Financial fluency, a willingness to ask questions and not being afraid to stand out are critical traits of public company directors, said directors speaking on a panel at the Council of Institutional Investors' Fall Conference in San Diego on Wednesday.
The panel was on governance dynamics at emerging companies and those of more established public companies.
"Financial acumen is the key element that anyone who wants to be on a board has to have," said Richard S. Hill, chairman at Marvell Technology Group Ltd. and Xperi Corp., and a director at Arrow Electronics, Autodesk Inc. and Cabot Microelectronics Corp. "If (the board is) not fluent financially, they really don't represent the shareholders effectively."
It's also critical that as a company evolves into a high-tech company, the board includes directors who are fluent in technology, Mr. Hill said.
Young companies that are pre-IPO "really require active involvement of the board in a way that public companies don't necessarily require," said Daniel Cooperman, director at Molina Healthcare, Zoox, and Nanoscale Components Inc. "Specifically, board members really do need to be actively involved in helping the management in identifying consultants, individuals with expertise that can fill particular roles in the company." Another important function of a young company board is helping management construct the company's strategic plan, Mr. Cooperman said.
Mary Beth Vitale, a director at CoBiz Financial, said it's important that a board isn't just stuck with "asymmetrical information from (its) management team" but has directors who know what's happening outside of the company and can identify potential disruptors.
Asking questions if you don't understand something and having the confidence to call something out should also be part of a director's DNA, panelists said.
Before joining a board, Messrs. Hill and Cooperman said they need to be convinced the CEO has a value system that is focused on its shareholders.
Ms. Vitale said she asks herself whether she can add value to a board.
On whether an independent chairman or combined chairman/CEO was more effective, panelists said either setup could work, depending on the company.
"It depends on the circumstances," Ms. Vitale said. "When you're looking at young boards that are evolving ... sometimes it is easier to have an independent chair there because they need the help. That CEO may be a founder not knowing what needs to be done."
"I don't think this is an area where one size fits all," Mr. Cooperman agreed.