This product has already been purchased.
- Reverse due diligence is essential. Before accepting a board seat, executives should scrutinise organisational alignment, strategy clarity and management quality.
- Spot governance red flags early. Watch for whitewashed reporting, boardroom toxicity and unbalanced power dynamics between chair, CEO and directors. Assess commitment realistically.
- Confirm meeting cadence matches workload, as some board roles disguise near-executive time demands.
The smartest directors interview the board, probing alignment, culture and workload, before accepting a seat that could make or break their reputation.
In an operating environment marked by intense governance scrutiny, rising regulatory expectations and significant financial and reputational risks, experienced executives are becoming more selective about board appointments.
Executive search firms are noting a fundamental shift in board director recruiting behaviour. “The power dynamic has shifted,” says Jason Johnson, founder and CEO of board advisory and executive search firm, Johnson Partners. “Boards are no longer just interviewing candidates. The best candidates are interviewing the board.”
Instead of simply asking whether the company is interesting, high-profile or well-remunerated, candidates are questioning the functionality of the board, the effectiveness of the chair and whether the appointment could damage their reputation, Johnson says.
“You need to over-index on due diligence,” says Geoff Summerhayes, chair of Zurich Insurance, Australia and CGI Australia.
Before accepting a board seat, executives must gauge if the prestige of a board appointment is worth the risk by conducting rigorous “reverse due diligence” and watching out for these warning signs.
1. Something is missing
While the realisation that something is missing can take many forms, a lack of alignment is one of the most significant red flags. “First and foremost, you have to have a sense of whether the organisation's purpose, mission and business values align with yours,” Summerhayes says. By having a definitive framework for what your ideal portfolio looks like prior to considering a board role, your parameters are clear well before an opportunity comes knocking.
Alignment between shareholders and the board also needs to be present, says Johnson. He advises being wary of misalignment, particularly in founder-led, private equity-backed, government-related or activist-affected organisations.
Another area of concern, according to Johnson, is an unclear strategy. “Candidates become concerned where the board and management cannot articulate a credible plan.”
Assurance in the quality of the management team is also a ‘must have’ for both Johnson and Summerhayes. “When something goes wrong, even though it’s not necessarily of the board’s making, accountability often stops with the board. You have to have confidence in the CEO and the executive team,” Summerhayes says. “They have your reputation in their hands.”
2. “Whitewashing”
Evasive answers and sanitised information, are also red flags according to Johnson. “If the chair or CEO cannot answer direct questions about risk, culture or performance, be careful,” he says. “If the company only provides glossy material and resists sharing board reviews, risk reports or committee papers, that is a warning sign [as is if] the organisation is reluctant to share basic information.”
To best ensure an accurate read of the organisation, Johnson recommends asking questions such as: ‘When did the board last disagree materially with management?’ ‘What happened?’, ‘What are the major unresolved risks facing the organisation?’ and ‘What would I discover after joining that has not come up in this process?’ If their responses appear whitewashed, exercise caution.
3. Toxicity at any level
While frequent departures of directors, CFOs, general counsel, chief risk officers, auditors or senior executives usually indicate deeper issues, Johnson also points out that it’s not enough to simply assess culture at the very top of an organisation. He notes an example of a candidate realising only after his appointment to the board that two levels below the executive team there was high turnover, unresolved bullying complaints and a fear-based culture. Candidates are increasingly wary of toxic boards, however they need to assess for toxicity all the way through the organisation.
4. An unbalanced boardroom
Boardroom dynamics play a huge part in the attractability of a board role. Johnson believes leaders who are either too dominant or too submissive to be problematic. “A founder, CEO, chair or shareholder who appears to dominate the board can make true governance difficult,” he says. However, a leader who leans too far the other way, also causes issues. “If the chair cannot manage debate, address underperformance or create trust, strong candidates will hesitate.”
Striking the right balance is crucial to a healthy board. “The biggest concern is not disagreement. The concern is silence, politeness, factions or a chair who suppresses debate,” Johnson explains. “Candidates are looking for evidence that the board encourages dissent, challenges management constructively, deals with underperformance, has trust between directors, receives unfiltered information, is not captured by the CEO, founder or major shareholder, and can make hard calls quickly.”
Watch for warning signs of poor communication and etiquette. “If directors avoid eye contact, speak in coded language, defer excessively to the chair or CEO, or appear reluctant to discuss difficult topics, the culture is probably weaker than advertised,” Johnson says.
Summerhayes adds what he believes to be most important for directors. “You have to have an ability to have a good working relationship with the chair. The chair sets the tone.”
5. Commitment and cadence are ‘off’
Lastly, if you can’t give the board responsibilities the attention they require, that’s a red flag. Johnson cautions against board roles with a disproportionate time commitment. “Some board roles are advertised as six to eight meetings a year but are actually near-executive roles in disguise,” he says.
Summerhayes advises to also look carefully at the cadence and rhythm of an organisation’s calendar to spread the pressures throughout the year (i.e., make sure they don’t all operate on the exact same strategic or financial reporting or meeting cycle). “You need to create capacity in how you curate your portfolio to give each of those responsibilities your full attention,” he says.
Latest news
Already a member?
Login to view this content