ILA Essentials – Participants’ dinner and opening speech
On 9th January, ILA hosted Fernand Grulms, Independent Director, at The Essentials Dinner. Mr Grulms shared his own experience as an independent director and focused on 5 topics: what being an independent means, “logistics” of a director, “How to get mandates?”, “Do directors need a contract?” and D&O Insurance.
When working as an independent, directors are on their own: They must think on their own, without people preparing reports or making decisions for them, “the successes that you have, it's your merits and no one else. Unfortunately, the disappointments you get, it's also your fault” said Mr Grulms.
Independence also means financial independence. This financial independence can take some time, but Mr Grulms warned directors not to accept cheap mandates, they should value their work and be rewarded properly.
Regarding to logistics, working as private person or setting up a company is almost the same, tax wise: Directors have a 20% withholding tax, irrespective if the client pays to an individual or a company. However, as a private individual, directors have no possibilities to carry forward their losses – if any, which is possible in a company. Mr Grulms also advised to organize due diligence and a compliance reports at board level.” I have that in all the boards of companies I sit on. Besides, I ask a compliance reporting on taxes: when have the tax declarations to be made? when have they been filed for the tax? and when have the taxes been paid? So, you see that no one can come and ring at your door at home to take your TV away”. Independent directors also have to make a regular bookkeeping, also known as "comptabilité à partie double" that applies as from 100000 Euro turnover per year.
Mr Grulms then moved to his 3rd point: How to get mandates? Directors must build a good reputation by networking, being involved in the board they sit, attending events, etc. Even if they are competitors, directors can also bring business to each other.
They should also develop a thick skin and be aware that they will not always win mandates. Finally, they shouldn’t forget to communicate: stay active on social media and express their opinions through those channels. Even if they don’t always say it, people read the content posted by someone they follow.
Negotiating a contract is really learning by doing. Mr Grulms identified 3 different forms of contracts in the market. The first one is a letter of appointment, the second one is a “regular” contract, and the last one is no contract at all. He explained that this last one should be avoided,.
Finally, Mr Grulms concluded with D&O Insurance “: D&O is important. I always ask for it and normally you get it. And I'm very strict on that: usually, I ask in my contract to get a copy of the premium payments of the D&O insurance every year. It is nice to have it in the contract; but it's even better if they do it and if they pay the premiums. So, I can always only encourage you to go for that and look into that in detail.”