involved. You want to meet the person involved and try to understand the company as they see it. But they should know you aren’t in a position to deliver or commit anything… you’re just there to enhance your understanding.”
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
