Why membership in company boards is the new status symbol

“We can’t meet tomorrow, I have a board meeting.”  “I can’t play golf, I got a board meeting.” Such statements are now more common than in the past. Could it be that more of my acquaintances are in boards or has such membership become the new status symbol to be peddled? 

Let’s be blunt, board membership is the ultimate dream of most professionals. After all, where else can you go beyond that? It is more like reaching the top of Maslow’s hierarchy of human needs. Some become transcendental, thinking of the next generation and beyond their lives. They often become religious, joining cults or mainstream religions.

For others who reach this stage early in life, meaninglessness often follows, espoused by drug abuse and other extremities. Musicians often fall into the latter class. Others think of those they left behind, the hustlers and sufferers at the bottom of the social pyramid; they set up foundations.

Why is board membership gaining currency? One is the possible oversupply of other status symbols, leading to their loss of lustre. Status symbols are subject to laws of supply and demand. Think of the car: With a vibrant second-hand market, everyone now can easily own a vehicle. It does not matter the engine size or make. Owning a car ceases to be a status symbol.

Prolong life

But this symbol is not going down without a fight; in Kenya new and more exclusive models have come to prolong this symbol’s life. Have you seen Bentley, Jeep, Porsche and other high-end cars on our roads? The final death blow to this symbol however will be the electric car; quiet, less polluting and possibly cheaper. The ‘vrooom’ that makes heads turn will be gone.

The once leafy and exclusive residencies are now for everyone; Westlands and Lavington are competing with Githurai in building apartments. Even historic Karen is fighting to retain its status. The beneficiaries of this are real estate developers who are charging a premium for owning apartments in the once-exclusive estates. The new owners seem unaware that they are buying past status.

Professions that once imbued status have now been invaded by quacks and pretenders. How often do we read of medical malpractice or lawyers running away with client’s money? Schooling was once a status symbol; going to Harvard is not the same as going to Githaka-ini University. But changes in the schooling system have muted elitism and status. Notice how all universities got under the same law in 2012 and original national schools expanded into 105?

Another more recent status symbol is cross-cultural marriage, particularly black with caucasian. This status symbol is hard to copy but is also hard to show off beyond the wedding day. 

More reason for the elevated status is that there are only a few slots for board membership. There are only a limited number of private or government entities that need board members. This excludes secondary schools which are too many to bestow status or prestige except in the school locality. The scarcity is accentuated by the fact that once you join a board, your chances of joining others increase. That is not Kenyan, it’s common in US too.

In board membership, the Bible works to the letter; to those who have, more will be given.

For example, former US Senator Sam Nunn sits on the boards of Centre for Strategic and International Studies, ChevronTexaco, The Coca-Cola Company, Dell Computer, General Electric, Internet Security Systems and Scientific-Atlanta.

Kenneth Duberstein sits on the boards of The Boeing Company, The Brookings Institution, Mack-Cali Realty Corporation, Mack-Cali Realty, ConocoPhillips Alaska, Neff Holdings LLC and The Travelers Companies, Inc.

Brian Mulroney, the former Prime Minister of Canada, sits on the boards of Barrick Gold Corporation, Quebecor Inc, TrizecHahn Corp, Archer Daniels Midland Co, Cendant, AOL Latin America Inc, Cognicase Inc, and Wyndham Worldwide. Some board membership is advisory. The list can be enriched too. Get me a similar list for Kenyan firms.

Hold sway

The third source of status is insulation from the “hard” part of business. You receive reports and give direction, you may not be too concerned about the operational issues. It is hoped that you got into the board membership because of your experience, which at times equals wisdom. You are likely to have worked for several years to understand the intricacies of business.

It is contestable if the experience acquired over the years is always relevant once in the board. Think of an area such as computer science where youngsters hold sway because of the rapid changes. They have better insights into the reality of this industry but will most likely not join boards. This insulation can bring firms to their knees.

Board members are not “supposed” to get involved in operational issues, they should focus on strategic issues. The problem is that the border between what is strategic and operational is thin and keeps shifting. Insulated from the reality on the ground, one would question the chances of the board making optimal decisions.

The problem is made worse by the fact that a board member might have spent his or her professional life insulated from the realities of a firm and then eventually gets to the board to accentuate his “illusions”.

Think of someone who has worked as an accountant in an oil exploration firm. He might be a top notch accountant but has he ever visited an oil well? How is information from all functional areas analysed and synthesised for the board?

This insulation from reality is what makes the board attractive. The meetings are often not held within the firm’s premises, though they might have a boardroom, but in a five-star hotel. The board meetings should be as close to the firm’s core business as possible. Even high school board meetings should only be held when the school is in session.

The inclusion of chief operating officers into the board of some firms could be a realisation that lots of boards are insulated from the reality. Lots of COOs are also becoming CEOs. In public institutions where board membership might depend on political loyalty, not your track record, insulation can be extreme and risky to the future of the firm. 

The other source of prestige is that most board members are not elected. A few county boards now advertise for board membership, which I think is a step in the right direction. Most board members are appointed depending on their experience and the value they might bring to the firm - from networks to name recognition. Even when shareholders have to vote, it is never that democratic. In public institutions, closeness to political power is likely to earn you a board seat and the perks that go with it.

Board membership also comes with resources the body controls. Lots of meetings are about how to safeguard the firm’s resources. The fact that board decisions affect lots of people, some unborn, increases the prestige of joining it. Some firms control more resources than presidents while some employ more people than our Teachers Service Commission. Think of the prestige that comes with ensuring such jobs are secure and their families and dependents will not go hungry.

The prestige also comes from another usual source, networks. Such networks are often deliberate with cross-listing of membership to safeguard interests and can be sources of leverage in negotiations. They also ensure that information, one key strategic resource, is safeguarded. It is also possible that such networks can be used to control the markets and cut deals. The network becomes more powerful when extended to political power wielders.

Of interest in Kenya today is popularity of former government officials in private sector boards. Most firms know that government bureaucracy is complex and former insiders can make it easier to navigate.

Check the boards carefully; members have tentacles extending to other firms, governments and families to ensure leverage in critical issues of business. Some firms have diversified their boards to include non-Kenyans to inject new ideas and thinking.

In addition, the status is enhanced by perks, which are now disclosed to the public. The pay is something to write home about. This disclosure made me realise joining boards is not that bad for the pocket. What of offices and boardrooms themselves? Boardrooms are some of the coziest rooms in office complexes. Never mind that a “boardroom deal” is not a very positive term.

In the past, lots of Kenyan academics used to be board members; that seems to be waning but one private university seems to be doing very well in placing its faculty into the boards.

Advertise

Board membership is also used to advertise the firm, with photos and credentials of new board members appearing in major newspapers. That might also add to the prestige - other employees never get that privilege. 

The rise of capitalism and the status associated with wealth has made board membership prestigious. There is lots of intrinsic satisfaction that comes with reaching the pinnacle of capitalism. Some board members got there because of their entrepreneurial acumen, being the founders of the firm.

The prestige and status of board membership will continue rising driven by growth in the private sector and the younger generation’s appreciation of entrepreneurship.

The writer teaches at the University of Nairobi.