New Zealand Law Society - How great lawyers can make great directors

How great lawyers can make great directors

How great lawyers can make great directors
The changing faces of Board Members, the Superdiversity and the Ministry for Ethnic Communities recent list of Top Diverse Board-Ready Directors.

Great lawyers can make great directors, but not for the reasons an observer might think. The required skills are broad, deep and liberally topped up with personal and commercial experience. Four experienced directors who are lawyers by training, focus on how to build a director out of a lawyer, from the ground up.

Four experienced directors, who are lawyers by training, focus on how to build a director out of a lawyer, from the ground up.

All concur: great lawyers can make great directors, but not for the reasons an observer might think. The skills that are required are broad, deep and liberally topped up with personal and commercial experience.

Get started early, do courses and keep sharpening your skills, they say.

Become a Director? Maybe

Not all lawyers make brilliant directors. Many do, but some don’t. If you want to, you can get there. Directorships are as much an art as a science. Opportunities abound.

Not as many lawyers are on New Zealand boards as accountants, says Kirsten Patterson, CEO of Institute of Directors. There’s a reticence – and therefore an opportunity, potentially, for lawyers in New Zealand to hone their skills in governance.

Kirsten Patterson, CEO, Institute of Directors; lawyer; Co-deputy Chair of the Global Network of Directors Institutes (GNDI), Chair of the Brian Picot Ethical Leadership advisory board.

“We often say: ‘every board in the country will have a chartered accountant, and if they don’t they should,’” she says. “But it’s not true for lawyers to the same extent.”

There are several reasons. First, says Kirsten, is that lawyers have a clear understanding of the growing liability of directorships. “They may be put off by that,” she says.

Conflicts of interest are another reason, says Alan Sorrell, a barrister who has served on many boards and chaired several. But while conflicts are real for practising lawyers, he says that often they can be managed. “The term is widely misunderstood. It’s about one party’s interest perhaps overwhelming their obligations in relation to the enterprise itself,” he says, adding that there is a scale of conflicts of interest, from high to low.

Mai Chen, Managing Partner of Chen Palmer and a director herself, says a lawyer makes a choice between the opportunity to advise a client or serve on its board. “For that reason, if you want to be a director, you should consider being one all the time,” she says.

The joint and several liability of partnerships is a live issue for lawyers, as it is for accountants.

Alan Sorrell, Barrister; former Chair of the NZ Film Commission, the Arts Board of the Arts Council of New Zealand Toi Aotearoa (Creative NZ); board member – Auckland Film Studios Limited; Dep Chair Tennis NZ Inc.

“A partnership might want to have a say as to whether you become a company director, and if so what kind of company, and what your participation will be,” says Alan. “At one end of the scale is being a director on a public company in the finance sector; at the other is being a board member on a crown enterprise where the state gives you indemnity.”

“Many in the legal profession move into outstanding governance roles and careers as leading directors, at the end of their professional lives,” says Kirsten. But there’s more opportunity than that, she says, which young, practising lawyers should explore.

“Having some exposure to governance by developing directorships through the not-for-profit sector, while you manage the risk appropriately, may be a great way to build your skills. You can apply them later commercially,” she says.

Good at governance

So what skills does a lawyer need to be ‘good at governance’? And how can legal skills be applied in governance? The experts are surprisingly in accord.

You’re not there as general counsel

A lawyer may tick the skills box for those appointing to the board, but that’s not enough. Counterintuitively, perhaps, lawyers should not take a board appointment to give legal advice, though their legal skills are very usable.

Mai Chen, managing partner, Chen Palmer; independent, non-executive member Bank of NZ; chairs the Superdiversity Institute of Law, Policy and Business.

“If a board wants legal advice, they buy it. External or in-house legal advice is easy to get. But your job as a director is to add value to the company, to senior management,” says Mai.

“Directors are there to understand and challenge management, to know when external advice is needed and when further research is needed,” says Kirsten. “That’s a real skillset; it’s not expecting the board member to take legal responsibility.”

“I wasn’t brought onto the board because I was a lawyer,” says Liz Longworth (a director on the Financial Markets Authority Board, lawyer by training and with an international career at the UN under her belt). “That being said, I think my law training is extremely helpful. It helps when I’m looking at matters with a regulatory mandate, or looking at them through a policy lens. Having that legal background means you can navigate frameworks and contexts in which the business is operating.”

“Knowledge of the law enables decision-making in a context where risks are identified. The lawyer on the board helps everybody understand the further investigations that may be needed before a decision is made, and the consequences of that decision,” says Alan.

He adds: “Your knowledge of the law is not relevant except when it comes to considering whether the legal advice given to the board stands the test. Don’t roll up your sleeves and do the work yourself. Equally the consequences of being the lawyer on the board is that other members of the board are entitled to get some comfort from your legal knowledge, and rely on it.”

But your legal, critical-thinking skills are vital

“Lawyers are good at problem-solving,” says Mai. “They are customer-focused because they are used to looking after clients; they see the big picture, they can predict the consequences. They can be strategic on the board. They can recognise when an issue is not the battle, but is actually the war and thus requires rapid escalation and effort to solve.”

“Law helps you develop a very analytical mindset. You’re trained to take in large amounts of information, distil it, work out what’s important,” says Liz. “Legal training enables one to weigh up competing factors, and make sense of variables. As a lawyer, you become quite agile when working through a problem or strategy. You never get a simple case, or a simple principle in law. You need that agility on a board, to understand how you weight factors, and cope with variables.”

Liz Longworth, FMA board member, former lawyer in practice

“Legal ways of thinking help,” says Alan. “As lawyers, we ask ourselves: what is the evidence? Why is this so? Why did they say that? What are the other sides of the matter? What is the counter factual? These are really important questions when reading reports from the operational side of the business.”

“On a board, the ability to recognise things I thought were black and white – and are actually grey – is helpful,” says Mai. “I have found myself saying to other directors: ‘hold on, it might not be this way. This thing might happen’.”

Get ready to do the mahi: read, read, read

All our directors agree: if you want to serve on a board, get ready to spend time. A lot of it: much of it reading.

“Boards take in information through the written word,” says Kirsten. “I don’t think directors really appreciate the amount of work that will be required. They have to consume, apply judgment, decision making and objectivity to large amounts of written information.”

“Governance takes you into the heart of all matters,” says Liz. “You’ll need to understand what you read, and how to interpret it.”

“Number one: do the work, just as you do in a court case,” says Alan. “Read the papers. Learn about the business the enterprise is in.”

Leverage psychology: deploy diplomacy

The sheer variety of human interaction that lawyers encounter stands them in great stead at the board table.

“Lawyers bring people skills,” says Kirsten. “They have an ability to form relationships with people across a broad spectrum. They’re able to challenge, be comfortable being challenged, to listen, to change their view. These are great skills for boards.”

“Lawyers interact with all sorts,” says Liz. “They see a lot of different scenarios. This helps one interpret human reactions, and to read character. You get pretty good at understanding what’s coming at you across the table.”

“To be a great lawyer, and a great director, you need to be a great psychologist,” says Mai. “Most lawyers have to get people to do what they do not want to do. So, you have to understand what motivates them and what they value. Given that hard conversations are sometimes required on a Board when things are not going right, it is critical to be able to catch senior management “doing things right” when you can. Praise what you can. These soft skills are very important for succeeding in governance.”

Polish your knowledge

All board members must have a wide understanding of the world, and keep up to date.

“Directors need to be able to consume large amounts of information from a range of sources: international, national,” says Kirsten. “Things they agree with, and things they don’t. They need to be curious, and great curators of trends, reports, news, what’s happening. Every issue is a board issue – equal pay, diversity, takeovers – the range of issues a board has to be over requires intellectual agility.”

“It’s good to be forced to keep yourself up to date so you continue to be at the top of your game with relevant expertise and insights to contribute,” says Mai. “Stand back and take a broad view. It’s good to think about all sorts of things like anti-slavery, Covid-19, vulnerable customers, climate change. You can’t rest on your laurels.”

“Diversity has real benefits, not just ethnic diversity around the board table,” says Alan. “I’m talking about diversity in skill sets, life and work experience. It means you’re less likely to end up with collective group thinking. You’ll hear new ways of approaching problems, doing things, new systems for running the enterprise and dealing with problems. Evidence proves diversity brings more profit.”

“Being a director is quite an art,” says Liz. “You have to bring a broader lens than a lawyer, a broader world view. But you also can see a lot as a lawyer, if you have your eyes open, and bring it to the table.”


Learn more about governance at the IOD:

Sport NZ also offers an excellent introduction to governance, ideal for not for profits.

Lawyer Listing for Bots