If You Want to Become a Director, It Helps to Know Somebody
SPECIAL REPORT - Banking & Finance: Boards Under Fire What Do They Know?
By CONOR DOUGHERTY
It's not always who you know, but it sure helps. The process by which a corporate board gets adjusted varies from company to company: some are asked to sit on the board by a chief executive, others are cultivated through a search process that can take as long as a year.
"In general, CEOs are looking for other CEOs to sit on their board," said Betsy Berkhemer-Credaire, founder of Berkhemer Clayton, a Los Angeles search firm. "Since there's greater scrutiny of public companies, they want people who have experience with that."
Bonnie Hill, who sits on six corporate boards, including Albertsons, Home Depot and Hershey Foods, admits that, "people like to bring in someone they know. They want to know if the person will be able to interact with others on the board."
Boards, said Hill, president of B. Hill Enterprises LLC, a Los Angeles consulting firm, "are often polled to see who they know who might fit the profile."
To start, though, companies will often contact an executive search firm when a board seat comes available. The firm is given a list of credentials the board member must have: career experience, industry expertise and prior board experience. Experience in a public corporation, whether as a board member or senior executive, is often required.
If a company is in search of a candidate with special qualifications, such as a woman or minority, the search can take longer.
Vilma Martinez, a partner at Munger Tolles & Olson, sits on four corporate boards: Anheuser-Busch Cos., Fluor Corp., Burlington Northern Santa Fe Corp. and Bank of the West. In being asked to consider a board seat, Martinez said each experience is different.
"I met August Busch III when I was doing fundraising for the Mexican American Legal Defense Fund," she said. "When I joined Munger Tolles & Olson, he contacted me."
In 1990, Martinez joined the board of Sanwa Bank California (now Bank of the West), but only after several interviews. "I just don't think there's any one way it happens," she said.
Candidates, too, have their own set of requirements, including assessing the board's meeting schedule, usually between four and 10 times a year.
Compensation, another factor, is often a function of the number of committees audit, compensation, etc. a director will serve on. Being on several committees for a large public company can mean as much as $75,000 a year. Board members with minimal responsibility at smaller companies make about $25,000 per year, according to Berkhemer-Credaire, who was quick to emphasize that directors are usually required to invest in the company once they've been elected to a seat.
"Some candidates think it's all fun and games until they are required to buy stock," she said.
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