Whats the deal with board seat gigs?

I once had an old-timer tell me the sweetest gig in the world is becoming a board member (Non-Equity) and get a fat paycheck to show up at annual meetings. How do companies recruit for those advisor board seats?

 

Depends on the size of the company (and owenership type). For my firm (LMM PE) I would say has 3 types: Former owners & executives, PE Firm member, and other connections. Others connections have contained past executives and board members from other portfolio companies. Or a lot of the times partners will have made industry connections and friends who are at least remotely involved in the industry and have some management experience.

TL:DR - "Recruitment" = partners' friends who have passable resumes to be board members

 

This might just depend on the company/industry, but is it mostly management experience that counts when a company is looking for a new board member or do companies also look for certain specialties/expertise? I sometimes see board members that were initially outside advisors to the company (e.g. accountants and lawyers) but maybe this isn't as common given the potential conflict of interest?

 

It depends on what the owners (in my case, LMM PE Firm) want in their board. (As a side note, I keep emphasizing my case because it is a small sample size and can vary a ton depending on many factors).

Management experience is a minimum for us, it is kind of the idea that how can a board member be helpful in advising the current management team if the board member has not been in their shoes before? There is a signaling effect here too, it gives the board members a certain amount of 'respect/clout' that qualifies then to be there. Beyond this, we look to have a diverse experience of boards members too, so some may be more strong in certain areas than others.

We have not had any outside advisors who have joined boards, I don't have the exact answer for this but conflict of interest could be one.

 

With smaller companies I'd wager this is highly relationship based. For a small tech company, they might look for very experienced software engineers in leadership positions, or a founder who has left a successful tech startup after being acquired and therefore has a wealth of experience growing a tech company. I have to believe that this is simply a matter of meeting someone or having someone in your network that fits the bill and reaching out.

If we're talking large F500 corporates here, you'll see a lot of current and former CEOs on the boards of other companies in non competing industries. For example, the current CEO of The Hershey Company serves on the board of New York Life. Here I could see it being less of a relationship based game in that the figures chosen are already well known and lots of info on them is already published making it easier to seek them out.

 

Do you get paid anything as a board observer? Wondering if it is worth negotiating with PE firms to allow for a board observer seat for any deals I close

 

Many are through your network by my understanding.

A former boss of mine is on the board of a reasonably sized tech company because the founder was a friend of his from B school that valued his opinion/liked him.

A friend of mine’s mom is a board member of a billion+ business because of early business connections they made in their career which resulted in the board seat. Compensation for the latter example is in the hundreds of thousands a year for literally no work. Very sweet gig.

 

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