Moving on Up? Before Reaching for a Board Seat, Make Sure You Understand Public-Private Nuances

Compliance professionals can fill in critical expertise gaps on corporate boards and also benefit from the experience. A board seat offers an opportunity to expand your network, find fulfilling ways to share your knowledge and advice, pick up fresh ideas from another company that you can apply to your own and expand your options for the later stages of your career.  

For anyone putting out feelers for serving on a board, one big consideration will be whether to limit yourself to private companies or open yourself up to serving on a public company board. Ultimately, directors on both board types have a fiduciary duty to act in the best interest of the company and shareholders, but in many other respects, public and private companies offer very different experiences.

Your level of influence

While you have an opportunity to put your experience to use and impart your knowledge in a public board seat, and you could have an effect on some of the actions the company takes, but you will not be doing any of these actions yourself.

If this distinction is a priority, then you may find serving on a private board to be more rewarding, particularly if the company is in growth mode and has a lot to learn. The private boardroom tends to have a more collegial and collaborative atmosphere, where expert recommendations are encouraged and there’s more flexibility in terms of the information and suggestions that can flow between management and the board. 

While convincing a private company they need changes when it comes to compliance issues can be tougher than at a public company, a pre-IPO company could be open to your guidance if it is looking for ways to tighten up its controls and implement new compliance programs. You may find that to be a more rewarding experience than at an early-stage startup that is not anywhere near implementing any type of  compliance program.

Defined boundaries

Another distinction could make some compliance professionals uncomfortable or see an opportunity to make a direct impact at a company. Public companies usually have a much more clearly defined boundary line between directors and management, making it clear who is on the operational side and who is serving a primarily advisory role. 

This means, however, that you may not have much if any interaction with anyone at the company besides those who participate in board meetings, whereas at a private company you could find yourself serving as a mentor to some employees, including senior management. Of course, public company boards are required by law to disclose a significant amount of information, while private companies are not. My view is that this type of transparency is positive in both instances, so be sure that any private company you are considering for board membership shares your philosophy for transparency.

Pursuing both options

From my experience serving on and working with numerous boards, both private and public, starting out with a private board may be preferable for a first-time board member. Getting appointed to a board seat can take some time, and it involves expanding your network and letting people know about your interest. If appropriate, network with the board members of your own company for advice and any help in expanding your connections. You may not want to limit yourself to one type of board over another from the outset.

Likelihood of getting a board seat

Serving on a public board for the first time once seemed like a chicken-and-egg scenario — if you weren’t already on a board, a nomination would be tough to come by. In recent years, as many companies have put effort into making their boards more diverse, they have been more willing to give inexperienced board members or those from previously overlooked groups their first opportunities.

In general, first-timers have a better chance of getting a board seat at a private company, where the appointment process is much easier than undergoing a proxy vote. However, at public boards, compliance professionals can find an ample need for their guidance on issues around ethics, risk, audits and more, as these companies are subject to more scrutiny, more regulation, and they are more likely to have a compliance committee than private businesses.

An excellent means of gaining board experience before being named to a private or public company board is to serve as a board member for a nonprofit organization. This is particularly true if you can point to specific recommendations and actions the nonprofit took under your guidance that helped expand the organization’s success and how it could apply to any company board role under consideration.