New Director Orientation
Director orientation is a lot like breakfast. Everyone knows it’s important,
but it’s often rushed and lacking in substance. In my work with boards
across sectors, I regularly hear from directors about ineffective orientation
(it’s little wonder, then, that lunch is often the focus of many boardroom
questions!).
With annual meeting in full swing, many organizations will be welcoming
new directors to their boards. Now what are you going to do with them?
More often than not, very little. For new directors out there, be prepared
to feel ill-prepared for your first board meeting.
Recognizing the lack of quality director integration among issuers, the
Canadian Securities Administrators have given prominence to director
orientation in the governance guidelines introduced last June.
Regulators want issuers to ensure that all new board members fully
understand the role of the board and its committees, as well as the
contribution individual directors are expected to make (including, in
particular, the commitment of time and resources that the issuer expects
from its directors). All new directors should understand the nature and
operation of the issuer's business.
While this policy is clearly directed to publicly traded companies, the
importance of new director orientation spans sectors and organizations of
all size and scope. The principles of effective orientation highlighted here
are relevant to every board, but must be adapted and implemented to
address their unique attributes.
The bottom line is that educated directors make for more valuable board
members and are better able to provide wise counsel and direction.
Director orientation needs to be seen as an investment in a critically
important corporate asset.
All of the governance reform over the past decade and the resources and
time expended in developing and implementing new and better board
processes can be rendered useless if new directors are not properly
inducted. While the board structural and process issues are all essential
pieces of the good governance puzzle, underpinning these are the need for
a boardroom and governance culture where new directors are welcomed,
oriented, valued, and respected. Developing new board members to where
they become valued contributors is a significant challenge requiring a
strategically designed process to ensure individual success in the
boardroom.
But where to start? Equipping the new recruit with a basic understanding
of how your organization governs itself and its business focus are
foundational. While many boards fall into the trap of replicating
management skills and experience on the board, director independence
guidelines mean that, increasingly, new directors will be recruited from
other sectors with little or no industry or boardroom experience. It’s hard
to contribute to discussion and decision-making if you don’t know the
business. So, you can initiative the process by providing new directors with
external consultant reports, books, trade journals and websites, and other
useful resources.
While general information is valuable and
essential, director orientation must be
tailored to the new board member’s specific
needs and the board’s requirements. They
must reflect that director, on that board, in
that company, and in that industry.
Directors need to be briefed on the
organization’s core functions and business
drivers, and industry developments. New
directors should be provided insights into
key client relationships and the
organization’s position in the industry -- its
strengths and weaknesses, along with
competitive threats and opportunities.
One-on-one time, on-site with each
member of the senior management team
are essential, with additional time with the
chief financial officer to make sure new
directors gain comfort level with relevant
financial information and accounting rules.
Having the opportunity to communicate
directly with those who are giving direct
leadership to running the business provides
invaluable insights.
A new director orientation
program, at a minimum, should
include:

a governance briefing by the
Chair or President;

an introduction to the
company, its mission, and
values by the CEO and other
senior officers;

stakeholder communications,
accountability and disclosure
documents

access to key analysts who
cover the company;

financial performance of the
company and comparative
industry data;

strategy and operations at
the division or department
level;

human resources and
succession planning; and,

the legal and ethical
environment.
In preparation for site visits and management meetings, pre-read and
background materials should be provided to new directors well in advance
so they are prepared to ask questions that will help close knowledge gaps.
The agenda should focus on the business from a strategic perspective, with
plenty of time available for informal exchanges of information and
questions, as opposed to formal, one-sided presentations.
An effective orientation program should also introduce the “softer” side of
the board: its culture, the relationship with management, group dynamics
and other governance “informalities”.
The can be achieved through meetings with the board chair and more
senior directors who can help establish rapport and set expectations around
director performance. One way to tackle this side of director orientation is
for established board members to mentor new recruits through easily
accessible off-line advice.
Organizations also need to invest in building the board team through
planned social interaction. This can be easily included as part of off-site
meetings where significant company operations are located. These
occasions can be used for business unit reviews, as well as providing more
concentrated time for board members to get to know their board
colleagues.
Effective director orientation clearly doesn’t just happen. Organizations
need to develop the means to proactively identify director developmental
needs. Here, the board chair or governance committee has a critical role to
play in making sure that the potential new directors bring to the boardroom
is leveraged as fully as possible.
Just like other organizational assets, there needs to be a planned and
concerted effort to develop new directors to achieve good governance and
board excellence.