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By Jeffrey Levinson
Netscout Systems Inc.'s Vice President, General Counsel, and Secretary responsible for global legal strategy and legal operations Jeffrey Levinson discusses the preparation and processess for successfully bringing on board a new corporate director.
Successful director onboarding and orientation lets the new director hit the ground running with the right information and corporate context to make a difference from the start. Directors starting with a new board have substantial business experience, though there may be gaps in the immediate application—understanding what the company does precisely and how the company accomplishes its mission.
Successfully bringing directors up to speed will help the company with their immediate contribution, help the Board see things from the new director’s fresh and diverse perspective, help management gain insights in the areas that the new director can contribute, and help the new director feel like a valued new board member. Picking the right team for your board gives the company huge advantage.
However, because Boards typically turn over infrequently, the General Counsel and others responsible for the onboarding process, such as the corporate secretary, often have to dust off an old process document so as to avoid missing an important step. This article sets out a comprehensive checklist to support the onboarding and orientation process.
Note, however, that laws and regulations change, so be sure to run a “rules check” and update applicable requirements for new directors, whether in a public company or regulated industry. Also note that this article is aimed at public company director onboarding, a comprehensive standard of compliance, more so, generally, than that of private companies. Some of the regulatory requirements would not apply to private companies or non-profit organizations.
Preparing to formally bring on a new director assumes that the Board has followed its bylaws, corporate governance guidelines, and applicable legal and regulatory requirements. Boards will have recruited, vetted, met with and questioned the candidate, obtained the candidate’s responses to a directors and officers’ questionnaire, conducted a background check (preferably run by an reputable and independent company that specializes in these screenings), discussed the candidacy at the Nominating Committee, discussed again at the Board level, and voted to appoint or elect the director to the Board.
Several of the steps required to prepare for a director’s appointment or election will carry over into the director’s service. As one simple example, in responding to the corporation’s standard director and officer questionnaire, as part of the Board’s vetting process, a candidate will provide biographical information. That biographical information will be used in the public disclosures and press release as well as the corporation’s website page about the Board. Equally important, these preparatory steps ensure that there will be no legal, regulatory, or other obstacles to appointment or ongoing service.
The Board resolutions will have addressed the size of the Board, findings of independence, equity and compensation (pro-rated, as appropriate), and the director’s term and class. Considering when shareholder approval may be required, the new director would be assigned to a specific class, if a classified Board, as part of the series of voting resolutions. For Boards without classes, the director would be appointed to the Board without classification. Then, or later, the Board would assign the new director to committees.
This article is not intended as a legal primer on directors’ fiduciary duties, the role of the Board vs. management, boardroom dynamics, or strategic guidance. In addition, while outside the scope of this paper, it is important to set the expectation with prospective directors as to the commitment required, in time, preparation, and attention. The Chief Executive Officer and other corporate executives—as well as fellow directors (and shareholders)—expect that each director will be engaged, prepared for meetings, and available outside of meetings for formal or informal discussions.
Once the date of appointment or election has been set and then the director appointed or elected, you must ensure that you take care of all of the items set out below. The items cover everything from scheduling to compensation, required disclosures to indemnification. The list is comprehensive, based on experience, but it should be updated for your situation and as rules and practices change. Preparation for Director Appointment or Election
Starting the orientation process assumes that the director has already become substantially familiar with the company and its operations, by reviewing its public filings and other materials, meeting with and questioning the company’s executives and other directors, and as a result of the individual’s familiarity with the industry and market.
Following appointment and the immediate requirements noted above of onboarding a new director, the orientation process provides for a complete program to integrate and educate the new director. Orientation ensures that the director obtains a solid understanding of the company and its operations, at a base level, like a “101” for the director, the foundational course for what follows.
However, director orientation is not optimal as a “one and done,” but instead ideally sets the stage for further training, with opportunities for all directors to continue their education with internal sessions and external seminars (e.g., National Association of Corporate Directors sessions, university and business school programs, and webinars). Other components of an ongoing program might include opportunities to meet additional executives in the corporation, outside of the C-suite, not only by inviting them to present formally in board meetings but also in getting together informally for dinners, at site visits, or during other corporate events.
Before initiating the kickoff orientation meeting, the new director should be provided the foundational materials set out below, made available via the electronic Board book or in a binder.
Corporate items made available to directors during onboarding:
Questions a new director might consider, to draw out answers with respect to those key areas, could encompass the following:
As part of the orientation, the director should be provided a facility tour, site visit, or plant tour, depending on the company or industry. A walk-around gives a concrete introduction to what the company does and gives a new director a feel for the employees and the work. Again, depending on the company, a tour may need to be handled separately from the orientation provided by management. Further, as part of the continuing orientation, the executive team should consider who else the director might benefit from meeting, those with special skills, charter or assignment, or perspective. As noted previously, director orientation, much like continuing legal education, is an ongoing process.
Jeff Levinson is Vice President, General Counsel, and Secretary responsible for global legal strategy and legal operations at NetScout. Before joining the company in 2005, he served four years as corporate counsel at Nuance. Before that he was General Counsel at an internet startup and a division counsel at a global publishing company. He is the author of Bloomberg BNA Corporate Practice Portfolio Series No. 95, Managing the Corporate Legal Department: How to Create Plans, Develop Processes and Lead the In-House Legal Team. This portfolio volume describes the legal and business skills needed to effectively lead and manage a corporate legal department.
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