Referrals Are Key When Seeking and Appointing Board Members
Latinos have made major strides in the professional workforce, but there is still one significant territory to conquer: board membership.
To this end, The Alumni Society’s final event of the year was a SocietyCast that featured a conversation between TPG Partner and Global Head of Human Capital Ben Holzemer and Latino Corporate Directors Association (LCDA) President and CEO Esther Aguilera on how Latino leaders can best position themselves for board membership opportunities.
Here are key takeaways from their conversation:
Different Companies Have Different Board Needs
Companies require different types of boards at different points in their lifecycles, and there are many nuances and advantages to each, according to Holzemer. He noted that different boards will offer their own learning experiences, challenges, and compensation.
“Every company needs a great management team who is responsible for building a strong team and culture to execute the business plan. As investors, we’re responsible for supporting the management team but also putting in place a governance structure and board of directors that oversees and advises on the evolution of the business and the execution of the investment strategy or business plan,” Holzemer said.
Different boards will also entail different responsibilities. Aguilera specifically called out the responsibilities of serving on a public company board.
“In public company boards, there’s always a saying that directors are ‘nose in but hands out,’” Aguilera said. “You’re guiding and asking questions but the team is there to execute.”
Length of Service
The length of time served on a board depends on the type of company. In a private company board, for example, the expectation is often that you’re there until the next chapter of the company’s life, Holzemer said. In contrast, public companies tend to elect directors for very specific periods of time and those directors stand for election again at the end of their terms, he said.
“Generally, when you’re recruiting a director for private companies—be it venture capital, growth equity, [or] private equity-backed business—your hope is that the director commits to stay on until there’s an exit, meaning the point at which you as the investor realize your investment either through an IPO or a sale of the business to a different investor or to a strategic buyer,” Holzemer said. “Because these moments are often opportunistic, the tenure or timeframe for board membership is less concrete, and director compensation usually reflects that. There is a general attitude of ‘Hey, you’re along for the ride with us. It might be three years, it might be four years, it might be six years, we don’t know.’”
Referrals Are a Prime Sourcing Tool
TPG uses a variety of methods to find board-ready candidates for its portfolio of companies. Holzemer pointed to partnerships that TPG has with organizations such as the LCDA, The Alumni Society, Ascend, and Him For Her. These organizations help build connections and relationships with professionals with relevant backgrounds.
TPG also has its own in-house database and gets “a tremendous number of referrals” from its network, he said. These efforts and resources allow TPG to effectively match people to opportunities, he said.
“I think a lot of people in the industry know of our interest and passion on this topic, so we’re fortunate to benefit from referrals from many within our broader advisor network,” he said. “We also ask all of our partners around the world to use their own networks and the people they meet in the flow of business to refer individuals they think would be distinctive directors, with a particular focus on diversity.”
Diversity Is Key to a Successful Board
Holzemer and Aguilera vehemently agree: there is a plethora of diverse board-ready talent out there.
As a global investment firm that supports a wide variety of companies, TPG needs to find different leaders and leadership teams and board members that reflect the needs and interests of its diverse portfolio, Holzemer said. One aspect of TPG’s philosophy is that diverse boards and teams deliver better results and better returns, he said.
“We believe building diverse teams is not only the right thing to do but, importantly, it’s the right business strategy. We’ve seen this many times over the past few years through our own efforts to help our portfolio companies diversify their boards.”
While he believes there is a plethora of diverse talent out there, Holzemer encourages those who want to serve on boards to be proactive in their efforts.
“I can’t think of a board search we’ve done where we haven’t been able to surface really interesting and diverse candidates, no matter how specialized the company or skill set needed,” he said. “This said, we always encourage interested candidates to be thoughtful in the way they build their profiles and network. For example, you want to be in [databases such as] Equilar. You want to make sure your LinkedIn is up to date. You want to make sure you get to know people in private equity firms and other people that are directors. Those referrals are really powerful.”