This week I had the privilege of moderating a forum in New York for ethics and compliance officers who wanted to talk about an idea that makes tremendous sense: CCOs serving on corporate boards.
After all, regulators increasingly want companies to embrace a culture of compliance that avoids corporate misconduct in the first place, or addresses misconduct directly when it happens anyway. Other stakeholders — investor groups, consumers, NGOs, cranky people on Twitter — are increasingly vocal about companies being good corporate citizens, willing to act on issues of ethical sourcing, unprincipled business practices, and other social issues.
Given those trends, then ethics and compliance officers could bring some valuable expertise to corporate boards trying to navigate that world. So how many CCOs actually do serve on public company boards right now? What’s that work like? And how does one get asked to serve on a corporate board, anyway?
Those were the questions we explored at this forum. We had about 20 people attending, all mid-career or senior compliance officers. Five serve on public company corporate boards today, and they graciously shared their perspective.
What did we learn? A few things…
First, ethics and compliance officer do have value they can add, although we might be framing that value the wrong way.
That is, almost never does a board approach a recruitment firm saying, “We really want an ethics and compliance officer for our next director.” Why would they? To them, a compliance officer is the person who oversees a specific corporate function. That’s a job someone does.
Boards think in terms of skills they need: someone skilled in financial reporting, or international expansion, or cybersecurity, or corporate strategy.
Well, compliance officers do have a skill that boards need — but it’s not fulfilling regulatory requirements. It’s helping to build an ethically aware corporate culture that strengthens risk management.
That’s how CCOs need to frame their work, and frankly their resumes. Because if you ask a corporate director, “Does your board need more capacity to diagnose risks in your corporate culture and oversee risk management?” that person will say yes.
Build Your Value to Last
One CCO serving on a public company board said a crucial question is always how a board director can add value to the company. Directors are paid a lot, there aren’t many of them (maybe 9 or 10 at most public companies), and they shoulder considerable fiduciary responsibility. So every director must be able to add value. (One person said board service a bit like a competitive sport, each director trying to show why he or she deserves to be in the room.)
Moreover, the average board tenure is roughly 10 years. You need to be able to add value over that entire time — and a board’s needs will evolve over that time. So the skills a director needs to bring to the board must be versatile, able to be useful in a wide range of situations that might arise: mergers, investigations, recessions, expansions, CEO succession, and who knows what else.
Another CCO serving on a board reminded everyone that directors represent the shareholders, so directors should have a good “spidey sense” of what issues will provoke shareholder dismay.
Sure, missed financial performance will always be one of those things — but many other issues can set off shareholders too, including questions about business conduct. I’d even argue that as transparency into corporate operations keeps increasing, questions about misconduct will become more common, and more inflammatory. Which increases the importance of companies keeping things right from the start.
Compliance officers who want to serve on boards can play into those trends. For example, as ESG issues become more important to institutional investors and the chattering classes on Twitter, someone with expertise in non-financial corporate reporting, ethical sourcing, and strong corporate culture will become more valuable. Someone who knows how to build or oversee systems for those tasks will become even more valuable.
So do you have ESG as part of your responsibility, or could you expand your duties to include it? Have you tackled a culture problem at your organization, where you could demonstrate that improvement and explain how to repeat it elsewhere?
That’s the type of experience that can add value to a board for 10 years. It’s moving beyond mere corporate compliance, to making strong corporate compliance a strategic asset to the company — so you need to position yourself, and the compliance function at your company, to do those things.
Getting on to Boards
OK, OK, let’s get to the good stuff. How does one actually get asked to serve on a board?
Four of the five speakers at our forum said they were asked to serve through networking and personal connections. Only one said she was recruited by an executive search firm.
Our forum even had two executive search recruiters give talks about the process, and they said that’s perfectly normal. Roughly two-thirds of corporate board placements happen through informal networking.
For example, one CCO started attending the National Association of Corporate Directors, and the directors she met there ultimately decided to recruit her. Another CCO met a board director at a dinner party and struck up a collegial relationship that lasted for years before that director asked the CCO to serve on a board.
So if you do want to serve on a corporate board, find ways to get close to corporate boards. For example, consider serving on the board of a nonprofit — not because the experience is similar (it isn’t), but because you’re more likely to meet other directors who do serve on corporate boards. The same holds true for serving on private company boards, or even on advisory committees companies might create to help their boards navigate technical issues.
Board service is also not something to take lightly. You should expect to stay on a corporate board for at least three to five years. Leave before that, and recruiters will wonder whether the company had issues, or you did. (And yes, one of the executive recruiters said, search firms will notice when you leave a board quickly.)
Also, if you do get invited to serve on a board, do your due diligence. One CCO who serves on boards said he hires a lawyer to review the company’s financial filings and other corporate documents. That might cost you several thousand dollars, but it’s money well spent to know you’re not signing up for something you’d rather avoid.