By Tim Stephenson, of Stephenson Executive Search
There comes a time in every senior executive’s life when a decision has to be made about whether or not to continue in full time employment or – if not – either to retire completely or change tack and start to go down the pluralist route.
If the latter, I always suggest consideration of a three-strand approach – consultancy work, not-for-profit roles and paid non-executive appointments.
Freelance consultancy has several advantages. It pays better than a portfolio of part time board appointments; there is little or no fiduciary or legal risk to the individual; it may open the door at a later stage to joining a client in a non-executive capacity and perhaps most importantly, it does not commit the individual to a continuing relationship after the end of the consultancy term.
Not for profit appointments – charities, schools, parish councils, church wardenships etc, are usually unpaid and can be very satisfying but extremely time consuming.
I recommend keeping this part of a portfolio to no more than two roles, for example a charity trusteeship and a school governorship.
When it comes to non-executive directorships, as a general guideline, fully listed companies are usually “safer” than AIM listed ones, which in turn are less risky than private companies.
A number of prominent individuals in the past with successful full time careers, during which they have been prudent and risk averse, have not done proper due diligence before accepting appointment to the boards of companies that have shortly afterwards gone into liquidation, leading to irreparable damage to their reputations.
Always confirm that directors’ and officers’ liability insurance is provided by the company and satisfy yourself of both the good financial standing of the company and the ethical and moral probity of the other board members. This may necessitate requesting permission to meet and interrogate the company’s auditors.
Always make sure that you are happy with the specific contribution that you will be expected to make to the board’s deliberations and that you are not being asked to join just to provide “window dressing”.
Also, make sure that you are happy with the expected time commitment. Ten board meetings a year, plus strategy days, committee and ad hoc meetings may easily lead to a total of at least seventeen days per year.
The company’s corporate governance philosophy and track record is important and should conform with the code’s gender and diversity recommendations. In the case of public companies, it should ensure that there are a majority of independent non-executive directors on the board.
Increasingly, activist investors are showing hostility both to individual board tenure exceeding nine years and to ‘overboarding’. To calculate overboarding, a directorship counts as one point and a chairmanship two, except for closed end funds where a directorship attracts half a point and a chairmanship a single point. A total of five points is recommended as the acceptable maximum for each individual director.
Before deciding to pursue the pluralist route, always bear two criteria in mind.
Do not do so if you need to earn the sort of money that you were used to during your full-time career, because you won’t.
More importantly, don’t panic. It takes time to build a portfolio of part time appointments and after landing each one, re-assess the changed total time commitment: If you try and match the hours and days to the various roles that you had in your previous life, you might just as well have stayed in full time employment.
Stephenson Executive Search is a family-owned headhunting firm with origins dating back to 1987. It specialises in private banking, private wealth management, family office, legal, and board appointments.
