Is it your New Year’s resolution to focus (finally!) on joining a corporate board? After all, you are a seasoned in-house lawyer who has a ton of industry-relevant business experience. So it makes sense to get out there and network. If the stars align, an interesting board position will surface. Before accepting, take a moment to step back and ask some key questions. Board service is like marriage: It’s a great idea that can tragically turn into a nightmare if the wrong people are tied together for the wrong reasons.
Before joining a board, you might consider three categories of questions: 1) management-board dynamics, 2) board processes, and 3) board protections.
Board processes might seem straightforward, and they can be. On the other hand, woe be to the newbie board member who is the only person that realizes the way a particular board is operating falls far outside of normal practices. Even when a board agrees that governance is important, nothing will sideline a new board member faster than appearing to be overly concerned with processes at the expense of the business. Exploring the reasons for the current size of the board and set of skills represented on the board can be illuminating. Also, one of the most important responsibilities a board has is its own succession. Is your ascension to the board part of a master plan, or is the board adding members in an entirely opportunistic fashion? The latter can be just fine, although it might not be the best way to ensure that the board has the full set of skills it needs to be as effective as possible.
Finally, before agreeing to join the board, it’s worth researching what board protections are in place. For example, has the company included exculpatory provisions for monetary liability in its charter where possible? Has it considered choice of forum provisions in its bylaws (or charter)? Also, what indemnification arrangements have been put in place? A company that is not offering a state-of-the-art personal indemnification agreement contract to all independent board members is a company that may be behind the times in other ways as well.