Many aspiring directors take the step of joining a board without sufficiently reflecting on the possible risks in terms of personal financial liability and reputational damage — and without properly investigating the organization, sector and people involved. It is not uncommon to hear directors reflect that if they’d known what they were letting themselves in for, they might have had second thoughts.
Things you need to ask before agreeing to join a Board of Directors and while sitting on a Board of Directors.
One of the first things you will want to look at before joining the Board would be the financial statements of the company. There are other considerations as well.
Primarily, you want to join a Board that is … above Board. This means the Board acts in the best interest of the Company. You do not want to be in a situation where there are opposing and hostile factions on the Board. This could result in infighting and inertia which does not serve the company.
Also, consider issues of conflict of interest. Not just for yourself, but the company as a whole. Are communications on price-sensitive and profit-determining and cost-changing information open and complete?
Directors should disclose interests properly in the director’s reports. That would mean that the quality of financial statements and director’s reports from prior years should be scrutinized.
While being invited to join a Board is exciting and a step-up for many, tread with care. Directors have duties and responsibilities, and you should be aware of these before you join any Board.
Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you require legal advice, please contact us at: