Tuesday, December 21, 2010

Gen. Georges Doriot's Holiday Party Advice

I first became aware of Gen. Georges Doriot — a famous Harvard Business School professor who is widely acknowledged as the founder of the modern-day venture capital industry — during a conversation with Barbara Hackman Franklin. I was interviewing Barbara for the "Oral History of Corporate Governance" special 25th anniversary issue of Directors & Boards published in 2001, and this was one of her remembrances:

"I certainly don’t recall corporate governance included in any studies at Harvard, although I still find it amusing today to remember that a course taught by one of the most esteemed members of the faculty, Gen. Georges Doriot, was closed to women. We were warned by our counselling professors not to try to sign up for that course because he didn’t take women. When I ran into him many years later, I told him I had wanted to take his course, and what did he think about not allowing women in his class. He looked right at me and said, 'I’m damn proud of that!' ”

Barbara was a good sport and laughed about it when we talked, but I am sure it was not a laughing matter at the time. As one of the first women to graduate from Harvard Business School (which she did in 1964), she and other high-achieving women missed out on taking a class with this renowned individual. As the New York Times stated in its obituary when the General — as he was universally called because he had been a brigadier general in the U.S. Army during World War II — died in 1987, "for four decades [he] was widely credited with inspiring and training more leaders of American corporations than any other person."

The blog Creative Capital, written by Spencer Ante as a follow-on initiative to his book, Creative Capital: Georges Doriot and the Birth of Venture Capital, listed the "Top 10 Aphorisms of Georges Doriot." It is a marvelous set of observations and guidance.

One in particular is quite applicable to this time of year — the Christmas and New Year's holiday season, when parties and festive occasions are in full swing . . . and wine and spirits are flowing freely. Thus, take heed of the General's counsel:

"Never have more than two cocktails on any occasion. If any information is to be exchanged over whiskey, let us get it rather than give it."

That sounds like prudent behavior for executives of all stripes. (Another of the General's top 10 aphorisms is this: "Do not have a banker on your board — in bad times he remembers he is a trustee of someone's money"; but we won't deign to comment on that eyebrow-arching maxim at this feel-good moment when Christmas is almost upon us.)

So on this note of party etiquette from the General, we will close out the "Boards At Their Best" blog for 2010, and wish all our readers of this blog and of Directors & Boards and the monthly e-Briefings a joy-filled holiday season and my very best wishes for a resoundingly strong year in 2011. Be sure to come back and read us in January.

Photo of Gen. Georges Doriot courtesy of Harvard Business School

Thursday, December 16, 2010

Executive Stress: We Have Been on the Case

I venture to claim that there is almost no topic of board governance and leadership that Directors & Boards has failed to address in its 35-year history.

Take executive stress, for example — as in Jeffrey Kindler's stress-related retirement as Pfizer Inc. chairman and CEO, announced last week.

A dip into the Directors & Boards archives — circa 1977, a year after the journal was founded — turns up this article: “Beyond Executive Stress: Board Responsibility for CEO Mental Health,” written by Patricia Aburdene. (Ms. Aburdene went on to co-author the huge bestselling Megatrends series of books, and is now out with Megatrends 2010.)

A pertinent passage that certainly speaks to what just unfolded in Pfizer's boardroom:

A CEO under stress can make a disastrous decision before his condition has deteriorated to the point of breakdown. A tangle of family and marital problems might not affect a chief executive’s performance one iota. But if the business is going downhill too, it could become too much. A strong and competent corporate head is, after all, only human. Says Dr. Gertler of New York’s Stresscontrol Center, “It’s up to the board to keep track of how much stress the CEO is under at any given time” — and how much the CEO is capable of withstanding.

Corporate executives are no more prone to mental problems than any other group and perhaps less so. But because the adverse consequences of mental problems are multiplied by the level in the organization the executive has attained, it is always a cause for concern whenever it occurs among senior management.

At the shop level, it’s hundreds of dollars lost; at the department level, thousands; at the divisional level, millions; and at the corporate level, tens or even hundreds of millions.

The Pfizer board is taking heat now for this sudden succession issue. Did the board wait to long to force the matter? Should the board have separated out the chairman and CEO roles before this to ease the load on their CEO? Such questions naturally arise.

But this incident raises awareness of a little-commented upon role of the board — to monitor the CEO's tolerance for stress and to take action when warranted.

Even in its earliest days Directors & Boards was making this case. But you don't have to be such a longtime reader of the journal to know that we are specialists in pointing boards to the high ground of enlightened engagement with their managements and shareholders.

"The Scream" (2001), illustration by Jean Kristie

Tuesday, December 14, 2010

Russia House: The Pepsi Formula

In the fall of 1990 Directors & Boards Publisher Robert Rock and I traveled to PepsiCo headquarters in Purchase, N.Y. The reason for our trip? The Iron Curtain was coming down, Eastern Europe was opening up as a new market for U.S. goods and services, and Russia was undergoing perestroika — a thawing of relations with the West — all of which boded promisingly for American companies. We wanted to talk to a leader who knew how to penetrate previously closed-off marketplaces for some lessons that would be useful for our journal's readers in pursuing this historic business-development opportunity.

That meant talking to Donald Kendall.

At the time of our visit, Don Kendall was chairman of the executive committee of the PepsiCo board. Earlier in his career, he was the engineer of PepsiCo's breakthroughs in Eastern Europe and the Soviet Union (and in China, too). You can see him pictured above at left with Soviet Premier Nikita Khrushchev and U.S. Vice President Richard Nixon at the historic U.S. Exhibition in Moscow in 1959, where one of the exhibits was famously a display of Pepsi-Cola. Kendall, then the president of Pepsi-Cola International, arranged for that exhibit. Over the next 13 years, he patiently worked to develop a relationship with Soviet officials. Finally, in 1972, the company signed a breakthrough trade agreement providing for the bottling and sale of Pepsi in the U.S.S.R. — the first foreign consumer product to be sold in that nation. By 1990 it was the leading foreign soft drink in the Soviet Union, widely available in restaurants, grocery stores and from street kiosks, and was also the most widely distributed soft drink in Eastern Europe.

Kendall was elected chairman and CEO of the corporation in 1971 and held those positions until 1986. Bob Rock and I spent an hour with this affable veteran of global expansion, capturing his memories of those very early forays into inhospitable markets — asking him everything from what Moscow was like in 1959 to the intricacies of bartering Pepsi for vodka to lessons for CEOs in venturing abroad.

Of course, this recall of our visit with Kendall is prompted by PepsiCo's bold bid for Wimm-Bill-Dann, an offer of $3.8 billion for a two-thirds stake in the dairy and juice company — the largest acquisition by an American company in Russia.

Here are two of the questions we lobbed at Kendall, and his answers give you a taste of how this Pepsi visionary thought about risk and opportunity.

Directors & Boards: Given the current instability in the Soviet Union, would you encourage your colleagues in major Western companies to enter the country at this time?

Kendall: Absolutely. There is no place with greater opportunity. If you wait until you have stability and convertible currency, the opportunity is going to be gone. When you have an opportunity is when there are problems — when everybody is not running there. In running a business you have to take risks. Where there is opportunity there is always risk. If there were no risks in the Soviet Union, someone else would already have the business. So I don't think instability is something that would stop me from going to the Soviet Union. What is going to happen? They are not going back to what they had before. You might have civil unrest. A lot of the republics may end up seceding from the union. But they are going to have some system that will be different. It probably won't end up like the United States or Germany. It will probably end up more of a socialist country. Nobody knows how it is going to end up. But there will be some structure there in which you can continue to operate. Nobody would have dreamed years ago that you would have what's happened in the Soviet Union today. But I believed back then that given the opportunity, we could be successful. We were successful under the old system, so you know we are going to be very successful under the new system.

Directors & Boards: You even held a PepsiCo board meeting in the Soviet Union way back in 1974 — the first U.S. company to do so. Do you think other boards have begun to embrace the opportunities to be found in the Soviet Union and in Eastern Europe? Or is it more of a curiosity?

Kendall: I wanted the board to understand the opportunities. One of the problems we have in the U.S. with our international operations is that a lot of chief executives don't get involved. Somebody said one time that a lot of chief executives are inclined to travel the 'silk stocking' route — they love to go to London, Rome, and Paris. They won't go over to the Soviet Union and conduct negotiations. This will change over time, but if a chief executive — the decision maker — goes over there, he can get something done. Furthermore, you don't get the enthusiasm for something unless the chief executive gets involved. The same is true in China and in a lot of other countries. You must go there and find out what the opportunities are.

Identifying opportunities, measuring risk, making bold moves, and reaping rewards — that was Don Kendall's 'Russia House' formula for Pepsi's growth and success, being applied again in the Wimm-Bill-Dann deal.

Thursday, December 9, 2010

The Annual Meeting as the Art of Romance

As discussed in my previous blog posting, I am underway on a cover story for the first Directors & Boards issue of 2011 that will tee up a major rethink of the annual shareholder meeting — what is wrong with how it is done today and what may be needed to fix it for the governance era ahead.

Which brings me to Steve Ross (pictured).

I have fond memories of Steve Ross from back in the mid-1980s when he was head of Warner Communications. I made some money in Warner stock, which makes for warm recall. And as a shareholder I attended a couple of annual meetings that he ran. I remember them as some of the best annual meetings I have ever sat in on — infused with his outsized "CEO rock star" personality, his ultrasmooth handling of the crowd — and it was quite a crowd in those heady days when a Hollywood studio like Warner Brothers still reigned over the global entertainment industry — and his marvelous presentation of the scope and scale of Warner's businesses.

Connie Bruck, in her superb 1994 biography of Ross, Master of the Game: Steve Ross and the Creation of Time Warner, further amplifies my recall of why Ross was so masterful about so many things in his business dealings — including running an annual meeting. From her book, a telling anecdote, capped by a nicely personal coda:

From the start, Ross prided himself on his shareholders' meetings.

Over the years, he would become more polished, but even in the early days of Kinney Service he came to these events like a natural; showcasing his depth of knowledge about the company, his numerical nimbleness, his salesmanship so consummate that it seemed more about the art of romance than about selling. As he did with other business tasks, Ross made his preparation for these meetings into a game; he challenged his associates to find a question that would stump him, as though he were about to appear on one of his favorite television quiz shows.

He had a strategy for these meetings ("You never play a shareholders' meeting to win, you play to tie") as, it often seemed, he did for everything in life. And once he was on the podium, taking questions from the audience like so many lobbed balls, he seemed to want them to go on forever. "To make him stop answering questions," recalled the company's longtime secretary, Allen Ecker, "you'd have to turn out the lights."

Despite his prowess, however, in later years Ross liked to recount how he had gotten into trouble in one of those early meetings. "We were in the parking business then, and a woman asked why we didn't have a garage at a particular location in Brooklyn," Ross told me. "I gave some response, and she said, 'You're making fun of me because I'm from Brooklyn.' And I said, 'No, no, I'm not doing that at all. I wouldn't do that. I'm from Brooklyn too.'

"Well, after the meeting my mother came up to me. 'Steven.' (She only calls me that when she's angry.) 'Do you know how many years we've been trying to live down that we came from Brooklyn, and now you've come right out and said it, in front of al these people!' "

Hmmm . . . the annual meeting as the "art of romance." Maybe that is one of the fixes that is needed — to have the current generation of chief executives bring a Steve Ross-style verve to this corporate event and return it to a rightful place as a centerpiece for the display of CEO and board leadership.

Tuesday, December 7, 2010

How to Fix the Annual Meeting

It seems that no one — management, boards, shareholders — is happy with how annual meetings are conducted these days. Annual meetings can be a frustrating and often futile exercise — in meeting statutory requirements, yes, but not much else as a worthy vehicle for demonstrating corporate leadership and facilitating shareholder relations.

Thus, the cover story for the first Directors & Boards issue of 2011 will be:

What’s Wrong with the Annual Meeting . . . and How to Fix It

I am going to seek a roundup of opinion on what to do about the annual meeting. The seed of this article idea was planted this past summer when I was a peripheral participant in a study group looking at "Electronic Participation in Shareholder Meetings" — i.e., the pros and cons of virtual annual meetings and the practices necessary to hold a meeting that meets the needs of all parties. This group was organized by a close colleague, Gary Lutin, through The Shareholder Forum initiative that he chairs.

The virtual annual meeting will be an important dimension of the discussion, and possibly factor in as a "key fix" — or maybe not, depending on the input I get from important players who are doing virtual meetings or thinking of going in this direction. Early adopters, and their shareholders, have had some rocky initial experiences with virtual meetings.

And there may be other fixes that we should focus on for reconfiguring the annual meeting for a coming governance era of heightened transparency and disclosure.

Stay tuned. It should make for a lively lead article in the Q1 Directors & Boards.

Photo: A Johnson & Johnson annual meting from the 1970s, courtesy of Kilmer House.

Friday, December 3, 2010

'One Terrible Cost of Leadership'

It is interesting how J. Crew's Mickey Drexler identified a classic leadership characteristic as one of the things he wished he knew when he started out in business (as per my earlier blog post) — the need to ease an executive out of the organization once it is determined that he or she is not up to the job. As Drexler put it, "Let those who aren't working out go quickly."

I first came across this counsel in an interview I edited that Warren Bennis conducted with Dr. Franklin Murphy, which was published as a Q&A article in Directors & Boards in 1982. Dr. Murphy is not a household name today in the annals of corporate leaders, but he was a major figure in the 1960s into the 1980s. He had a most unusual route to the top of a major corporation. Trained as a medical doctor, he began his management career at the University of Kansas, serving as dean of the medical school and then, at age 35, chancellor of the university. He subsequently spent eight years as chancellor of the University of California at Los Angeles. In 1968 he was personally recruited by Norman Chandler, then chairman and CEO of Times Mirror Co., to be his successor.

In 1982 Murphy was chairman of the executive committee of Times Mirror when Bennis spoke with him on “Starting Corporate Life at the Top,” as we titled the article. Here is the key question and answer that identified a classic test of a leader's ability to act:

Bennis: You’ve been in very responsible positions virtually from the start. Are there any costs of responsibilities?

Murphy: Yes, there’s one terrible cost and it’s the one thing in administration that I find the most distasteful by far — and that is when you have to fire somebody. Having to let go a loyal and capable person who just isn’t up to his job is so painful. I brood about that, but it is a price you pay. You’re not just disemploying an individual, you’re affecting a wife, children, a whole group. I must say, if I’m indecisive about anything it’s in that area. But I’ve learned over time that the quicker it’s done, the better it is for all parties.

As Murphy implies, the removal, while it must be done, can be done with a human touch —another classic characteristic of a leader.

Franklin Murphy died in 1994. Portrait of him shown above was done by Directors & Boards to accompany his 1982 article.

Wednesday, December 1, 2010

The Dancing Board Member

The holiday shopping season is off to a rousing start. Crowds were strong on Black Friday, and it appears Cyber Monday set new records.

There can be a governance angle in almost anything. When Y&R consumer expert John Gerzema announced in mid-November that he expected Zappos.com, the online merchandiser of apparel and footwear, "to win the online shoe retailing war with its celebrated customer service" this shopping season, I was just reading Zappos.com Inc. CEO Tony Hsieh's book, Delivering Happiness: A Path to Profits, Passion, and Purpose [Business Plus, 2010].

Here is a choice story he tells in the book. Before becoming CEO of Zappos.com, Hsieh headed LinkExchange, a Web design company he cofounded in 1996. That's where this story takes place:

I’m not quite sure how it started, but we had a really fun tradition at LinkExchange. Once a month, I’d send an email out to the entire company letting them know that we were having an important meeting, and that some of our important investors and board members would be attending, so everyone was required to wear a suit and tie on the day of the meeting.

Everyone except for the most recently hired employees knew that it wasn’t a real business meeting, and that they didn’t actually need to wear a suit and tie. The real reason for the meeting was so that we could initiate and haze all the new employees who had joined LinkExchange in the past month.

So once a month, all the newly hired employees would show up to the office dressed up in suits and ties. There they would realize that they were the target of the companywide practical joke. In the afternoon meeting, all the new hires would be called up to the front of the room to complete some sort of embarrassing task.

After an investment by Sequoia Capital, we asked Sequoia partner and our new board member Michael Moritz to attend our initiation meeting, and we called him up to the front of the room along with the other six employees who had been hired in the past month.

After each person introduced himself, we let them know that in honor of Moritz’s presence, we decided that we wanted everyone to move together in unison to the music that was about to be played.

If you’ve ever read anything in the media about Moritz, he’s generally portrayed as an intelligent, introspective, and proper British journalist-turned-venture-capitalist, so everyone was excited to see that he was willing to stand in front of the room with the other new employees. Someone brought out a boom box and turned on the power as everyone started clapping and cheering. And then music started playing. It was the Macarena.

I don’t think that words can every truly describe what watching Moritz being forced to do the Macarena was like. It ranks up there as one of the strangest sights to behold. Everyone in the entire room was cheering and laughing, and by the end of the song I had tears streaming down my face from laughing so hard.

I remember looking around the room at all the happy faces and thinking to myself, I can’t believe this is real.

Two years after cofounding LinkExchange, Hsieh sold it to Microsoft for $265 million. He then guided Zappos from almost nothing to over $1 billion in gross merchandising sales annually, and got it onto Fortune magazine's "Best Companies to Work for List." And then along came Amazon, which bought Zappos in 2009 for $1.2 billion.

This is an impressive case of how creating customer value creates shareholder value, but maybe Tony Hsieh is on to a new tactic for how a board can help create shareholder value — get the directors up dancing in front of the team.

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 Payscale.com.

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.

Friday, October 29, 2010

Taunting the Gods of the Markets

Oh my, this is not good.

Here is a headline staring out at me in this morning's New York Times business section — "Awash in Liquidity." The piece examined the amount of institutional funds sloshing around the world looking for yield.

Why does this make me tremble? This is why.

To recap the above link ever so briefly, I have had prior run-ins with a prominent declaration that "The world is awash in liquidity" . . . only to see shortly thereafter a dramatic and dismaying drying up of that so-called "excess liquidity."

The example cited in the link above that last made me extremely fretful happened in December 2008. It caused me to suggest at that moment in time that any board should warn its CFO to run for cover and any investor to think about bulletproofing his or her portfolio.

A good call indeed. Within weeks, the market plunged scarily, hitting a low on March 9. It was a gut-punch of a first quarter of 2009.

Will history repeat? Is it again time for boards to tell their CEOs and CFOs to batten down the hatches?

October has been a good month for investors. Call me superstitious, but it sure seems to me that, upon hearing the intrepid claim of a world awash in liquidity, the gods of the markets are then moved to swiftly and ruthlessly vacuum up said liquidity.

If you don't go to cash (or even more cash than is now sitting on your corporate and personal balance sheets), then maybe Bette Davis's legendary line in the movie "All About Eve" is your next best move, now that the gods have again been taunted: "Fasten your seatbelts, it's going to be a bumpy night."

Wednesday, October 20, 2010

Why Pick on Her?

There is plenty of shame to go around among those who were directors of Lehman Brothers. But I can appreciate the outrage that women feel over the choice of photo by the New York Times to illustrate its article spotlighting directors of companies that collapsed during the financial crisis.

As you can see from the clip above, of all the Lehman board members that it could have chosen to splash across the top of the front page of its business section, the paper chose the one high-profile female director — Marsha J. Evans, a retired U.S. Navy rear admiral who after her distinguished military career ably led such organizations as the Girl Scouts of the USA, the American Red Cross, and the LPGA (Ladies Professional Golf Association) as well as being in demand for corporate board service.

I personally witnessed the umbridge taken over this sexist slight. It happened last month at the all-day globally oriented Gender Balance on Boards conference held in Washington, D.C., at Johns Hopkins University that I previously wrote about. One of the principal speakers held up the NYT offending page for all in the audience to see. A quite audible groan reverberated through the crowd — a room largely comprised of senior women executives, directors, academics and diplomats.

It is hard to tell on whom to pin the wrap for this questionable choice of graphic — the co-reporters (one of whom was a woman), the photo editor, the business editor, the copy desk, the makeup department, and/or other. But the women called it for what it was — a cheap shot.

In light of my previous blog postings this month on the theme of gender balance on boards, I am reminded anew of this experience as another example of the hard path it is, with unpleasant potholes (such as this article treatment) tripping them up, that women traverse to gain access to and succeed in the boardroom.

Friday, October 15, 2010

A Not So Magic Number

We all like to be recognized for our expertise and accomplishments, and people in corporate governance welcome as eagerly as anyone the pat on the back.

My governance colleague, and past Directors & Boards author, Catherine Bromilow brought to my attention her selection (along with two of her PwC colleagues) for the latest "100 Most Influential People in Corporate Governance" list. This is a roundup assembled by the National Association of Corporate Directors that recognizes influencers in all spheres of corporate governance.

Good for Catherine. She is partner in PwC's Corporate Governance Practice. She advises clients on strategies to achieve enhanced transparency and greater director accountability and on providing shareholders with a voice in certain boardroom decisions. She has a long and impressive set of involvements in advancing governance best practices, from her consulting, writings and speeches, and director education engagements. Full disclosure: We also know each other from our service on the advisory council of the Center for Corporate Governance at Drexel University.

Now let me digress. This NACD Directors 100 list always bemuses me. I am never on it. How legit a list can this be if someone who has been engaged in corporate governance for as long as I have — a tenure lengthier than most everyone on the list — and contributed the vast thought leadership to the field that I have in three decades as editor of Directors & Boards — not make this list?

Okay, now let me get down off my high horse and unplant my tongue from where it was just now firmly planted in cheek.

The 100 list is worthy and appropriate recognition and is a good thing for the NACD to be doing.

Here is what is really interesting about this latest list.

Catherine is one of only 15 women on the list. By my count, that means women make up 15% of these 100 key influencers in governance. Why does that figure jump out at me? Because it exactly matches up against the 15% representation of women on the boards of the Fortune 500, according to the 2009 census by Catalyst.

What's up with this 15% figure for women board leadership? It's a not so magic number, that's what. And my tongue is not planted in cheek when I say that.

Thursday, October 14, 2010

Pipeline to Nowhere

She's pretty — that's Katharine Weymouth, pictured at right, publisher of The Washington Post and CEO of Washington Post Media (and newly elected board member of the Washington Post Co.), who was the keynote speaker at a business leadership event in Philadelphia last week. But the report released at this event was anything but pretty.

The event was the unveiling of the annual survey of women on boards in the top 100 companies (by revenue) in the Philadelphia metropolitan region. This is a survey done by Philadelphia's Forum of Executive Women. The 2009 board composition tally was unveiled on Oct. 8. Here are some of the key findings:

• In percentages, women held 11% of board seats at Philadelphia's largest public companies, up slightly from 10% in 2008.

• In terms of the number of board seats, women held 90 of 844 total board seats at the 100 companies.

• 43 companies had no female board members.

• 8 companies had three or more female board members.

• 7 board seats were held by women of color.

The Forum survey also tallies women in the executive suite. There is no robustness in the numbers to be found there either:

• Women held just 11% of the top executive positions in 2009, the same representation as in 2008. That is, women were in 71 of the 645 top spots.

• 57 of the companies had no women among the top executives.

In reaching to find a "somewhat more encouraging" number, the Forum looked at five-year data. The meager finding:

• The number of women holding board seats increased from 84 in 2005 to 90 in 2009, a 7% rise.

• The number of women in C-suite positions increased from 62 to 71, a gain of 15%.

Concludes Forum President Ellen Toplin: "There have been some gains over time but the numbers point to a stubborn trend: While more women than ever are in the corporate talent pipeline, companies continue to tap mostly men for top positions."

Monday, October 11, 2010

Show of Support for Gender Quota on Boards

The majority of directors, both men and women, do not favor a gender balance quota on corporate boards. That is one of the major findings in a survey of nearly 400 male and female board members done earlier this year. The results were released on Oct. 6 at a briefing at the 21 Club in New York. The survey was conducted by Heidrick & Struggles International Inc., WomenCorporateDirectors (WCD), and Dr. Boris Groysberg of the Harvard Business School.

Now, here is who supported diversity quotas for boards: 25% of the women directors. And for the men? No surprise that it is a number that barely registers on the meter: 1%.

There were many other important findings that came out of this survey, which I will be citing in my blog and in Directors & Boards as time goes on. But this is the story that was buried in the overall report: That one-quarter of the women directors favor a board gender quota is an astonishing show of support for this controversial tactic.

This quota finding hits the market just as the new edition of Directors & Boards comes off press with our major examination of board gender balance and the pros and cons of a gender quota (front cover pictured).

A lead article offers up a Norwegian minister who walks the reader through his country's thinking on legislating a gender balance board quota and the process of how it got there — i.e., from women holding 7% of board seats in 2003 to today's mandated representation of 40%. That is quite a tale, one that is getting worldwide attention, providing the template for other efforts to institutionalize a quota system or contemplating a move in that direction.

Another article in this new edition takes our own informal poll on whether to mandate a board gender quota in the U.S. We asked a select group of directors, recruiters, and governance experts to write a brief essay attacking or defending the concept. Interestingly, that roundup of opinion mirrors the Heidrick/WCD survey.

"It is interesting to see in the survey and in our conversations with women directors around the world how the idea of quotas is gaining traction," says Alison Winter, co-founder and co-chair of WCD, which has over 700 members serving on over 850 boards in 27 global chapters. Look for more traction as this survey and the new issue of Directors & Boards roll out over the next few weeks.

Sunday, October 3, 2010

Birth of the Hedge Fund

Every day UPS delivers to my office at least one or two, sometimes three or four, review copies of new business books from publishers. Only a tiny fraction make it into "Book It: Best Bets for Board Reading" — a popular section of each issue of Directors & Boards that spotlights a handful of these new books.

It is one of my favorite pieces of each edition to pull together. I select the chosen few for "Book It" and present a brief passage from each book that serves two purposes: 1) to give the Directors & Boards reader a taste of the book, and 2) the passage must be a sprightly written and observed pointer in leadership that stands alone in the telling. If both objectives are achieved, the hope is that "Book It" prompts a few extra sales of the spotlighted books. My colleagues in the book publishing industry tell me how much they like our "Book It" feature for bringing some much-needed attention to their offerings in a crowded market.

I learn a lot in editing the "Book It" feature. For example, in considering Randall Lane's book, The Zeroes (Portfolio, 2010), I learned about something I had not given much thought to – the birth of hedge funds (and, yes, the breathtaking hedge fund fee structure). Let me share Lane's interesting bit of business history:

A writer for Fortune named Alfred Winslow Jones, in the course of preparing a story on stock market forecasting, developed a strategy that held that selling some stocks short (betting that some prices would go down) while simultaneously buying others, and borrowing against both types of trade for added oomph, would provide a “hedge” against market risk, at least matching the overall market in good times while greatly outperforming it in bad. “Speculative techniques used for conservative ends,” as he put his leveraged “long-short” philosophy.

In 1949, he raised $100,000 — $40,000 of which was his own — and thus the first “hedge fund” was born.

By the mid-1960s, Jones had proven phenomenally successful, and copycats abounded, notably Michael Steinhardt and George Soros. Most, however, did not adhere to Jones’s long-short model, and the roiling 1970s markets efficiently punished that oversight; by 1984, a researcher could locate only 68 hedge funds globally.

But Jones’s influence was far from finished. In 1952, three years into his fund, Jones institutionalized an innovative compensation system for himself. He didn’t follow the structure of a mutual fund, which generally charges 2% of all money managed to cover costs and its fee. Rather, Jones arranged to get 20% of the profits. In other words, while a mutual fund manager was mostly incentivized to not lose money, Jones was incentivizing himself to make money, and taking an outsized cut if he did.

For some boards that get into their gunsights, hedge fund managers are not the most popular people. The next time a hedgie starts upsetting your boardroom apple cart, you might let out a little curse directed at that Fortune writer who got hit by a Newtonian apple in the 1940s about a new way to coin money in the capital markets.

Friday, October 1, 2010

A Board Mystery: The Case of the Emeritus Director

It happened again this week — a request for a copy of "The Enigma of the Emeritus Director." This is an article Directors & Boards published in our Fall 2003 edition, written by Dan Dalton and Catherine Daily (now Dalton) of the Kelley School of Business at Indiana University.

Invariably every couple of weeks I get an emailed request for this article. Apparently there is so little in the governance literature that deals in detail with policies and practices related to designating an emeritus director that our article comes up high in the Google search rankings.

In fact, I just tested it — and yes, what comes up second in the Google listing, at least on this day, for Emeritus Director is a condensed version of the article that I ran in our monthly e-Briefing newsletter in 2005. In that adaptation I offer to send readers the full version published in the print journal, which stimulates the emailed requests for the full article.

I am always happy to share this article because the authors' research fills in a lot of the missing pieces on what this relatively obscure board title is all about. (Pictured is noted venture capitalist Arthur Rock, cited in the article as an emeritus director of Intel Corp. at the time of the article's publication.) As they acknowledge in their article, "We are not familiar with any general source that one might consult for guidance on the status of emeritus personnel on the board, their efficacy, or their related rights and privileges."

Dan, dean of the Kelley School at the time of the article's writing and now director of its Institute for Corporate Governance, and Catherine, the institute's research director, ably fill in the blanks. They analyze three different models of emeritus director and address such specific matters as the independence of an emeritus director and what the term limits and compensation might be for this special breed of board member, as well as other questions that come up in transitioning a board member to this status.

With the dearth of information on how boards employ the emeritus director designation, the authors propose that companies can and need to do a much better job of disclosure to take what they call the "mystery" out of this board practice. Here is their conclusion:

For those firms relying on emeritus directors, proxy material might include that the board of directors has authorized the director emeritus designation and an explanation of eligibility requirements (e.g., distinguished service, years of board service, reaching mandatory retirement age). These materials should also define what the term is for emeritus status (lifetime designation? to be reviewed every five years?) and grounds for withdrawing emeritus status.

Such disclosure should also include the roles and responsibilities of emeritus directors (voting privileges? board attendance at will or by invitation? both full board and committee meeting participation?). And, of course, the compensation and benefits that accrue as a function of emeritus status should be clear, particularly to the extent that they differ from compensation and benefits awarded to non-emeritus board members (advisory or consulting services?).

Since such disclosures are still slow in coming, it appears I can count on many further requests for a copy of "The Enigma of the Emeritus Director."

Tuesday, September 21, 2010

The Anomaly of Long Tenure

I come to work this morning wondering if I am the longest-tenured editor of a national magazine currently active in the industry.

On this day in 1981 I joined Directors & Boards as a senior editor, and within months took on full editorship of the journal. Thus I begin my 30th year with the publication.

When I am asked about my career, I whimsically describe it in one word: "Preposterous."

How many people have the opportunity in this era to spend that kind of time with one organization? Rare. And especially in publishing, how many editors have that kind of tenure atop one masthead? The rarest few.

In the modern media business, editors are a high-turnover lot. Many editors have the kind of tenure that CEOs have — five or six years being a good run (Mark Hurd, e.g., who joined HP in 2005). Case in point in publishing: the Harvard Business Review, which has had eight editors of that august journal during my tenure here.

I have a few years to go before I reach the lengthy reigns of my two idols:

• In the business magazine category, Jim Michaels (top) was editor of Forbes for 38 years, from 1961-1999.

• And in the general magazine category, William Shawn (bottom) was editor of The New Yorker for 35 years, from 1952-1987.

On my tenure milestone, let me note with admiration a few others in this rare breed:

George Plimpton, editor of the Paris Review, with a tenure record that likely will never be equaled, having co-founded and edited the literary journal from 1953 until his death in 2003.

William F. Buckley Jr., founder of the National Review and its editor for 35 years, from 1955 to 1990.

Paige Rense Noland, editor of Architectural Digest for 35 years, from 1975 until her retirement earlier this year.

Helen Gurley Brown, editor of Cosmopolitan for 31 years, from 1965-1996.

Lewis Lapham, editor of Harper's for 28 years, from 1976 to 2006 (taking a two-year hiatus from 1981-1983).

Stephen Shepard, editor of Business Week for 21 years, from 1984-2005.

Art Cooper, editor of GQ for 20 years, from 1983-2003.

Walter Anderson, editor of Parade (the newspaper magazine supplement) for 20 years, from 1980-2000.

I know of one long-tenured active contemporary: Anna Wintour, editor of Vogue, who has been the guiding force of that magazine for 22 years, since 1988. There may be others, but certainly not many.

What is the secret to being a long-tenured editor? I again have a one-word answer: "Publisher." You don't get to enjoy a lengthy run as editor unless you have the backing of the publisher.

I have been blessed to have the equally long-tenured father and son ownership team of Milton and Robert Rock, who purchased Directors & Boards right before I came aboard and who have had the confidence in me all these years to produce this "journal of thought leadership in corporate governance," as our tagline goes. (Or, as the New York Stock Exchange once said of us in its own nyse magazine: "Directors & Boards is to the field of corporate governance what Variety is to show business.") Simply put, Milt and Bob have been the most supportive publishers that any editor could hope to have.

Just as I now embark on this milestone year of 30, Directors & Boards is entering its 35th year of publication, which will culminate in a special 35th anniversary edition in fall 2011. More news forthcoming on that. Right now all I can do is think back to that 21st day of September in 1981 and be astonished at the anomaly of it all.

Friday, September 17, 2010

Closing the Gender Gap

I am just back from Washington, D.C., where I took part in a most enlightening conference. Themed "Closing the Gender Gap: Global Perspectives on Women in the Boardroom," the daylong program held on Thursday, Sep. 16, was filled with experts from the corporate, diplomatic and academic sectors from around the world — all of them influential in tracking trends in board diversity and even moving the trendline along for increased presence of women on boards.

As a member of the opening panel in the morning, I had the pleasure of sharing with the audience some of the newsworthy data from the Directors & Boards Directors Roster, our quarterly and annual reviews of new appointments to corporate boards.

Actually, SEC Commissioner Luis Aguilar beat me to the punch. He launched the day with a keynote address in which he cited some of our Roster data in his compelling tribute to the value of board diversity and review of what the SEC is doing to move the needle in making it happen.

The key stat that both the Commissioner and I conveyed was that 39% of board recruits in 2009 were women. That represented a big ramping up from the 25% rate of women as new board recruits in both 2008 and 2007 — and a tripling from the 13% rate of women named to boards that we tracked in the first year of collecting this Roster data, which was 1994.

One reason 39% is a figure worthy of note is that much of the conference centered on analyzing the impressive experience underway in Norway, which legislated a gender balance on boards mandate of 40%. We are not anywhere near that in the U.S., so I did have to temper the enthusiasm over the Roster data by admitting that even a continuing 39% rate of new women directors does not get us anytime soon to a state when women hold 40% of U.S. corporate board seats.

Nonetheless, the Roster holds hope that a progressive trend is in place. We are still maintaining an elevated state of new women directors so far in 2010: In this year's first quarter, the rate was 34%, and in the second quarter (being announced here for the first time), the rate was 36%. (As a representative new woman director elected in Q2, pictured is Christine McCarthy, EVP of corporate finance and real estate and treasurer of Walt Disney Co., who joined the board of FM Global, a commercial and industrial property insurer with $5 billion in revenue.)

Kudos to Susan Ness, senior fellow of the Center for Transatlantic Relations at the School of Advanced International Studies (SAIS), Johns Hopkins University. She brilliantly organized and chaired the "Closing the Gender Gap" conference, which was held at SAIS. If we can keep the Roster (i.e., free market activity) data in an upward trajectory, keep the SEC providing its big-stick backing for board diversity, and keep having impressive consciousness-raising programs like this SAIS conference trumpeting the value that women bring to boards, we are bound to show progress in closing the gender gap in the boardroom.

Tuesday, September 14, 2010

All Directors Are Not Equal

Good things happen again for a past Directors & Boards author. Our congratulations to Dr. Curtis Crawford (pictured) on being selected to receive a special award at next month's annual conference of the National Association of Corporate Directors. He is being honored with the B. Kenneth West Lifetime Achievement Award. This award, named for an esteemed former NACD chairman, recognizes individuals who have been instrumental in bringing management, boards, and investors together to find common ground on issues of transparency, director independence, and corporate responsibility.

In his article for Directors & Boards, which appeared in our First Quarter 2008 edition, Dr. Crawford put the fork into the notion that all directors are equal. Here is a taste of his disagreement with that "polite fiction":

"Corporate directors are chosen from a pool of highly qualified people, and being selected as a shareholder representative is a very significant achievement that demonstrates that the director has cleared a high hurdle of competence. However, it is naive to assume that all directors are equally capable in every respect.

"While traditional boards might find it useful to maintain this polite fiction, all directors and boards are not equal. Maintaining this position is an excellent way to enforce a status quo that limits the board's performance.

"Although all directors are high achievers with equal legal responsibilities to serve, exercise duty of care, and act in good faith, they differ substantially in the kinds of value they can contribute to the board. Each director embodies differences in experience, background, interests, and tenure, which is desirable, considering that multiple talents are necessary for the board to execute its responsibility effectively."

That wasn't the only notion he pooh-poohed in his article. He also had the temerity to argue that "even CEOs who are generally great leaders do not necessarily make the best directors."

Dr. Crawford comes to his conclusions from having been in a lot of boardrooms and seen a lot of directors in action. He is president and CEO of XCEO Inc., a consulting firm that provides governance support to corporate boards. A couple of the boards he currently serves on are DuPont Co. and ITT Corp. He has held positions with such companies as IBM, AT&T, and Lucent Technologies, and is the author of two books on leadership and governance. Additional passages from his article can be found in this adaptation that ran in the September e-Briefing.

I wonder what other notions he may challenge when he takes to the stage of the JW Marriott Hotel in Washington, D.C., on Monday evening, Oct. 18, to receive his award. I hope to be a friendly face in the audience for this past author, and will report back on this blog.