Successful director onboarding and orientation lets the new director hit the ground running with the right information and corporate context to make a difference from the start. Directors starting with a new board have substantial business experience, though there may be gaps in the immediate application—understanding what the company does precisely and how the company accomplishes its mission.

Successfully bringing directors up to speed will help the company with their immediate contribution, help the Board see things from the new director’s fresh and diverse perspective, help management gain insights in the areas that the new director can contribute, and help the new director feel like a valued new board member. Picking the right team for your board gives the company huge advantage.

However, because Boards typically turn over infrequently, the General Counsel and others responsible for the onboarding process, such as the corporate secretary, often have to dust off an old process document so as to avoid missing an important step. This article sets out a comprehensive checklist to support the onboarding and orientation process.

Note, however, that laws and regulations change, so be sure to run a “rules check” and update applicable requirements for new directors, whether in a public company or regulated industry. Also note that this article is aimed at public company director onboarding, a comprehensive standard of compliance, more so, generally, than that of private companies. Some of the regulatory requirements would not apply to private companies or non-profit organizations.

Preparing for bringing a new director on board

Preparing to formally bring on a new director assumes that the Board has followed its bylaws, corporate governance guidelines, and applicable legal and regulatory requirements. Boards will have recruited, vetted, met with and questioned the candidate, obtained the candidate’s responses to a directors and officers’ questionnaire, conducted a background check (preferably run by an reputable and independent company that specializes in these screenings), discussed the candidacy at the Nominating Committee, discussed again at the Board level, and voted to appoint or elect the director to the Board.

Several of the steps required to prepare for a director’s appointment or election will carry over into the director’s service. As one simple example, in responding to the corporation’s standard director and officer questionnaire, as part of the Board’s vetting process, a candidate will provide biographical information. That biographical information will be used in the public disclosures and press release as well as the corporation’s website page about the Board. Equally important, these preparatory steps ensure that there will be no legal, regulatory, or other obstacles to appointment or ongoing service.

Appointing the director

The Board resolutions will have addressed the size of the Board, findings of independence, equity and compensation (pro-rated, as appropriate), and the director’s term and class. Considering when shareholder approval may be required, the new director would be assigned to a specific class, if a classified Board, as part of the series of voting resolutions. For Boards without classes, the director would be appointed to the Board without classification. Then, or later, the Board would assign the new director to committees.

This article is not intended as a legal primer on directors’ fiduciary duties, the role of the Board vs. management, boardroom dynamics, or strategic guidance. In addition, while outside the scope of this paper, it is important to set the expectation with prospective directors as to the commitment required, in time, preparation, and attention. The Chief Executive Officer and other corporate executives—as well as fellow directors (and shareholders)—expect that each director will be engaged, prepared for meetings, and available outside of meetings for formal or informal discussions.

Director onboarding

Once the date of appointment or election has been set and then the director appointed or elected, you must ensure that you take care of all of the items set out below. The items cover everything from scheduling to compensation, required disclosures to indemnification. The list is comprehensive, based on experience, but it should be updated for your situation and as rules and practices change.
Preparation for Director Appointment or Election

  • Completed Directors’ and Officers’ Questionnaire—The candidate should have received the blank form, responded completely, and returned it promptly so that the Nominating Committee has sufficient time to consider the responses and ask for clarifications before considering the formal appointment of the candidate and making its recommendation to the full Board for approval. The questionnaire assists in the corporation’s compliance with the SEC, exchange requirements, and standards of due diligence. It also supplies baseline information for the corporation’s proxy statement and annual report on Form 10-K. The corporation’s legal department or outside counsel should update the questionnaire annually to ensure that it is picking up any new federal securities laws, regulatory changes, and exchange requirements, and is capturing other information requests the Board would like to consider. The questions cover numerous points around independence aimed at eliciting conflicts and related persons transactions, with an expansive scope sweeping in, on the one side, subsidiaries and affiliated companies, and on the other side, family members.
  • Background check—Another task to complete before the Nominating Committee formally considers the individual’s appointment is the background check. Using a well-established third party to conduct the background check helps assure the independence and completeness of the Board’s diligence process.
  • Other checks—The Nominating Committee or its chair, or the corporation’s chief legal officer, should ensure that the prospective director has no other conflicts or impediments to Board service. To that end, the candidate should be questioned as to whether he or she is ready, willing, and able to serve; has any medical constraints that would affect his or her ability to serve that could not be accommodated; or has any financial constraints or is dependent on the income from the Board service.
  • Clearances—The candidate should ensure, and the corporation should ask, that there are no other clearances required nor conflicts. To that end, the corporation should verify that the candidate has obtained clearances from any other board on which he or she serves (some Boards restrict or limit other board service); has no other conflicts of time or commitment that cannot be managed; has no contractual limits on his or her service, including employment arrangements, or other commitments or agreements, or regulatory limits; is not at risk from “overboarding,” serving on too many boards, whether as a practical matter as to the amount of time the individual could commit or otherwise (that is, either regulatory limits or proxy advisory firm recommendations); and has no issues with board or committee “interlocks” under securities regulations and anti-competition laws.
  • Confirmation of independence—The Nominating Committee, with the assistance of counsel, should specifically confirm the candidate’s independence, or understand that if the candidate is not independent the effect on governance as well as limits on committee service.

Immediate Steps After Appointment or Election

  • Obtain EDGAR codes for SEC filings
  • Provide forms and obtain signatures for limited power of attorney authorizing the corporation to file Forms 3, 4, and 5 with the SEC on behalf of the director, if the director will not be signing himself or herself
  • Provide to the new director two copies of the corporation’s indemnification agreement (if any) with directors, for signature, one signed copied to be returned counter-signed. Be sure to double-check your company’s directors and officers insurance coverage.
  • Obtain any bank or brokerage account and individual tax information required to issue compensation and equity.
  • Update the Board of Directors contact and internal distribution lists
  • Review with the new director his or her biography provided in the D&O Questionnaire, to determine whether any changes need to be made for use in an 8-K filing disclosing the director’s appointment, as well as in a press release and with the proxy statement. Similarly, obtain a photo for use on the website and for PR purposes.
  • Coordinate press release and 8-K filing from General Counsel with Investor Relations and Press Relations leads.
  • File 8-K within required time and issue press release in coordinated fashion.
  • File Form 3 and Form 4 with SEC for equity grants and holdings. (Note the anomaly that Form 4 filing is required within two days, and Board appointment disclosure on 8-K is required within four days (Form 3 filings are even more anomalous with 10 day filing requirements). Companies often announce the appointment and file the 8-K within two days and issue the press release then so that the Forms 3 and 4 filings about equity awards and holdings do not hit the public disclosures without context of the appointment.)
  • Follow up and send courtesy copies back to director of new filings disclosing their appointments and equity filings.
  • Update website to add new director and biography. (Now would be a good time to double-check the other directors’ biographies to see if they need revision.)
  • Update related persons transactions list with director name and affiliated entities, as obtained from D&O Questionnaire.
  • Add new director to whistleblower hotline access if the company’s practice and as appropriate.
  • Provide director electronic Board book access and instructions and training on the system (and supply device, like iPad or other tablet, if usual practice). Provide access to background or resource materials, or send the materials to the new director.
  • Provide updated Board calendar, confirm no conflicts with Board and committee meetings, and ensure director on distribution for any updates (which would typically be made through the usual Board distribution).
  • Brief director on other resources available, such as subscriptions or mailings (and add new director to Board subscriptions such as National Association of Corporate Directors programs).
  • Point director to director education programs resources and materials and brief him or her on the Board’s obligations and the corporation’s support (e.g., reimbursement for director training seminar and reasonable travel expenses).
  • Schedule new director orientation as well as any site visits, sales meeting participation, off-site strategy meetings, and product demonstrations.

Director orientation

Starting the orientation process assumes that the director has already become substantially familiar with the company and its operations, by reviewing its public filings and other materials, meeting with and questioning the company’s executives and other directors, and as a result of the individual’s familiarity with the industry and market.

Following appointment and the immediate requirements noted above of onboarding a new director, the orientation process provides for a complete program to integrate and educate the new director. Orientation ensures that the director obtains a solid understanding of the company and its operations, at a base level, like a “101” for the director, the foundational course for what follows.

However, director orientation is not optimal as a “one and done,” but instead ideally sets the stage for further training, with opportunities for all directors to continue their education with internal sessions and external seminars (e.g., National Association of Corporate Directors sessions, university and business school programs, and webinars). Other components of an ongoing program might include opportunities to meet additional executives in the corporation, outside of the C-suite, not only by inviting them to present formally in board meetings but also in getting together informally for dinners, at site visits, or during other corporate events.

Before initiating the kickoff orientation meeting, the new director should be provided the foundational materials set out below, made available via the electronic Board book or in a binder.

Corporate items made available to directors during onboarding:

  • Articles of incorporation
  • By-laws
  • Corporate Governance Guidelines
  • Code of Business Conduct
  • Insider trading policy and blackout policy
  • Director and officer trading guidelines including 10(b)(5)-1 and pre-clearance trading
  • Director stock ownership guidelines
  • Related persons transactions policy
  • Director compensation summary and excerpts from proxy statement
  • Director and officer liability insurance summary, including Side A, and benchmark data
  • Anti-corruption policy
  • Other corporate compliance policies as appropriate (anti-harassment, export control, acceptable use, social media, data privacy and data security, etc.)
  • Committee assignments
  • Committee charters
  • Committee policies (e.g., Audit Committee investment policy)
  • List of Section 16 officers and biographies
  • Director contact information
  • Board calendar
  • Public filings, including latest 10-K and 10-Qs and recent public filings such as offering documents
  • Earnings call transcript
  • Proxy statement
  • Relevant recent 8-k filings
  • Relevant recent press releases
  • Presentations to analysts (investor relations and industry analysts)
  • ISS and Glass-Lewis reports
  • Select recent analyst reports
  • Corporate organization chart
  • Corporate strategic plans, business plans including by division, and consultant analyses
  • Product descriptions
  • Current operating plan, financial statements, budget
  • Optional modules for director training might include
    • legal duties,
    • market and marketing plans,
    • customer support and satisfaction briefings, etc.

To maximize the benefit of the orientation session, the new director should have familiarized himself or herself with the material provided, as noted above. He or she should come prepared with questions, to ensure that he or she has a sound understanding of the corporation’s mission, vision, strategy, and value proposition.

Questions a new director might consider, to draw out answers with respect to those key areas, could encompass the following:

  • What are your goals for this year, next three years?
  • Please describe your strategy (mission, vision, value proposition).
  • How does your strategy help achieve the goals? And in reverse, how do those goals align with the overall strategy?
  • What investment has been made to achieve those goals?
  • How does the strategy mesh with the corporate culture and vice versa?
  • What is the team that will be executing on the strategy? What are their skills, talents, gaps? Who are your high potential employees? What is your succession plan?
  • What are your competitors doing? How are they responding to your initiatives? How are you responding to theirs?
  • What is disrupting your industry? What could be disrupting your industry? How can we keep an eye on the horizon to help you, management, spot trends and try to anticipate where disruption may come from?
  • Please review with me your finances, marketing, sales, manufacturing, etc.
  • Describe the key elements of the ecosystem, market, industry, and geopolitical environment in which the company operates. What are the tax and regulatory effects and compliance requirements that the company faces now? How do you think about enterprise risk management?
  • For each manager, what is the company’s elevator pitch?
  • How do you think about financial drivers, returns (on equity, investment, capital), margins, benchmarks?
  • Describe the shareholder profile and base.
  • What are the most critical risks for this strategy and the components of it?
  • How do you stay current on the industry, technology, markets?
  • How can I be most helpful to you?

While the director should be prepared with materials and questions, the company employees should also prepare for the director orientation session. Senior leadership should be prepared to set the tone and cover top level strategy. Functional leaders can then fill in on their view of the strategy and what is being done to execute on that strategy.

As part of the orientation, the director should be provided a facility tour, site visit, or plant tour, depending on the company or industry. A walk-around gives a concrete introduction to what the company does and gives a new director a feel for the employees and the work. Again, depending on the company, a tour may need to be handled separately from the orientation provided by management. Further, as part of the continuing orientation, the executive team should consider who else the director might benefit from meeting, those with special skills, charter or assignment, or perspective. As noted previously, director orientation, much like continuing legal education, is an ongoing process.

Jeff Levinson is Vice President, General Counsel, and Secretary responsible for global legal strategy and legal operations at NetScout. Before joining the company in 2005, he served four years as corporate counsel at Nuance. Before that he was General Counsel at an internet startup and a division counsel at a global publishing company. He is the author of Bloomberg BNA Corporate Practice Portfolio Series No. 95, Managing the Corporate Legal Department: How to Create Plans, Develop Processes and Lead the In-House Legal Team. This portfolio volume describes the legal and business skills needed to effectively lead and manage a corporate legal department.