All a(board)!

Board orientation critical to success of new (and existing) directors

By Linda Wood Edwards

“We need new blood, new ideas on this board!” Then one day, through a magic process, a new director appears! That new director needs to be onboarded so that they can be impactful as soon as possible. This is a big job that shouldn’t be left to magic.

I like to imagine that a potential new board director did some homework about the company’s values, vision, mission, and financial situation. I also like to imagine that the board’s Nominating Committee did some serious vetting and interviewing before the potential new director was even put forward for election. Assume nothing! An organization needs to approach onboarding as though the new director knows nothing.

At least half of an onboarding program (board orientation) is delivered using the “drinking from the firehose” approach (i.e., receiving an overwhelming amount of new information while simultaneously attempting to understand, remember, and apply it). I have experienced hundreds of board orientations and not once has the firehose been avoided. This is especially true with a director who has never sat on any board. Take heart, however, because after the initial blast in the face, the contents of the firehose will taper to a slow and manageable drip. 

An effective onboarding program should be shaped to the needs of the organization AND the needs of each director. A good board Chair will take time to ask a new director about their own goals. This is a good way to identify synergies (win/win) and to confirm people are there for the right reasons. If it wasn’t a good fit after all, it’s better to find out early!

If your company has a board buddy system in which new directors are linked with experienced directors, the Chair can use that meeting to determine who would be a good match. This could be a full-on mentoring system, or just a few calls to touch base and field questions. Board buddy systems adds even more time and responsibility to a director’s workload, so if you love this idea please proceed with caution.

Before a new director even gets to the first board meeting, a certain amount of information should be provided. Cue the firehose! This is where we blast out a million things and pray that some information soaks in. You’ve heard the expression “you don’t know what you don’t know”? A new director can’t possibly know and grasp until they see the board in action. Except the action doesn’t all happen in the first board meeting. Boards work on annual cycles and so there will always be new information presented for the director to understand, remember, and apply. Count on it taking a full year before a new director will see everything the board expects to see. By then the director will be better equipped to deal with the things that the board has NEVER seen (e.g., disruptions, disasters, etc.).

Ground rules for board service are usually documented. This means there are many board documents! A new director doesn’t have to learn everything at once – they just need to be able to access the information where and when it is needed. In the old days, it was called the BOARD BINDER. Now, most often, access to every document you will need is found in a board portal with a secure login. 

Exactly what does a new director need to know? Information: 

• About the company/organization

• About the people on the board

• About the staff and other stakeholders

• About the facility, if any

• About the industry/sector

• About your their and responsibilities as a director

• About their rights as a director

• How to find more information

The answers to all of this will be found in:

a) personal introductions and organizational charts,

b) tours, 

c) governing documents, and

d) board meetings themselves.

People. The people a new director needs to meet right away are the Board Chair, the CEO, and the Corporate Secretary (or whomever in the organization supports the board with logistics, documentation, etc.). That individual is GOLD to a director, and especially a new director. Eventually a new director will also want to meet the Finance Director (staff). For everyone else on the board and senior staff, a list with contact info and bios should be provided.

Place. The new director should tour the physical space of the company. It may be just an office, it may be a plant or factory, or it may be virtual. Just make sure the director gets a sense of the “place” (i.e., number of employees, working environment/conditions, even environmental impacts of what the company does, etc.).

Governing documents. There is a hierarchy to governing documents. A new director doesn’t have to read the Canada Business Corporations Act (Canada Not-For-Profit Corporations Act, Cooperatives Act, Societies Act, etc.), but they should know the piece of legislation under which the company is registered/incorporated. 

The new director should read the Articles of Incorporation (aka Constitution, Constitution and Bylaws, Charter). The Articles/Constitution will tell a new director why the company exists – what did the founders hope to achieve? Next come the bylaws, which tell a new director how the organization will govern/run itself. 

After that, share the strategic plan. Where does this company plan to go in the next five years? What does it want to accomplish? How will we know we’re successful? This is the big picture for the organization that a previous board approved and that the CEO uses to guide its operational decisions.

Then have a look at the operational/business plan, which is one year of the strategic plan and is generally staff-focused because it is tactical and ground-level. The annual budget funds this one-year plan, so a new director needs to see that! 

Next, encourage the new director to look at the last audited financial statements – go back a few years. If they are contained in the company’s annual report, the narratives will be as interesting as the financials.

Then look at the board’s governance policies. The new director doesn’t need to worry about the content for now but should get a sense of what is there. At a minimum, a new director should pay attention to a) how the board and CEO communicate; b) how the board holds the CEO accountable; c) how the board deals with its own business, collectively and from director-to-director; and d) what board committees exist and how far their authority extends. If there is a director job description, it will be found here. 

Then come the roles and responsibilities. It’s not just about the expectation to attend, prepare, and participate in board meetings (Note: include a calendar of board and committee meetings a year in advance). It is so much bigger! Here is what a director must know because it is Common Law and applies to every company and non-profit in Canada. 

Fiduciary Duty – A director must act honestly and in good faith with the best interests of the corporation in mind (loyalty), must avoid conflict of interest, and must subordinate all personal interests to those of the corporation.

Duty of Care – A director must act as a reasonably prudent person would act in similar circumstances.

If a new director understands the Fiduciary Duty and the Duty of Care, the board is well on its way to having a productive new member. Boards and directors need to be reminded of these duties often. Seriously, often. If it hasn’t come up before this, a director should be told about any directors and officers liability insurance held by the company.

Tied to these duties, the company should have a conflict-of-interest policy. Conflicts arise with regularity, so boards (and new directors especially) need a way to deal with them. I recommend “declare, decide, record.” 

Declare if you have a conflict (or might); get out of the room.

Decide: let the rest of the board decide if you do or don’t have a conflict. 

Record: The fact that you left the room goes in the minutes, and so does the board’s decision as to whether you do or don’t. If you are in conflict, the board will handle the matter without you (it’s not about abstaining – you’re just not there). If the board says you are not in conflict, the minutes should reflect that as well. This paper trail in the minutes is required for when something hits the fan. Minutes are legally compellable, so make sure the trail of actions/decisions around conflict of interest is clear.

Attestation: A director may be asked to sign a declaration attesting that they understand their duties, that conflict of interest will be properly addressed, and that they will uphold the values and mission of the company. This might be requested annually, or it might be a one-shot deal for a new director. If there is no attestation, it is because the organization has assumed the director is a person of character and will do these things anyway. 

Vote. A director has been put on the board (elected or appointed) to make the best decisions on behalf of the company. A director cannot abstain for conflict of interest because that director is not in the room (see above) and the minutes reflect this. In my experience, the only other time directors (try to) abstain from voting is because they didn’t do their preparation and/or they don’t understand the issue. That’s garbage. It is imperative that a director asks questions until the situation is understood. If it means holding over a decision to the next meeting, then that’s probably in the best interests of the company (you won’t be popular, but it leads to a better decision). Questions only serve to clarify the matter for others. Also, a director should never abstain because they think disagreeing is impolite. If a director cannot support a recommendation, then vote against it. The world will keep turning, I promise. 

The Catch: A director must keep in mind the “One Voice” principle. A board can discuss and debate as much as it needs to, but once the decision is made (either by vote or consensus), all directors on the board must speak with one voice in support of the decision, no matter how they voted. Let that marinate. The One Voice principle is a cornerstone of governance and if it is broken, trust on the board is broken. It can take years to get that back.

Now that the firehose is down to a trickle, a director needs to understand the difference between governance and operations/management. Many directors on boards are managers themselves, so the temptation is great to just “do what you know.” Being a director on a board requires a different mindset because the job of governing is different. We talk about the board taking a 30,000-foot view versus being “in the weeds.” The board’s job is to use their best insights and skills to look ahead for the company. The management’s job is to take that view and implement it on the ground now, with the best information and people it can muster. So, the board decides “what” (with management involvement) and management decides how (with no board involvement). 

I believe that board orientation should be annual, and that it is not just for new directors. Continuing board members (even very senior directors) should also be expected to go through it again. Like “you don’t know what you don’t know,” there is an element of “I’ve forgotten more than you’ll ever know!” Expect resistance from senior directors and persist anyway.

As is obvious by now, an article that tries to distill the essentials of a good onboarding program still ends up like a firehose! There’s no getting around it, so grab it with both hands and hold on tight. As always, do your best. 

Linda Wood Edwards, owner of LUE-42 Enterprises, is a Certified Association Executive and a Fellow of the Chartered Governance Institute of Canada (CGIC). She holds a Bachelor of Administration degree, a certificate in human resources management, and the Accredited Director designation. Linda consults on board governance to organizations across Canada, serving as Corporate Secretary to several. She is CGIC’s Chief Examiner for Corporate Governance and a facilitator in the Directors Education and Accreditation Program.