Great gig or a reputation nightmare?
AlamyBeware the reputation ripple effect
A number of years ago I coined the expression ‘director contagion’. Think of it like this: you‘re on a board and something goes wrong in another area of your work, it risks bringing reputational damage or extra scrutiny to the company on whose board you sit. Or the inverse: the company where you are a board member does something wrong which could potentially harm the reputation of your other interests.
This is the risk you run taking on a directorship and one reason why it’s vital to be an active and engaged director — keeping your finger on the pulse of everything that is going on.
You don’t have to be on a board to experience this problem. Everything you do in life can impact the organisations you are linked with professionally or otherwise. Think of the world’s former number one golfer, Tiger Woods, after a series of revelations about his private life hit the headlines there was a direct impact on his sponsors. The stories had nothing to do with golf or any of his sponsors directly, but the scandal still hit their bottom-line. One study estimated the scandal cost shareholders of sponsor firms up to $12 Billion.
When I first came up with ‘director contagion’, the context was the unfolding phone hacking scandal in the UK. James Murdoch, who was deputy chief operating officer at News Corp at the time, was sitting on a number of other boards unrelated to the media giant. Those boards and companies began to get questions about why he was on their boards and whether he should remain on them. He drew attention to those companies simply because he was in the news.
Another more recent example, Alan Yentob, BBC Creative Director, resigned from his job at the BBC because he was also chair of charity, Kids Company during a period that is now being investigated for mismanagement. Yentob, as chair, was increasingly the focus of government investigations in to the charity and a source of interest for journalists which became a distraction from his BBC job.
This is a cautionary tale. People are often keen to join boards as a next step in their careers, but it is important to consider fully what that means. After years of working hard to develop a reputation, if you join a board where you haven’t done enough due diligence, all of that hard work could be for naught. Also, once you’ve joined the board, if you “phone it in” rather than being an active and engaged director, you are likely to miss important warning signs of problems.
That is not to say that people shouldn’t join companies that are going through difficult times, or in the midst of a restructuring. Those companies can be some of the most interesting and satisfying boards to be on. I love them! The important thing is to be genuinely engaged and to know what you are getting into.
Beware of over-committing yourself
Also, beware of joining too many boards. Every board requires time and attention, and not just the time in the boardroom. It means attending all the board meetings, participating in board committees, reading all the papers, keeping an eye on what’s going on in the sector, and really getting to know what is happening inside the business.
The commitment to the relationship as a board director means that you will be an engaged director. It also means that if you are bringing trouble to the table, you need to step down. You don’t want to be in a position of having to be asked by the board to step down. You’ve got to have enough regard for the company to step down yourself.
Being a board director requires more time, attention, and integrity than ever before. Before taking up a seat, think hard about ‘director contagion’ and make sure you are committing to a board that is a good fit, and that you are willing to give the time and attention necessary. This will be the best path for both you and for the company on whose board you’ll be sitting.
Lucy Marcus is an award winning writer, board chair and non-executive director of several organisations. She is also the CEO of Marcus Venture Consulting. Don’t miss another Above Board column by subscribing here. You can also follow Lucy on Twitter @lucymarcus.
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