What I learned surprised me.
We discussed pathways to independent
director opportunities. While there is no rule for this, here is a handful of takeaways you may find interesting (please note that this was a conversation with a PE general partner. He was providing his opinions based on his experiences; obviously each firm has its own practices).
Typically, an independent director with an operating title (past or
present) of CEO, CFO, and COO, is attractive to boards because the title indicates their P&L and operational experience.
The candidate must have 100% of the credentials required for the role. An independent director is not a developmental opportunity; the candidate must offer a specific value proposition and subject matter expertise to be seriously
considered.
While an independent director role in private equity may sound glamorous, it is very much a working role and directors are expected to roll up their sleeves to get things done—there is lots of heavy lifting in these roles.
“Celebrity” or well-known directors may be attractive to boards; however, time-poor business leaders (despite their popularity and visibility) often don’t have the time required to help boards achieve their goals. If you’re counting on such a celebrity to bring value to your board, you may be disappointed.
If an independent
board role in a private equity portfolio company is part of your career or business plan, start early. Build relationships in the investment community at earlier stage venture capital companies. Give to get, be interested, and be seen as a value-added resource.
Build trust. Understand that private equity companies are held by private capital, much of which is
personal equity of the founder and partners. Financial stewardship is critically important in such roles, and often compensation comes in the form of equity—much of it is sweat equity.
While his firm hires board recruiters to search for independent directors, they often struggle to find the exact match, and they won’t move forward with the search if the match is
not exactly what they need, which is why networking is so important on both sides. When searching for an independent director, they explore their contact lists first: “Do you know anyone in your network who has experience in finite element analysis, negotiating contracts in the shipping industry who also has a PhD?”
Director certifications are helpful but not
necessary. If taking the path of director training, he recommends the National Association of Corporate Directors (NACD), the NASDAQ, or the New York Stock Exchange programs. He suggests those organizations because of the granularity and a la carte nature of courses. While Ivy League programs are popular, especially for networking into Fortune 500 companies, they often don't offer courses in highly specialized topics.
Of much surprise to me, his firm will not recruit attorneys onto their portfolio company boards because the PE firm partners worry about how an attorney will influence decisions and the perspectives of other board members. When they require a legal opinion, they retain external counsel so there is no conflict of interest.
We discussed women in private equity and his estimate is an 80% / 20% split. He encourages women interested in board roles to participate in groups that support women in the investment sector and explained that his firm has supported and invested in women’s groups over the years. He suggested All Raise as a group (founded by Allen Lee) to follow for those interested in women's participation in investments and private equity sectors.
While I learned a lot from my conversation with Bernard, there is one theme that bubbled up for me and that is relationship building. Relationship building earns others’ trust and loyalty: two components of successful business building, in my opinion.
