Amassing your governance capital: getting on a corporate board is about who you know (network), how you conduct yourself (character), and what you bring to the table (expertise). Exercising leadership on nonprofit boards is a winning start to the process.

• Author: Korngold, Alice

DENISE O'LEARY'S first governing experience was serving on the board of the YWCA of San Francisco, which she joined in 1985. Twenty-five years later, O'Leary, 49, serves on the boards of US Airways and other major publicly traded companies. At the same time that she was advancing as a highly accomplished venture capitalist, she was also amassing her governance capital.

Today it is harder than ever to meet the demand for top-quality corporate board members. Executive recruiters have databases filled with people who have the business expertise to serve on public boards. Yet the recruiters will recommend only those candidates with personal references by high-level corporate peers who have observed their performance in strenuous decision-making group dynamics. Recruiters describe this process as "establishing character."

It is more difficult to identify public board candidates now that Fortune 500 CEOs have been asked by their own directors to cut back on outside boards. Yet another limiting factor is the compensation for board service. The remuneration is not significant enough to attract high-net-worth candidates unless they actually find board service otherwise compelling. Fear of personal liability also dissuades potential directors. All told, the traditional supply of candidates has constricted.

These conditions suggest that boards and recruiters need new solutions to find excellent candidates other than the usual suspects. At the same time, in today's world of ethics and accountability, it is necessary to ramp up the expectations of board members. Scrutiny of candidates who are considered for boards has increased, not diminished.

A fresh opportunity

The need for quality candidates presents a fresh opportunity for the coming cohort of high-potential individuals. For businesspeople who seek to serve on corporate boards, the best way to develop and prepare themselves is to serve on nonprofit boards as early in their careers as possible, and to strive to make those boards better by learning and introducing best governing practices. Then, they can move up on the nonprofit board trajectory to learn, develop, contribute, and become recognized, while they are also doing good. Service on a nonprofit board is an important, if not essential, means to develop the skills, judgment, and experience for corporate board service; these skills enhance one's business acumen as well.

Denise O'Leary is a case in point. She ultimately became a member of the US Airways board primarily because of her business accomplishments. She has a B.S. in industrial engineering from Stanford and an M.B.A. from Harvard. She was a general partner with Menlo Ventures, a venture capital firm, from 1983 to 1997.

O'Leary paid her dues on nonprofit boards through hard work and leadership roles. She became chair of the finance committee of the YWCA of San Francisco and a member of the executive committee. Then, in the mid-1980s, in the midst of the shareholder pressure on divestment in South Africa, she was asked to serve on a small committee formed to advise the board of trustees of Stanford University regarding endowment investments in companies doing business in South Africa. She eventually chaired this committee, which prompted a board colleague to ask her to run for election as an alumni trustee. In 1990, she was elected to the Stanford University board. Later, she also chaired the board of the Stanford Hospital and Clinics.

While O'Leary was serving on the Stanford board, a fellow board member recruited her to serve on the Alza Corp. board. Alza develops pharmaceutical products and is now part of Johnson & Johnson. Alza was her first large publicly traded board. From there, she was asked to serve on the boards of Chiron, Del Monte, Medtronic, and America West Airlines (which merged with US Airways when it emerged from bankruptcy in 2005). She recently accepted the (nonprofit) board chair position of Corporation for Supportive Housing, a national organization with proven strategies for reducing homelessness.

O'Leary is a compelling example of a high-potential candidate who typically would not be found in a recruiter's CEO-centric database for public boards. Yet she surely had supreme qualifications in terms of her business expertise. By serving on nonprofit boards, she gained critical leadership experience and governance capital. Just as important, by serving nonprofits she signaled to others that she was qualified...