New director onboarding

For any new director, a learning curve comes with the territory. Just how steep that learning curve is can hinge directly on the quality of the onboarding process, which affects how quickly a new director can contribute meaningfully to the work of the board and its committees.

Understanding the business – its strategies, risks, financials, operations, management team, workforce, culture, competitive landscape, and stakeholder interests and expectations – is a major undertaking for new directors. It takes time to develop that understanding of the business and the external forces that impact it, as well as the priorities and culture of the board and its committees.

A robust onboarding process can greatly accelerate a new director’s integration and contribution to the board’s work, so at minimum it should include essential information and briefing materials, quality discussions with key people, and a “road map” for getting up-to-speed. Directors joining their first external board face the added challenge of understanding the unique role of a director in helping to oversee and guide the business forward, and how it differs from that of management.

In today’s business environment – rife with disruption, uncertainty, and turbulence – board members need to be ready to contribute from day one. The onboarding needs of new directors will vary from director to director, depending on a number of factors, including the director’s background, experience, and the role the director is expected to play on the board and its committees. Even if there is a formal orientation process, new directors should be prepared to take responsibility for their own onboarding plan, working with management and others to determine how best to get up-to-speed on the most important issues quickly and build a strong foundation for informed oversight.

In this article, we suggest a several considerations for new directors to incorporate in their overall onboarding framework, including:

• Suggested reading,
• Initial orientation, and
• Developing a deeper understanding of the company and the board.

Ultimately, a robust onboarding process should help position a new director to engage in a healthy, ongoing dialogue with management, fellow directors, and others with insights into the company and the business environment in which it operates.

A new director will want to review several background materials early on, including:

Information about the company

• Annual report and accounts
• Earnings releases and materials used for analysts’ calls for the past year or two (including a transcript of the question-and-answer period as well as management’s prepared remarks)
• Sustainability reports and public releases regarding the company’s ESG activities and initiatives
• The most recent materials provided to the board and the committees to which they will be assigned, as well as minutes for the past few meetings for the board and all committees
• The company’s strategic plan, as well as information prepared by management or third parties regarding customer needs, the existing competitive landscape, and emerging competitors
• Third-party assessments including analyst reports, vulnerability studies, and any communication from activist or institutional investors regarding the company or the board
• The company’s top-level organization chart and biographies of the company’s leadership team, as well as the company’s succession plans for the CEO and other key executives
• Recent reports and/or survey results assessing the company’s reputation, culture, and the strength of its brand(s)
• Presentations made to the board during the past year on risk, strategy, succession, and crisis management
• Reports on the company’s compliance program and any government investigations or significant litigation
• The company’s greenhouse gas emissions, its most recent diversity figures (if any), and its ESG-related goals, risks, and strategies

Information about the board and its committees

• By-laws and Corporate Governance Guidelines
• Committee charters
• A description of the company’s directors’ and officers’ liability insurance
• Policies applicable to directors such as the company’s Code of Conduct, conflict of interest policies, insider trading policies, and others, as applicable

Regardless of whether it is part of a formal orientation process, a new director will want to have one-on-one discussions with key leaders of the business to gain a better understanding of the company – the culture, strategy, key risks, strengths, areas of opportunity and concern, etc. – and to get to know the leaders outside of the formality of the boardroom.

Initially, it may be helpful to get the “lay of the land” by meeting separately with Chairman of the Board, the CEO, and other executives. How does the company make money? What are the hot-button issues facing the company? What issues have management and the board been spending the most time on? Which governance processes work well (or not so well)? What is the culture of the company and of the board?

The Company Secretary (or General Counsel) can provide information about the board from a legal and process point of view, including the committee structure, the role of each committee, and how the committees coordinate and communicate about oversight activities. They can also provide advice on the responsibilities of a director and director independence requirements, as well as an update on significant litigation, investigations, or compliance-related matters.

In the weeks and months following the initial orientation session, a new board member may also want to meet one-on-one with other leaders in the business – CEO; CFO; CRO (Chief Risk Officer or equivalent); CIO; CISO; CSO (Chief Sustainability Officer or equivalent), leaders of sales, supply chain, operations, marketing, investor relations, and HR – to get their views on a number of key company-wide issues, including the:

• Company’s strategic direction and key risks to the strategy.
• Effectiveness of risk management processes and the overall control environment.
• Status of preparation for any mandatory climate and other ESG disclosures.
• Tone and culture of the organization, including ethics, legal, regulatory compliance, as well as whether the organization is future-focused, innovative, open to reinvention as necessary.
• Strengths and weaknesses of the management team and the board.
• Company’s acquisition strategy, including any potential acquisitions under consideration.
• Company’s capital allocation priorities.
• Philosophy with respect to investor relations, including proactive investor engagement.
• Company’s technology profile, including any recent or proposed key digital transformation initiatives.

The business leaders will also have important insights to offer on issues that are specific to their areas of focus and responsibility. Below, we have identified possible topics to explore.

Board members can get a good view of the company by going beyond the C-suite: visit the factories, stores, townhall employee meetings, etc., as applicable.

Board members can also develop insight into the culture of the board by keenly observing the board dynamics and looking to an experienced and well-respected board member as a mentor.

Ultimately, onboarding is not a “one size fits all” process and may vary considerably depending on the company and the background, experience, and areas of interest of a new director. While management obviously plays a key role in shaping the onboarding program, every new director needs to take charge of his/her own onboarding to make sure that it is properly tailored and focused.

A good onboarding process should provide information about the company that will enable a director to add value based on their own unique experience and perspective. Furthermore, the learning process should never end. Continually seeking out relevant information (from internal and external sources) and a deeper understanding of the business, the competitive landscape, and emerging opportunities and threats, will be essential to providing effective oversight and bringing insight and foresight to the boardroom dialogue.

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