What Boards Want

From The Practice May/June 2020
Different backgrounds and approaches in the boardroom

As Scott B. Guernsey, Saura Masconale, Simone M. Sepe, and Charles K. Whitehead write in “Banking on the Lawyers,” banks and financial institutions increasingly include lawyers on their boards of directors. In “Lawyer-Director or Director-Lawyer?: Three Paths to the Boardroom,” we follow three lawyers along their distinct career paths, observing how each found their way from practicing law to board service. In this article, we consider board service from a broader perspective in an attempt to shed light on how lawyer-directors fit into the bigger picture of a board’s needs and composition. What are companies looking for in prospective board members? What skills and approaches are particularly valuable in the boardroom? What bearing does professional background and training have on these factors? We look at these issues through a variety of distinct lenses—that of an educator, a director, and a board search firm—to explore the work and goals of boards and to consider what it means for the aspirational lawyer-director.

Help wanted: Finding the next board member

After earning her undergraduate degree in economics, Lee Hanson knew she wanted to pursue a professional degree but was torn between two possibilities: get a Ph.D. in economics or go to law school. Searching for an education that might yield “practical” career options, she opted for law school. By the time Hanson graduated from Harvard Law School, she realized that the typical law firm career path was not for her. Instead, she moved away from the direct practice of law and entered the world of investment banking, spending the better part of two decades traveling the globe for firms such as Merrill Lynch and Morgan Stanley. (While Hanson did not practice law for very long, she notes that she draws on the skills and thought processes gained from her legal education daily.) When it came time for a change, she made the jump to Heidrick & Struggles, one of the largest executive search firms. Today, Hanson is a vice chairman and a member of the firm’s CEO and board of directors practice. In this role, she leads board searches for a broad range of companies, which affords her particular insight into what companies are looking for in their directors. And, given her legal background, she does so with the added awareness of how those demands match up (or don’t) with traditional lawyer profiles.

What are companies looking for in prospective board members? What skills and approaches are particularly valuable in the boardroom? What bearing does professional background and training have on these factors?

In a recent interview with The Practice, we asked Hanson what boards look for when they move to fill a seat at the table. The call might come from the head of a board’s nominating committee, the board chair, the company’s general counsel, or even the chief human resources officer, Hanson explains. Whether due to a retirement or some other issue, the company in need will often come to Heidrick with a developed list of characteristics and qualifications for the open seat. “They might come in, for example, and tell us they want a CFO, a woman, and somebody who’s already been on a board before,” explains Hanson. She goes on to say that the goal is to triangulate the company’s needs and deliver candidate profiles that align with those needs. Stressing the importance of skill sets in modern corporate boards, Hanson and her colleague Victoria Reese write:

[Companies] want experts with specialized skills who can identify areas of risk, assess compliance policies, and help accomplish strategic and financial goals. They want professionals who have excellent judgment and top problem-solving skills who have “been there and done that.” As a result, the National Association of Corporate Directors (NACD) reports that many companies are moving away from “relationship” boards to “skills and experience” boards.

While companies are looking for skill sets and experiences, Hanson stresses that these things are not exclusively linked to or the domain of any one professional background. “We don’t typically hear them asking for any particular professional background,” she says. “If anything, it’s ‘We’d love to have a CEO,’ or, ‘We are really looking for someone with a CFO’s skill set.’ Clients are often very specific about the experiences and skill sets they are looking for, but they place far less emphasis on any particular profession, be it a lawyer or otherwise.”

Professional background is just not how I think our clients are thinking about [recruiting board members], and honestly I’m not sure I think about it that way.

Lee Hanson, vice chairman at Heidrick & Struggles

This is a point that Hillary Sale—a professor of law at Georgetown University Law Center, affiliated faculty at Georgetown’s McDonough School of Business, and a governor on the board at FINRA—stresses as chair of DirectWomen’s Board Institute, a program designed to help position senior women lawyers for corporate board service. “When I run self-advocacy and leadership programs with women partners and associates in law firms, I do various exercises, but one in particular is practicing introducing yourself to people at a cocktail party and you’re not allowed to start with, ‘I’m a lawyer at ______,’” Sale says. “It’s off the table. You need to be able to talk about what you do—what specific skill sets you are bringing to the table beyond ‘being a lawyer.’ Gender adds another layer of complexity, which makes this especially important for women lawyers to master.”

Indeed, Hanson stresses that being a senior lawyer—even a managing partner of a major law firm or a top flight general counsel—does not quite command the same respect when it comes to potential board service among her clients as being a CEO. That being said, as Hanson writes in her article with Reese, it is not as if lawyers—and GCs in particular—are unsuited for board service. Indeed, they often do have the skill sets to do the job, particularly in certain industries (for more, see “Banking on the Lawyers”). Hanson and Reese write:

General Counsels who have worked in government or a regulated industry – e.g. financial services, pharmaceuticals or utilities – can bring a value to the boardroom, particularly if they have worked for a public company and are intimately familiar with the wide range of corporate regulations now facing companies – Sarbanes-Oxley, Dodd-Frank, the Foreign Corrupt Practices Act, and the UK Bribery Act. As one interviewee told us about his board’s concerns, “Good corporate governance is as important as a clean balance sheet.”

And yet, the pitch is not “Jane or Jim is a fantastic lawyer, engineer, or doctor—and therefore would make a great board member.” Whether the individual comes from a legal or other professional background does not directly enter into the equation when it comes to searching for the right fit and skill sets. “It’s just not how I think our clients are thinking about it, and honestly I’m not sure I think about it that way,” says Hanson. Rather, it is about stressing discrete skills and experience directly related to board service—which extends far beyond legal knowledge. Again, Hanson and Reese write:

[A] reason for resistance to General Counsels on boards is the notion that lawyers do not have true business experience or the necessary financial savvy. To the latter point, any General Counsel hoping to join a board should be financially literate and well-versed in reading financial statements. It would also help to have successfully led and managed the budget of a legal department and supported an Audit or Compensation Committee. If General Counsels can provide examples of how they have helped a company or department accomplish its goals, it will increase their appeal. As one General Counsel who serves on a sizable public company board told us, “Board members need to see the big picture, to have an ‘enterprise-wide’ lens.”

You need to be able to talk about what you do—what specific skill sets you are bringing to the table beyond ‘being a lawyer.’

Hillary Sale, professor of law at Georgetown University Law Center

Martha Minow, the 300th Anniversary University Professor at Harvard University and the Law School’s immediate past dean, has served as a board member at a number of public and private companies. Minow confirms that, in her experiences, there is no direct link between one’s profession and board service—at least not in the simplistic sense of being a lawyer or a doctor. “Today, if people have an expertise because they worked in a pandemic before, of course that will be very relevant,” she says. “But it doesn’t particularly matter that they went to a public health school or they trained as a doctor or they trained as a businessperson.” In Minow’s view, the details of one’s experience are what really count in the boardroom. She continues:

It is more about the experience than about any one specific professional background. To be a board member is to be someone with governance obligations and someone who’s there in tough times. I’ve been in the position of being on nominating committees and talking about what kinds of people we’re looking for, and I can say that it’s much more than whether they have a particular set of professional training.

…Though it might not hurt to be an auditor

Despite the lack of emphasis on specific professions in the boardroom, it is worth noting there is at least one specific professional background that is often sought out: auditors. Namely, Hanson notes, audit partners and leaders of Big Four accounting firms are in demand among her clients. Part of this, as Sale explains, goes back to Sarbanes-Oxley. “Sarbanes-Oxley, among all of its other provisions, put in a provision emphasizing, via disclosure, the necessity of having financial experts,” says Sale. “And it’s actually not everybody—even if you’re a math whiz—who qualifies as a financial expert. But auditors can, and most often are.” In this way, regulation creates, or at least increases, a demand among corporate boards for auditors given their frequent financial expert status.

Another unrelated factor that often makes auditors viable candidates are audit firms’ mandatory retirement ages. “Audit firms, unlike many law firms, have mandatory retirement at age 55,” says Sale. This is noteworthy in light of retirement-age policies of corporate boards. For example, as of 2015, of the 83 percent of Fortune 100 companies with retirement-age policies, 61 percent set their retirement age at 72, 28 percent set it at 75, and 11 percent set it somewhere else between 70 and 76. Of note, only about 8 percent of Fortune 100 directors at that time were age 72 or older. “That is significant because boards want you to have a 10-year runway,” explains Sale. “It takes a long time to learn the company and become valuable. As a result, it is harder to get on a board, particularly your first one, when you are over 65, because they look at the runway and worry about whether you will add sufficient value.”

Expertise in the boardroom

Notwithstanding the U.S. Securities and Exchange Commission and internal policy requirements, and beyond the business and finance acumen that are sine qua non for board service, the needs of companies vary. “I would have said five years ago nobody had heard of digital media, cybersecurity, those kinds of areas,” says Hanson. “To say that things come in vogue sounds too fluffy, but for valid reasons skill sets that weren’t thought about in the past as being important become important.”

To be a board member is to be someone with governance obligations and someone who’s there in tough times.

Martha Minow, 300th Anniversary University Professor at Harvard University and a current and former board member at a number of public and private companies

One recent trend, Hanson notes, is a preference for board directors with expertise and leadership experience in technology. “Boards are responding to that particularly if the experience is with a company that has gone through a transformation where, for example, a chief technology or information officer was a real driver,” Hanson says. “Boards often see that category of experience as particularly valuable when in the context of having successfully transformed an organization.” However, she notes that individuals from these backgrounds are not being recruited because they are engineers per se (though many may be). Rather, they are attractive because they have been at the intersection of their company’s operational and strategic thinking.

Cybersecurity is another instructive example where area knowledge may be valued less from a technical perspective and more from the ability to understand the long-term strategic and governance issues caused by such matters. In other words, boards often want someone who understands the cybersecurity landscape. But they do not necessarily need someone who can build them the latest app—that is not the role of a board member. And while a cybersecurity background can be a good sell for lawyers looking to pitch themselves to boards, there are others. “We’re also entering a period where #MeToo is a big issue, and right now boards are looking for people who have had some experience designing or overseeing effective antiharassment or inclusion initiatives,” Minow adds.

The type of organization will also greatly impact a board’s needs. It matters, for instance, whether a company is in a heavily regulated industry like banking or energy (see “Banking on the Lawyers” and “Lawyer-Director or Director-Lawyer”) or whether it is a for-profit or nonprofit organization. “Another distinction I might draw is between public and private,” adds Minow. “I once served as vice chair of the Legal Services Corporation, which is a government-created nonprofit. Everything is public, and everything is on the record. That was much more similar to my experience on a publicly traded company than it was on another nonprofit.” When it comes to private companies, anecdotal evidence suggests that lawyers may often find their way onto private boards, particularly if they were closely involved in the company’s formation.

Habits of the mind

Notwithstanding the relative lack of attention boards pay to the degrees listed on your CV, it would be unfair to say that where one comes from professionally does not matter. Indeed, for lawyers in particular, part of the reason that Sale has to consistently emphasize business acumen over strictly legal accomplishments is because the lawyer identity often matters a great deal to those within the profession. (For more on the professional identity of lawyers, see “The Professional Identity Formation of Lawyers.”) Moreover, professional socialization can be a powerful factor. Practicing lawyers are socialized into the legal profession’s structures, norms, and institutions. That socialization begins in law school, is reinforced with the bar exam and an oath, and extends throughout one’s career, whether in a law firm, the judiciary, or another legal role. One could tell a similar story for doctors, all of whom swear the Hippocratic oath, are trained through intensive and highly structured education and residency programs, and are socialized by the unique dynamics of the medical profession.

Whereas medical schools tend to use case studies that highlight the diagnostic process, law schools often focus on analysis, public policy schools emphasize developing options, and business schools zero in on decision points.

In Minow’s case, although she stresses that board members do not sit around the table with professional background pins to identify the lawyers and the doctors and the businesspeople, her legal education and the fact that she was a lawyer were certainly relevant to her role as board director. Recalling her training as a lawyer and its impact on her own approach to board service, Minow comments:

You ask questions like: What’s the entire picture and what’s the order in which to proceed in thinking about those issues? How do I divide areas where people disagree from areas where people agree? These are skills one learns in civil procedure or in writing a complaint and an answer. Of course, there’s some subject-matter interest and alertness generally to risk and risk analysis as well. Many lawyers also develop a kind of negotiation ability and an ability to find common ground or ways to resolve a dispute.

At the same time, Minow also notes that her background as a lawyer provided more than just a particular skill set in board debates. “As is true in other meetings where there are not very many lawyers present, I discovered that there are some basic habits of mind and approaches to problems that legal training offers, and it has been an asset in the work that I’ve experienced on boards.”

Highlighting the role education might play in helping to form these “habits of mind,” Minow points to David Garvin’s “Making the Case” as a possible framework to understand the impact of professional training. Garvin takes one common pedagogical tool—the case method—and assess how different Harvard professional schools adapt it to their own purposes. “It’s striking that each professional school has a slightly different emphasis,” remarks Minow. Whereas medical schools tend to use case studies that highlight the diagnostic process, law schools often focus on analysis, public policy schools emphasize developing options, and business schools zero in on decision points. Since the article was written, Minow adds, professional schools have begun to incorporate the approaches and considerations of the others. “I remember reading that essay and thinking, ‘We all have to do all of those steps,’” she says. “As dean, that was something that I brought to curricular development. How do we spend more time on diagnosing a problem? How do we spend more time on generating options and making hard decisions?”

Many of the skills noted above—risk management, problem solving, consensus building—are all baked into the habits of mind for lawyers. The bigger picture for lawyers to remember is that legal training is hardly the only means of discovering and honing these skills, and thus “being a lawyer” is not in itself any sort of end-all credential for board service.

Show, don’t tell

What should lawyers with board aspirations make of all this? In the end, a deeper understanding of what goes on in the boardroom and how boards think about filling vacancies should be both humbling and encouraging. On the one hand, boards are hardly ever looking for lawyers—not explicitly, anyway. Rather, they are looking for particular types of skills and experience. Moreover, providing legal advice is not what is required—or even desired—of board directors. After all, companies already have general counsel. (For more on separating the lawyer and director roles, see “Lawyer-Director or Director-Lawyer.”) On the other hand, lawyers often do have a lot of what boards want by virtue of their education, experiences, and habits of mind. As we see in “Lawyer-Director or Director-Lawyer,” the trick is to leverage the skills and experiences gained through the practice of law rather than treating the lawyer identity as proof of qualification in and of itself. There are any number of ways to become an expert communicator, issue spotter, and problem solver, just as there are plenty of professions and industries that can expose you to leadership and relevant expertise. A legal career is one such way—lawyers just need to be prepared to show how their legal work connects to the skills and abilities boards value.