Thursday, November 27, 2008


Thanksgiving Day 2008. In the spirit of being grateful for one's blessings, let me share with you two vignettes of thankfulness.

The first comes from Jack Bogle's new book, Enough. This anecdote, in fact, inspired the title of the book. (See my blog post of Nov. 24 below for another reference to Jack's book.) Here goes:

"At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, "Yes, but I have something that he will never have — enough."

The second insight into "enough" has been a longtime personal favorite.

It comes from H.L. Mencken (pictured here), a newspaper and magazine editor long revered by journalists as one of the most influential writers of the early 20th century. When the "Sage of Baltimore" (as he was known, thanks to his birthplace and base of punditry) was coming to the end of his days, he recounted in his diary the many things he was grateful for. One was this: "I always had a dollar more than I needed."

On this day, and in all days to come, may you feel blessed for all that you do have.

Monday, November 24, 2008

Bogle Is 'Not that Bearish'

Is there any steadier-at-the-tiller mind in the world of finance and investing than Jack Bogle's? I'm hard-pressed to name one.

Bogle has been the author of several pieces in Directors & Boards, which merit but minor mention among his voluminous output of books, articles, papers and speeches over his long and distinguished career. He is out with a new book, titled Enough [John Wiley & Sons] that I am anxious to read. 

I caught up with Bogle again on Nov. 20 when he did a special live radio broadcast from Philadelphia's Union League Club with the city's talk radio maestro Michael Smerconish. He fielded questions for an hour both from Smerconish and the 500-strong audience listening raptly for some guidance in navigating the choppy market from this wise elder statesman.

Here are a few sound bites from that broadcast:

• "Mutual fund portfolios will experience a 350% turnover this year" — more than a 10-fold increase over the average 30% turnover that was the norm in Bogle's early years of investing.

• "The market is now selling at 1.6x book value — the last time it was at that level was in 1986." It was at 8x book in 2001, Bogle noted.

• In answer to a question from the audience as to whether "Hank Paulson is an idiot?" Bogle replied, "No, something worse than that ... he is an investment banker." After a big laugh from the crowd, Bogle explained that being an investment banker gives him a skewed view of the world, one that may not be helpful in coming up with the right solutions for the current crisis.

• A damning verdict for the financial services industry: "Any business that subtracts value from its clients is going to be hoist by its own petard."

• He says he's "not that bearish" on the market. This "serious recession" will take about "1 and 1/2 to 2 years to get through, but the market will anticipate that and will start its recovery ahead of time." 

• What's needed when we get through this period is "to go back to a society based on long-term investing and not the folly of short-term speculation." 

• Rejecting the title of economic guru — "There are no economic gurus" — he answered the question of "Who do you trust?" with a forthright "The American electorate."

Put this book on your holiday shopping list. And, by the way, if you're passing through Philadelphia on a business trip or pleasure jaunt, tune in to Michael Smerconish's show, broadcast from 6 a.m to 9 a.m. Monday to Friday on 1210AM WPHT. It starts my day with a heady brew of current events analysis and lively guests — such as the inestimable Jack Bogle, whom I will call an economic guru whether he likes it or not.   

Thursday, November 20, 2008

Board MVPs

It's official — the Most Valuable Players of this past baseball season have been named.

In the National League, Albert Pujols, first baseman for the St. Louis Cardinals, got the MVP honor. To the chagrin of Philadelphia Phillies fans — yes, that's me, a lifelong Philadelphian — he edged out Ryan Howard, a major contributor to the Phils winning the World Series this year. 

Dustin Pedroia of the Boston Rex Sox gloved the big award in the American League, becoming the first AL second baseman voted MVP in nearly half a century.

Boards of directors have their MVPs too. What goes into being the most valuable player on a board?

Directors & Boards Publisher Robert Rock (pictured here) has seen such individuals in action. As he notes, "On the public and private boards on which I serve, I have worked with several directors whom I have come to admire as truly exceptional in the value they add to board deliberations and decision making. They are the MVPs of these boards."

Bob examines the skill set and personal attributes of a board MVP in his Letter from the Chairman, published in the Fourth Quarter issue of the journal and also in the November issue of the e-Briefing newsletter.

Does your board have an MVP? 

Tuesday, November 18, 2008

Capital Meets Capitol

Here is a sobering thought for all CEOs and board members: "Washington is now the financial capital of the U.S." The CEO who made that observation appended this remark with "God help us."

That comment was voiced at the annual board meeting of the Wharton School's SEI Center for Advanced Studies in Management, from which I have recently returned. I am reminded of that comment every time I see the head of Goldman Sachs' Washington office, aka Treasury Secretary Hank Paulson, leading the day's news developments. 

This is the world we're in at the moment. Plan accordingly ... and, as my CEO board colleague cautioned, God be with us.

The SEI Center, by the way, is headed by Prof. Jerry Wind, a thought leader in numerous business areas, including corporate governance. He authored what I like to call a "seeing around corners" cover story (pictured here) for Directors & Boards three years ago that asked the question, "Can one board do it all?" His well-argued answer was "No." Drop me a note and I'll share a copy of the article with you.

Incidentally, also overheard at the SEI board meeting: "One-third of the House and Senate members don't have passports." Let me append to that, "God help us."

Thursday, November 13, 2008

Five Words

Want a challenge? Describe what makes a great director — but do it in five words.

James Skinner, vice chairman and CEO of McDonald's Corp. (pictured here), nailed it when he did the honors of presenting the Public Company Director of the Year Award to McDonald's Chairman Andrew J. McKenna.

Mr. McKenna was selected by the National Association of Corporate Directors for this highest of honors, and was given the award on Oct. 20 during the annual NACD conference. In the award writeup on their honoree, the NACD noted that:

"Mr. McKenna has earned great respect for his strong leadership through very turbulent times. The untimely passing of two CEOs in the early 2000s posed difficult challenges to the company's board. Mr. McKenna demonstrated great compassion during these events, and his pragmatic leadership helped keep the board focused on business objectives."

But it was Mr. Skinner who cut to the quick. Eschewing any flowery rhetoric, the CEO gave the audience packed into the JW Marriott ballroom in Washington, D.C., the five-word formula for what makes a great director:

"Sound judgment and wise counsel."

Can you top that? Why try? It's perfect as is. All companies should be blessed with board members for whom this five-word description would apply.

Monday, November 10, 2008

A Leadership Idea for Lead Directors

I don't know how the banks are going to do it — scoop financial rescue money in the front door and shovel big bonuses out the back door. No matter what the rationale offered, I just don't see how this passes any kind of smell test. The stink of it will bowl you over even if you've got wads of tissue stuck up both nostrils.

$15 trillion.
That's how much investors have lost so far this year in the stock market collapse, as reported by the Wall Street Journal. And that's not even factoring in a couple of deep downdrafts the market has taken since that number was reported on Nov. 6.

Yet, Wall Street is still talking about bonuses earned. How incredulous is that?

My longtime colleague in governance watching, Nell Minow, put forward all the right reasons why there should be "No Bonuses for You" in her New York Post commentary.

So, here is a leadership idea for boards. The lead directors of all the financial institutions taking government bailout funding should publicly propose to their fellow board members and management that there be a bonus moratorium for 2008.

Some adult in the room has got to take the smell test and say, "This just doesn't pass."

The lead directors not only would be in harmony with the national interest but they'd be doing their fellow board members a favor. The bonus dispersal is going to be a reputational risk nightmare for the boards involved.

Lead directors, stand up and be counted — and that means don't be counting out millions in bonus bucks.

Thursday, November 6, 2008

Can You Say, 'Change Is Coming'?

Whew! The long march to the White House is over. We now know who the President-elect is.

Politics aside, who could dispute that Barack Obama is a masterful orator? And that those rhetorical skills propelled him from the streets of Chicago to 1600 Pennsylvania Avenue.

All leaders don't need to be masters of oratory, but they do need good speaking skills. There is a lot that can be learned by studying how Obama used his communication skills to present a vision of organizational change and energize the stakeholders. 

I expect the new book Say It Like Obama [McGraw-Hill] to be a hot motivational self-improvement book for CEOs, board members, and leaders of all stripes. In it are copies of Obama speeches, including the speech that started it all — his 2004 Democratic National Convention Keynote Address — and what the book terms "the speech that made history again," his 2008 Democratic National Convention Nomination Address. Leadership development coach Dr. Shel Leanne dissects the speeches and rhetorical techniques and shows how to construct an argument that is persuasive and motivates others to action. 

My previous post on Oct. 30 was a recommendation for a book that will equip you to navigate perilous financial markets. The "market" for organizational change will be huge at the tail end of this year and into 2009. This book will better equip you to motivate your key constituencies to do the job that needs to be done so as to still be here to enjoy the better days ahead that the new President has envisioned.

Tuesday, November 4, 2008

Ultimate Succession

Today is Election Day 2008. It's a day of ultimate succession planning — in which we as a nation designate the new Chief Executive who will lead the enterprise that we call the United States. 

What's going to happen today brings to mind one of the most trenchant remarks ever made about the voting role of boards in executive succession.

Brace yourself if you are a CEO. I'm not sure that you would be happy to have a group of directors who walk into every board meeting hewing to this voter's mandate.

And what mandate might that be? Simply this: According to one of the grandmasters of governance, the first decision that the board should address upon taking their seats is to answer this question — "Is this the day that we fire the CEO?"

I learned that from Robert Mueller (pronounced Miller), pictured above. Bob was a dear colleague. He was one of the most knowledgeable individuals about the workings of corporate and advisory boards, having written 18 books on leadership, and was himself an expert practitioner of directorship. Monsanto was but one of his public company boards. I'll have to devote one or more future blog posts about Bob because there is just so much to be said about him.

Bob served on a board (not Monsanto) whose members asked themselves this question before the start of every board meeting. If the answer was "no," Bob said the meeting then proceeded on course. But the focus on the leader's qualifications to maintain office was regularly before the "electorate" — and not subject to the vastness of four-year intervals of rendering judgment on performance and capabilities.

We won't be firing the current Chief Exec today. But I wonder how many voters are going to the polling stations and subliminally answering "yes" to the Mueller mandate: "Is this the day that we fire the CEO?"