Wednesday, November 24, 2010

Mickey Drexler at the Met

The J. Crew buyout announced this week calls to mind the time I saw its CEO, Millard (Mickey) Drexler, in action — giving a standout performance on, of all places, the stage of the Metropolitan Opera House at Lincoln Center.

That needs some explaining. So let me back up a bit.

Investor Ronald Baron of Baron Capital Group was holding his firm's annual investment conference at the Met. This was November 2007. I was a shareholder in one of the Baron family of mutual funds at the time, and thus was invited to attend.

This was my first Baron Investment Conference, and I was bowled over by what an event Ron Baron puts on for his investors. The daylong gathering included presentations in the morning by CEOs of companies in which the Baron funds hold sizable positions and who are leaders that Ron Baron and his portfolio managers hold in high regard. During the lunch break, in a tent set up on the Lincoln Center grounds, we ate our box lunches while rocking out to a live performance by Sheryl Crow. After lunch, back in our comfy seats at the Met, came brief remarks by the firm's portfolio managers and a fuller overview of the investment landscape and state of the firm by Mr. Baron. He then turned the stage over to a "surprise entertainer" – who turned out to be Bette Midler. She proceeded to give one of her inimitable songfests. The day then wrapped up with "milk and cookies" with the firm's portfolio managers and analysts. This was not your grandfather's annual meeting.

Now back to Mickey Drexler. This "retail statesman," as the Wall Street Journal called him in its report on the buyout, was one of the CEOs addressing the packed house. His presentation on J. Crew was cleverly couched in the context of "Things I Wish I Knew When I Started Out in Business."

Befitting the setting of this grand opera house, Drexler gave a riveting performance. His "wish list" was full of sound management wisdom that would be widely applicable across industry lines, not just for success in retailing trendy apparel. For example, one of his learnings was, "Let those who aren't working out go quickly." Another: "Old dogs need younger dogs around." He had rich material to amplify each of his management maxims.

Indeed, I was so taken with Drexler's presentation — immediately seeing its potential to be a cover story in Directors & Boards — that I followed up after the conference with his counselors about adapting his remarks into an article. Alas, nothing has come of that . . . yet.

But I am nothing if not dogged in pursuit of worthy additions to the canon of how great leaders lead. It may be hard to pin this down while the buyout process runs its course, but Drexler's "Things I Wish I Knew. . ." deserves to be captured in print — in the pages of Directors & Boards. Then, we will all know what he means, and how we can apply it to our own businesses, when this business dynamo says such things as, "It's All About the Mustard."

Monday, November 22, 2010

Arnold, Corporate Director

Esther Dyson, longtime IT maven, VC investor, board director, and cosmonaut in training, among the many impressive dimensions of her life, just posed an interesting question to her Facebook network: What should/will Arnold Schwarzenegger's next career be?

Some of the responses were on the level — "executive producer of various movies," "the international 'kick ass' guy on climate change and clean energy," and, citing his "great role" in "Kindergarten Cop," an FBer suggested, "Maybe a next gen of teacher, especially with young kids." Then there was this possibility: "Isn't his ultimate ambition to run for President?"

Of course Esther's query stimulated a few jokesters: "What was his last career? Bankrupting a state?" And this Conan-themed response: "Do we even have to ask? It will be to crush his enemies, to see them driven before him, and to hear the lamentation of their women."

I chimed in, too, with this suggestion: "How about a corporate director? Lots of possibilities — a media company, a defense contractor, even WWE." To which I added, "Then I get to interview him." I was only being somewhat playful, especially with the cite to World Wrestling Entertainment Inc., when I posted this to Esther's FB page.

But, actually, why not consider Arnold for a board seat?

Any other two-term governor of a major state — and remember that California's economy is the largest in the nation and the eighth-largest in the world — would get a serious lookover by board nominating committees and recruiters.

It was then, with a few curious clicks of the mouse, I discovered that there is, of all things, an opening on the board of WWE. Michael B. Solomon, a managing partner of Gladwyne Partners LLC, announced earlier this month (with no reason given) that he was stepping down from the board. The investor had been on the WWE board since 2001.

So, gentlemen and ladies of the WWE board nominating committee, start your engines!

And if Arnold does turn up in our Directors Roster as a newly elected board member somewhere in corporate America, I will indeed endeavor to line up an interview for a Directors & Boards article.

This is a bit of a fun blog post to kick off Thanksgiving week — a week that I hope finds the Directors & Boards audience in a thankful mood for having survived a year that brought us a plethora of new SEC rulings on governance disclosures and a year that also brought us Dodd-Frank. More than a few directors might well feel like asking: Where was The Terminator when we needed him!

Thursday, November 18, 2010

GM's IPO — Hit It, Dinah!

For the first time since it entered bankruptcy reorganization in June 2009, a new high-flying General Motors stock returns to Big Board trading today. Its IPO was priced swimmingly yesterday, looking to be the second-largest IPO in U.S. history, according to preliminary reports.

Who better to greet the return of GM from the dead than Dinah Shore, with her serenade of "See the USA in Your Chevrolet" in the clip above.

I am showing my age here, but I well remember Dinah singing this advertising ditty in her television show in the 1950s, although my remembrance of this goes back to the late '50s and not 1952, the date of this clip. A superstar entertainer during that decade, Dinah had a long and close association with GM and its Chevrolet brand. "The Dinah Shore Chevy Show" ran from 1956-1963. According to this detailed account:

A GM spokesman told Time magazine in December 1957 that the company considered its link with Dinah to be "one of the most enduring love affairs in TV." Indeed, Dinah Shore was helping to make Chevrolet the most popular automobile brand in America. In the 1950s, Chevy sales in the U.S. averaged 1 million or more cars and trucks a year. . . . She became the "queen of General Motors" in its heyday — a super-salesman and more.

So, welcome back GM. For most of my 30 years at Directors & Boards, the GM board has been held in fairly — and, in many cases, unfairly — low esteem. There have been many good people who served on the GM board, which has been inordinately defamed over the decades. But rightly or wrongly, just saying "GM board" has been a kind of shorthand for a board that fiddled while Rome burned.

Perhaps now, as trading gets underway in this resurgent automaker (that is actually making enviable profits again), we relegate to the junkyard GM's reputation as a lemon in the world of corporate governance.

Tuesday, November 16, 2010

How Long to Get a Board Seat?

A fascinating stat somewhat buried in the 2010 Board of Directors Survey recently released by Heidrick & Struggles and WomenCorporateDirectors (WCD) is this —

• It takes women about 2.4 years to achieve their first board seat once they start actively seeking a corporate directorship; the comparable "time in search" for men is 1.4 years.

The one-year difference in male-female board seating is an interesting story in itself. But my reaction to this statistic is this: Call me just a tad skeptical.

I say that based on years of anecdotal reports from close readers of Directors & Boards who have written and called me for counsel on the best ways to be considered for a corporate board. My sense from these interactions is that it typically takes longer — sometimes a lot longer — than the 1-3 years cited in the survey.

Here is one such seeker, who emailed me this note about a year ago:

When I turned 50, I felt like I had enough experience to add value to a public board of directors. I had served on private boards, and had also briefly been chairman of a public company. I want to serve for a public company. I joined the National Association of Corporate Directors, and began soliciting smaller public companies to serve on their boards. I even solicited pink sheet companies. I solicited private equity firms to serve on the boards of portfolio companies. I signed up with headhunters, and Nasdaq Board Recruiting. In the last several years, I have sent my CV to hundreds of people, and made hundreds of telephone calls. I have been in the running, but so far no board positions.

I did not have much to offer to this fellow — and it was a man who wrote this — other than to say that it seemed to me like he was doing all the right things. I passed along a few keen advisories on "How to Get on a Board" that Directors & Boards has published, and also planted the idea that one thing he might consider to raise his profile is to do some writing on leadership issues for us and other prominent publications.

But after receiving notes like his, and reading and hearing many similar stories of the frustrations in trying to crack the code of the director selection process, you can see why this particular stat jumped out at me. I am tempted to do some further fact finding on this. Stay tuned for that in Directors & Boards in 2011.

This board survey, overall quite impressive in its findings, is recommended reading for both present board members and hopeful candidates, and can be accessed on both the WCD website and the Heidrick & Struggles website.

Pictured is Susan Stautberg, the enterprising co-founder and co-chair of WomenCorporateDirectors, an organization that describes itself as "the only global community of women corporate directors."

Sunday, November 14, 2010

Women on Boards Q3 2010

The torrid pace of women being elected to corporate boards has cooled off in the third quarter of 2010. Our Directors Roster data tracking of newly elected board members shows women comprising 27% of the total. This is down from 36% in the second quarter of this year and 34% in the first quarter. For 2009, women comprised 39% of newly elected directors, according to our closely watched Directors Roster data.

The third quarter — July through September — can often be the slowest quarter of the year for new corporate board elections. The Roster recorded 103 board additions in total, down a tad from 115 in the second quarter, but up from 90 additions in the first quarter.

Representative of the Q3 elections is Trudy A. Rautio (pictured), EVP and CFO of hospitality and travel company Carlson, who was elected to the board of Imation Corp., which offers data storage and security products, in July. (A noteworthy feature of the Imation board is that it has a woman as nonexecutive chairman — Linda W. Hart, vice chairman and CEO of the Hart Group, a diversified group of companies primarily involved in residential and commercial building materials.)

The full display of the July-September board elections will be in the Directors Roster that is published in the Fourth Quarter edition of Directors & Boards. That issue comes off press in early December.

Thursday, November 11, 2010

Trench Foot: A Veterans Day Tale from Warren Bennis

Being a veteran of the U.S. Navy, this day has great meaning for me. Here is a tale of battlefield leadership that has just made a big impression on me that I want to share as we celebrate our country's past and present servicemen.

It comes from a new book by Warren Bennis, who has distinguished himself in so many ways over a long well-lived life — in leadership positions in academia both as teacher and administrator, as an adviser and consultant to companies, and as an author (of 30 books!) and thought leader in the art and science of management. His book is titled, "Still Surprised: A Memoir of a Life in Leadership" (published by Jossey-Bass).

That life in leadership started early. Here he is as a young officer leading a platoon of soldiers on the front lines "in the final throes of the Battle of the Bulge, that murderous last-ditch effort by the German military," he writes. There is no way to effectively paraphrase Bennis' tale, so here it is in his own words (copyright by the author):

In the field, one of the dangers our G.I.'s faced was a horrible condition called trench foot. For their march across Europe, the men had old-fashioned leather boots, not the rubberized ones that would be standard issue later. Their boots and socks would quickly become soaked through as they slogged through the snow. In a vain attempt at keeping their boots dry, they would wrap them in burlap sacks. That only kept the moisture inside, making the situation worse. Soon their feet would become infected. If they weren't tended to properly, their toenails fell off, their feet eventually turned black, and they developed gangrene. Frostbite might cost you some toes, but trench foot cost soldiers their feet, even their legs. The problem was enormous, especially for those soldiers stuck in water-filled foxholes for weeks at a time. Stephen Ambrose writes in "Citizen Soldiers" that in the winter of 1944-45, 45,000 American fighting men had to be taken off the front lines of the European Theater of Operations because of trench foot.

Some officers thought the men were goldbricking, getting trench foot on purpose in order to be relieved of duty. Given how agonizing and potentially crippling the condition was, I found that hard to imagine. I had been warned of the seriousness of trench foot by one of the doctors back at the regiment's makeshift first-aid station. He said that the only way to avoid it was to take off your boots and socks, wash your feet, and then dry them carefully, toe by toe, preferably by a fire.

Given the bitter cold and the men's ambient level of exhaustion, they were loathe to bother with this complicated nightly toilette. After all, it meant heating water from their canteens in their helmets, draping their wet socks around their necks to dry overnight, washing and meticulously drying their feet, then putting dry socks and their boots back on. But I had taken the regimental doctor's warning to heart. Other companies were losing a lot of men to frostbite and trench foot. I decided I would preach the gospel of meticulous foot care to my men. My crusade didn't have a heroic ring to it, but it would serve two important purposes: it would save the men from suffering, and it would limit the company's losses to those caused by German snipers and other perils we couldn't avoid.

This wasn't the kind of campaign you could wage by fiat. Every night I would go from squad to squad, making sure each man took off his boots, washed his feet, dried them carefully, and put on dry socks before he put his boots back on. And my initiative did what it was supposed to do. None of my men got sent back because of trench foot.

In retrospect, it is one of the things I am most proud of doing during the war. It sounds compulsive, even fussy, but it was an example of an officer fulfilling one of his most important obligations — taking care of his men. To this day, I think of those soldiers every morning after I shower and carefully dry between my toes.

A powerful story of leadership, no? It is just such displays of care for their country and their fellow comrades by veterans like Warren Bennis that we honor on this day.

Tuesday, November 9, 2010

NCR's William Anderson: Lessons for Today from the 'Japan Miracle'

In its report today about Avon selling its Japanese operation to private equity firm TPG Capital, the Financial Times calls the deal "emblematic of the gloomy sentiment regarding corporate prospects in Japan."

Gloomy? You can't get much gloomier than the assessment of Japan's decline on the world stage reported by the New York Times in mid-October in an extremely downbeat article, "Japan Goes from Dynamic to Disheartened." These accounts are dramatic testimony on what a turnabout the country has experienced, from world leader to world laggard.

When I arrived at Directors & Boards in 1981, we were just going to press with an article on the "Japan miracle," as the author called it. That author was William Anderson, then the chairman and CEO of NCR Corp.

Anderson had a unique perspective on the rise of Japan as an industrial behemoth: He had been a prisoner of war, serving for four years in a Japanese prison camp, and then was a witness at the war-crime trials in Tokyo at war's end. "I saw Japan at the low point of its long history," he wrote. "I was stunned to see the Japanese economy shattered, its political and social fabric torn, and its people demoralized. Those of us who were in Japan immediately after World War II had serious doubts as to whether the nation would ever rise to be a first-rate power."

Rise it did. Remember the early '80s hysteria that Japan was going to rule the industrial world, supplanting the U.S. as the engine of growth and productivity — and buying up America while it was at it.

And yet . . . read again Bill Anderson's description above of the Japanese economy. Does this sound familiar in how commentators are describing the U.S. economy today — angst-ridden wonderings about whether this nation will be a first-rate power in the future?

Maybe we should draw on the playbook that Japan followed to reenergize its economy. Here is that playbook, as Anderson laid out in his classic Directors & Boards article, titled "Scrutable Success: A CEO's View of Japan Inc.":

The structure on which Japan Inc. was built was beautifully simple. In the government sector, the Ministry of International Trade and Industry would develop and promote a national industrial plan. And the Bank of Japan and the Ministry of Finance would supply the capital and carefully control the purse strings in order to keep the new industrial plan on track.

Meanwhile, the doers — that is, business and labor — would be given a relatively free hand to utilize the inherent strengths of the capitalistic system. Taxation and government intervention would be kept to a minimum. Social programs would be deferred until Japan could afford them. Emphasis was to be on the future, not the past, or even the present.

In looking to the future, Japan's vision was clear. Modernization of its industry was given top priority.

Perhaps a national industrial plan as Japan crafted it would be questionable for adopting here, but that bit about taxation and government intervention being kept to a minimum certainly seems to be crucial to reenergizing the U.S. economy.

It is always heartening to find in the Directors & Boards archives a piece of wisdom that provided thought leadership at the time of publication and offers continuing thought leadership for solving today's great challenges.

Illustration of William Anderson that appeared with his article published in the Summer 1981 edition of Directors & Boards.

Friday, November 5, 2010

Gone, Baby, Gone: Lawyer-Directors

The Directors Roster that is published in every issue of Directors & Boards is mostly well known for its tracking of newly elected women directors and the noteworthy data findings from that research.

But many other insights into director recruitment and board composition come out of our Roster research. Here is one such finding worthy of note: In the Directors Roster launch year of 1994, the percentage of lawyers taking a seat on corporate boards was 11%.

Can you guess the percentage total in 2009? The answer: 1%. That is a major ramping down.

A smart aleck might chime in and say, “Gee, I am surprised it was so high.” The common wisdom is, “Why would a lawyer choose to join an existing or potential client board? Why subject yourself to revenue-foreclosure possibilities for the firm? Or risk being tripped up by the director independence rules or potential conflicts of interest? Or the liability”

But as our Roster data suggest, there obviously was in governance days of old — not so old at that — a greater representation of lawyer-directors.

One of my favorite anecdotes relating to the role lawyers played as board members was told to me by Raymond Troubh.

Regular readers of Directors & Boards will be familiar with Ray Troubh. He is one of our favorite authors — always chock full of important insights on board leadership and generous with his wise counsel on being a good director. Ray proudly wears the mantle of professional director. A graduate of Yale Law School, he came to corporate directorship first as a lawyer and then as a banker, before hanging out his shingle as a fulltime director.

The background in law was a valued asset he brought to his board work. We talked about that when I interviewed him for the “Oral History of Corporate Governance” that I did in 2001, on the occasion of the 25th anniversary of Directors & Boards. In reviewing his career trajectory from law school to the boardroom, here is a snippet of what he had to say:

“For board purposes the combination of my legal and investment banking experience was a great advantage. As a young lawyer I used to attend board meetings and draft minutes and prepare resolutions and watched how boards functioned — watched the chemistry among the directors. As an investment banker I made presentations to boards on doing financings or doing a tender offer or merger. And because I understood corporate law I was not as afraid of lawsuits and of standing up to the hostile bar.”

You can imagine what a comfort it was to his fellow board members to have a peer steeped in the rule of law, and procedures of law, and someone who is able to go toe to toe with inside and outside counsel as well as opposing counsel. Who would not want to serve on a board with a member like that?

For better or worse, the Directors Roster is documenting that those days are over. An option for knowledge sharing and “courage making” among the close circle of board members has been made moot — just as directors are being barraged by an unprecedented onslaught of new regulatory and investor aggressiveness.

What a time it would be to have within their ranks a member intimate with the law — the law as wielded by Congress and the White House, regulatory agencies, and the plaintiff’s bar.

It’s clear that, post-Dodd-Frank et al., boards need to embrace an ever-closer relationship with inside and outside counsel. For this Boardroom Briefing, we tapped many experts in the legal community who are close advisors to boards for their current best advice on a range of timely and pressing governance matters. Click here to access a copy.

Monday, November 1, 2010

Dickensian Times

I did not see "corporate director" as one of the 100 Best Jobs in America just tallied by Money Magazine and

I did not see "editor" on the list either.

To people who inquire of me about the state of the publishing business, I am telling them that while some in the media industry are calling it Darwinian, the term that for me best describes things is Dickensian.

That's Dickensian as in "The best of times, the worst of times." It is the best of times in that this is an exciting, even historic, time to be in the media business as we transition from print to digital. A whole new world of distributing information and communicating with audiences lies ahead.

It is the worst of times in trying to make it through that transition and coming out whole on the other side to be able to enjoy this new world and the opportunities it holds in promise. Even the best minds in the industry are not sure what the business model is that will undergird this industry going forward.

Perhaps the same situation holds for being a corporate director. It is the best of times because the role of the director has never been as important, and that importance will be magnified as we move into the future of heightened investor input and stakeholder expectations, spurred by ever-activist regulators and legislators.

But it is the worst of times to be a corporate director as this new balance of power among the directors, management, investors, and regulators sorts out. The financial crisis has put the boot to what remains of many of the comfortable and clubby old paradigms that governed how things were done in the boardroom, starting with how a new member was recruited to how directors acted once on the board.

For example, can you imagine any director being added to a board now with the understanding that he or she is to be seen but not heard during their first year in office? Ridiculous, no? Or the notion that directors don't need their own independent consultants. Or that the CEO should always be the chairman. Or that directors shouldn't talk to shareholders. So many dying embers of classic board behavior paradigms.

When behavioral paradigms and operating models become untenable, the present becomes a harsh place to do business as all eyes focus on the path to a more promising future. That's Dickensian times. So it is no surprise that neither corporate director nor editor are on any "best jobs" list.