Directors & Boards reported on the prevalence - and upsides and downsides - of political leaders assuming corporate directorships. About 6% of the 700 corporate board appointments at ≥$1 billion revenue companies tracked by Directors & Boards were characterized as political leaders, including former members of congress, cabinet officials, federal agency heads, military chiefs, and governors and other state government heads. A 2015 study cited in the article estimated an increased probability of corporate board service by former senators and governors of ~30% relative to the general population.
Global executive search firm WittKieffer CEO Andrew Chastain commented:
It’s common and appropriate for boards to target former politicians to serve as board members. A well-placed former public servant can assist the board in making strategic decisions informed by rich understanding of the current environment. While these board members may wield some political influence, what they really do is to check off an important strategic competency box — the ability to provide intelligence on how things work in the legislative arena, from Washington, D.C., to foreign and state capitals. Former political or government insiders ensure that governance decisions are made within the context of their political or legislative implications.
Soundboard Governance President & Society member Doug Chia adds that choosing a former political figure to serve on the board is particularly calculated for companies in industries "where government relations are important." However, as is the case generally, absent the chosen director's having the requisite skill sets or experience, board effectiveness may be negatively impacted.
Other potential downsides associated with political figure-directors include increased media and other scrutiny and associated PR and reputational risks, and perceived conflicts of interest.
See EY's Center for Board Matters' "Independent directors: new class of 2018" (reported on here) (indicating that government, public policy, and regulatory expertise were the seventh most frequently cited areas of expertise in newly elected Fortune 100 company directors in 2018), and additional information & resources on our Board Composition, Board Recruitment & Succession/Refreshment and Board/Governance Practices pages. This post first appeared in the weekly Society Alert!