Why the lawyer to NED transition isn’t as easy as it might seem.
As a former General Counsel and now Board Effectiveness Reviewer, I often get asked by lawyers about becoming a Non-Executive Director (NED) and the best way to go about securing a role. When they hear my advice - which is that few lawyers will make it as NEDs on boards of commercial companies - they often become a little dismayed, and sometimes even defensive.
Of all the boards I have reviewed, it is rare to see a NED with a legal background. Indeed, if a 25-year-old asked me what profession they should choose if their long term aim was to have a NED career, I wouldn’t advise being a lawyer – an accountant, strategist or HR specialist would be a better bet.
Still, if you are a lawyer wanting to transform yourself into a NED, in my view it is better to know the true picture. So here are some of the reasons why it is challenging (that’s the glass half empty!) followed by a few tips on how you can improve your chances (the glass half full!).
Competitive market
First, and this applies to all professions, there are far more candidates than there are roles in the commercial sector – that is, where you might expect to be paid as a NED. Let’s take the listed sector for example, where in the FTSE All Share Index there are about 600 companies.
Most boards of FTSE companies comprise approximately eight to ten members, typically with two executives (the CEO and CFO) leaving around six to eight NEDs on the board. That means there are only about 5,000 NED roles in this index, and obviously there aren’t 5,000 vacancies at any one time.
While it’s impossible to know the precise number of those seeking NED roles, I am pretty sure it exceeds 5,000. The FTSE All Share is just one sector of the commercial NED market of course, albeit an important one, but you get the picture.
Board balance
As a Chair with only five or six NED roles on your board, there are certain skills and experience you are likely to want to prioritise, over and above legal ones. Boards like to have members who have run other companies or at least been at the forefront of doing so, and many will aim for a balance of backgrounds and experience:
- A current or former CEO will be an attractive asset.
- Most boards will need an accountant or two, to chair or be members of the Audit Committee.
- Having someone steeped in strategy or marketing to help the executives will be seen as beneficial - these are important skills to drive forward both the board and the company.
- A NED with an HR background will be helpful with both the Remuneration and Nominations Committees and, more importantly, the people aspects of the company – after all, businesses are all about people (or at least they should be).
- Sector experience is also important provided it does not lead into a NED acting operationally and here, of course, a lawyer with an in-depth knowledge the company’s particular sector, may have an advantage (see below).
On the whole, Chairs of boards are going to look for the experience outlined above rather than legal skills for their pool of NEDs. This is particularly so in respect of having NEDs who have run organisations and few lawyers have.
Curb your counsel
As a lawyer becoming a NED you are not there to act as the Board’s legal adviser. The NED holds an influencing and oversight role, not a doing or executive one. There are two important aspects to this.
Firstly, for a company of any size, there will be a Company Secretary who may well be legally qualified (possibly doubling up as the General Counsel) or, if not, someone who should have a good knowledge of company law. If, as a lawyer, you are lucky enough to secure a NED role, it is really important that you don’t try and compete with the General Counsel or Company Secretary – they are the board’s legal adviser – not you.
I recall speaking to a FTSE 250 General Counsel once about appointing a lawyer to the board as a NED, and he was dreading the appointment for just this reason. A few months later I asked how the situation was working out. “Great” he said, “you would never guess in meetings that the NED had a legal background”.
That was a compliment; the person concerned was an excellent lawyer but also knew when to take his executive hat off and act effectively as a NED. Sure, having a legal background can be an advantage for the board in that you can act as a mentor to the General Counsel and discuss any legal issues that the company may be facing with other board members. But that is a far as it goes.
The second reason why your legal background may not be a valuable as you think is that if there is a material legal issue, the board and the company are likely to seek external legal advice. As such, it is a skill that can easily be bought in when and as it is needed.
Improve your chances, as a lawyer, of securing a NED role
Despite the challenges, it is possible for those with a legal background to secure NED roles. Here are a few ways you can enhance your prospects:
- As outlined above, boards like members who have run organisations and many lawyers don’t fit into this category. However, there are some that do. So, for example, if you have been managing or senior partner of a law firm or run a major department with P&L accountability, you should stress this experience. In these roles, you will have had to consider strategy, marketing and commercial decisions, and so will be a useful addition the board. You can utilise this experience in guiding and mentoring the executives.
- If you are still early on in your career, try and direct your focus so that you can get this experience as it will be a useful foundation for a NED career.
- If you are working as an in-house lawyer, you might want to consider going to work within the business so that you acquire P&L accountability and the experience of running a business unit. Another strategy, particularly if you have in-house experience, is to transfer across to other roles within the organisation which might give you a better chance of gaining the right experience for a NED role.
For example, I have seen lawyers move into the Chief People Officer role with responsibility for working closely with both the Remuneration and Nominations Committees. This is invaluable experience if you want to be a NED because it means you can serve effectively on these committees and perhaps serve as a future Chair of one or both. Indeed, in one of my Board Reviews, the Senior Independent Director and Chair of the Remuneration Committee was a former employment law firm partner who had specialised in advising remuneration committees, and so was ideally placed to be both a NED and member of this Committee. - Another route for a General Counsel is to take on the Chief Risk Officer role. It is not necessarily an easy thing to do, but if you can, you are well placed in sectors such as financial services to be a member of and/ or chair the Risk Committee which will give you a place on the board as a NED.
- You might like to stress your sector experience. As a NED you are not being appointed principally for your professional skills, but more for your commercial insight and the knowledge of a particular sector. So, if you are a lawyer who specialised in property you might be attractive to a property company. It is worth adding that heavily regulated sectors such as financial services or utilities, where there is complex regulation, are often keener than other sectors to have people with legal experience as NEDs, not forgetting of course that you are not being hired to be operational!
- Equally, if you have worked closely with boards either as the General Counsel, Company Secretary or as an external adviser, make sure you highlight this. Working with boards can be complex and highly demanding, so this too is valuable experience.
And a few final tips ...
- Don’t leave it too late in your career. More importantly, you should never look on it as a retirement job; it is too important and demanding to view in this way. If you are able to undertake a NED role alongside your executive career, the more the better, but don’t underestimate the responsibility and complexity of the role.
- Don’t underestimate the time commitment! If it says the role is 24 days a year, it will be far in excess of this if there is a crisis or any type of acquisition activity.
- Have a good head-hunter behind you who will champion your cause. This will help you significantly. Find one that specialises in NED roles.
- Understand and learn as much as you can on boards and governance.
- Attend a Non-Executive Director course so that you fully understand what the role encompasses.
- Talk with current NEDs to understand their experience and perspective on the role.
- Finally network, network, network!
So there you have it, I hope that I haven’t put you off – I have tried to end on a positive note! Lawyers can make exemplary NEDs, but often find it more challenging to find a position than they expect. Taking a practical approach and understanding what boards need can help you plan for your future NED role more effectively.
Good luck with your NED career!
Non-Executive Director Programme
Ian White is the programme director for the Cranfield Non-Executive Director Programme, which offers current and aspiring NEDs the opportunity to learn what’s involved in the role and build their NED network.
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