Transitioning to a Career as an Independent Director: What Executives Need to Know

Serving as a corporate executive comes with no shortage of its own challenges. However, if you’re looking to branch out — or if you’re hoping to land a new, post-retirement challenge — you might consider becoming an independent director.

Members of any business’s board of directors are tasked with overseeing and optimizing a business’s long-term health. If you have a track record of success as a C-suite executive, you’ve already proven that you’re capable of guiding a business in the right direction.

Serving on a board of directors can be an exciting and intellectually stimulating career move, but it’s not the right choice for every executive. Here’s a closer look at what it means to be an independent director and how to decide whether becoming one is the best choice for you.

Responsibilities of Independent Directors

An independent director is a board member who (1) is not employed by the company and (2) has no financial interest in the company. Because they aren’t at all affiliated with the business, they can be trusted to give unbiased opinions — even if those opinions run counter to management’s current practices.

Monitoring and Advising

Strong corporate governance is an absolutely essential part of having a well-run company. The board of directors is the entity responsible for establishing governance policies, as well as reviewing and amending them as needed.

When a board includes one or more independent directors, the company can benefit from knowledgeable oversight of both executive decisions and board decisions. If C-suite executives or corporate directors start acting in their own best interests instead of those of the company, independent directors can help them change course and get the company back on track.

Assessing and Managing Risk

Risk management isn’t unique to serving on a board. However, members of a corporation’s board of directors play a significant role in identifying and mitigating various kinds of risk, including financial, reputational, and operational risk.

While independent directors are not tied to the companies whose boards they serve on, they often have experience in similar industries. That means they have experience with managing industry-specific and sector-specific risks — and that experience can help the company avoid disaster.

Developing Corporate Strategy

As an executive, you’re already familiar with developing corporate strategy. Board members will typically assist the CEO and the rest of the executive team with both planning and executing the company’s overall strategy.

Many independent directors are retired executives themselves, so they can offer the current C-suite team valuable wisdom and help the company avoid common pitfalls.

Overseeing Executive Compensation

Deciding on executive compensation is much more complex than setting salaries for lower-level employees. The board of directors is responsible for putting together executive compensation packages, and it also decides on performance incentives and targets.

This is an area where a director’s independence may be critically important — particularly with companies that combine the positions of CEO and board chair. Independent directors are not employed by the company, so they generally will not support inflated salaries for executives if those salaries will hurt the company.

Contributing Unique Expertise

Look at the board of directors of any high-profile company, and you’ll see that independent directors come from all walks of life. While they generally all have experience in the corporate world, many bring unique insights from other personal and professional endeavors.

What Makes a Good Independent Director?

Each company’s board of directors is a little different. However, generally speaking, the following key traits make someone a strong independent board member:

  • The ability to assess various types of risk
  • The ability to make meaningful, intellectual contributions, even outside your area of expertise
  • Strong financial literacy
  • A genuine interest in the company whose board you’re serving on
  • The ability to be both independent-minded and a team player
  • Strong communication skills (especially the ability to be persuasive)
  • The ability to strike a balance between challenging and supporting the company’s leadership team
  • Self-confidence without an inflated ego
  • An understanding of corporate governance
  • A sense of integrity and fair-mindedness
  • The ability to actively listen and consider other viewpoints

Keep in mind that many boards are divided into separate committees. You might find that in order to serve on your desired committee, you need more specific skills or traits.

How Do You Improve Your Chances of Selection?

Even if you are a highly qualified candidate, getting a spot on a company’s board tends to be a lot harder than it seems. Most corporations don’t advertise when they’re looking for new board members. Even when they’re discussing potential candidates, those candidates might not know they’re being considered.

In many cases, current board members and company executives will first look to their personal networks when trying to select new independent directors. This means that if you’re interested in joining a board of directors, one of the best ways to increase your chances is to tell business contacts who are already serving that you’re looking to join a board.

You also might consider expressing your interest to executive search firms and other contacts (like members of private equity firms or outside counsel) who frequently interact with boards of directors.

Of course, it’s critically important to remain tactful. There’s nothing wrong with telling your contacts that you’re interested in joining a board of directors. On the other hand, asking for nominations is poor form. If you ask contacts to nominate you outright, they probably won’t entertain the idea — for current or future opportunities.

Networking isn’t the only way to boost your chances. Raising your profile by attending industry events and securing speaking opportunities is a great way to build up a board-ready resume. So is securing directorship opportunities with nonprofit organizations.

Is an Independent Directorship Right for You?

If you’re looking to serve on another company’s board while you’re still a sitting executive — or just looking to transition to a new role in the corporate world — joining the board of a company with a mission you’re passionate about can be immensely rewarding.

Of course, independent directorship opportunities don’t pop up often, so seeking one out is an exercise in patience in many instances. But when you take the time to optimize your professional profile and improve your chances, an exciting board opportunity might be right around the corner.