I was recently interviewed by Tony Featherstone, writer for the AICD magazine and former managing editor of BRW, for a story on how emerging directors should plan their transition from an executive to non-executive career.
Below is an extract of the article which appeared in Company Director magazine, Volume 31 Issue 02 MARCH 2015
Knowing when to start planning a governance career is critical.
By Tony Featherstone
Some executives decide on a career in directorship after their job ends abruptly. A change of ownership, missed promotion, or role change make them think about joining boards. Others take a long break after their executive career, find new energy and pursue directorships from a standing start.
Those who are more organised plan their transition a few years before leaving corporate life, joining not-for-profit boards (NFP) or those in an unrelated industry to their employer.
Robert MacLean, CEO of specialist advice practice Equitas Partners, believes executives and managers should gradually plan their transition to full-time directorship up to a decade before the event.
“Unless you are a hotshot CEO, aspiring directors can underestimate how much time it takes to build a portfolio of three or four directorships that provides a significant income.”
Many directors pursue board positions because they want to remain engaged in business after a successful executive career, be challenged by board work, stay connected with their peers, and give something back. Money is not the main motivator, especially for independently wealthy executives or those with a passion for the NFP sector.
But for those who have not been a C-level executive, partner at a professional service firm, or high-flying consultant, the loss of income from the transition from executive to non-executive and other financial issues, such as asset protection, require significant long-term planning.
MacLean say half the clients of his wealth management firm are company directors. “Everybody has different circumstances, but the common factor in those who had a successful transition to directorship was early planning, not only in financial issues but also how they built their networks and governance expertise. You don’t hear many successful directors talk about how they planned their transition 10 years in advance, but I can tell you many do.”
A decade of gradual planning might seem excessive to aspiring directors. It means planning for the transition in their mid-forties, given the 50-60 year old age bracket is prime time for director recruitment in Australia. Many forty-something executives, still enjoying a strong career trajectory, would find such long-range career planning a distraction or unmanageable.
MacLean disagrees. “For successful people, the forties are the decade where they start to accumulate assets more rapidly and make big decisions on houses, superannuation and shares or other investments,” he says. “It’s also the time when they should think about personal asset protection, particularly if they want to be a director later in life, and structure it right.”
MacLean says aspiring directors should start building their governance skills, experience and networks long before they make their transition. “The first step is doing the Australian Institute of Company Director’s Company Directors Course. It doesn’t mean you will get a directorship, but without it you will struggle. Then join an NFP board, such as a school board, to demonstrate your commitment to governance and build some real board experience and contacts.”
Aspiring directors should lift that planning at least two years before the transition, MacLean says. “At this point you need to start decoupling yourself financially from the organisation. That is, not having everything tied up in company shares, or being too reliant on company insurance policies and the like. The risk is that you leave your job abruptly and are left with a huge capital gains tax bill because your employee shares or options vest.
“You should also think carefully about life expenses. If you need $200,000 a year and it takes two years before you have a governance portfolio, you need to know where that $400,000 will come from.”
MacLean says a successful transition to directorship begins with leaving an executive career on your terms. “I have seen too many people pursue directorships because they are reacting to an event, such as job loss, rather than being proactive. They don’t realise that if you are a fifty-something executive, these days your job security can be very tenuous.”