A Commendable Commencement Address

With the end of May, we're coming to the end of commencement speaker season. A quirk of mine is monitoring stories on commencement speeches, such as this report on Jamie Dimon's commencement address at Harvard Business School. And here is the actual commencement address, courtesy of The Daily Beast, given by Christopher Buckley at Yale — brimming with hearty chuckles from this master humorist. 

I have published just one commencement address in my almost 30-year tenure here at Directors & Boards, and it was a memorable one. It was given by my editorial advisory board member, Norman Augustine, to the Drexel University graduating class of 2007, an occasion in which he was awarded an honorary degree. Norm, the retired chairman and CEO of Lockheed Martin Corp., is a master himself in sprinkling great wit along with great wisdom into his speeches and writings. So let's wrap up the month on a lighter note. Here is Norm's commencement lead-in before he begins to dispense his guiding thoughts to the graduating class:

"To receive a degree from Drexel University is a great honor indeed ... Nonetheless I am acutely aware of the difference between the degree I am grateful to have just received and the degree that will soon be conferred upon each of you — yours being known in the world of academia as earned degrees! As Neil Simon once remarked, 'Would you let an honorary mechanic work on your brand new Mercedes?'

"The commentary that was offered about my career was exceedingly generous. But among those who would perhaps take a somewhat different perspective is Mr. Laurence Peter, progenitor of the renowned Peter Principle — whom I have never met, but whose letter I treasure. He stated that he had been studying my career and that I had undermined his entire life's work: I had, he asserted, risen not one, but two, levels above my level of competence!

"In thinking about what remarks might be worthy of such an auspicious occasion, I solicited advice from my wife of 44 years. After careful consideration, she counseled, 'Well, whatever you do, don't try to sound intellectual, clever or charming ... just be yourself!'

"I will try to do that, and, furthermore, follow the advice once given by a student to Al Neuharth, the founder of USA Today, when Neuharth, a graduation speaker, asked the student what his fellow graduates might like to hear from him. 'Not much!' replied the student. 

"So, as George Steinbrenner is said to have told his new managers during the early years of his ownership of the Yankees, 'I won't keep you long.' "

Keen — albeit, as promised, succinct — wisdom was then imparted. You can read Norm's full commencement address here.

As we witnessed throughout the month of May, the world of governance is still a rough go for many directors. A self-deprecating wit, like Norm Augustine's, is one way of dealing with the challenges and keeping grounded. I hope Norm's comments brought on a chuckle or two. 

Two Joes Talkin' about Risk

Arithmetic was never my strong suit in school, but here is some math that even I can understand: "At 30 to 1 leverage, a 3% or 4% drop in asset prices means you're wiped out."

I thank Joseph Rizzi for the simple yet profound clarity of that equation. Mr. Rizzi is senior investment strategist at CapGen Financial. He was the guest speaker last month at a program on the lending crisis put on by the Center for Corporate Governance at Drexel University's LeBow College of Business. His presentation was the best I've heard all year in identifying the roots of the crisis and what needs to be fixed, from a governance standpoint. I'll be wanting to get more of his keenly observed analysis into the pages of Directors & Boards in the year ahead. 

I thought of his comment when something else just came across my desk: "Risk managers will emerge as heroes from the financial crisis." That's a powerful statement, put out by Joe Plumeri (pictured here), chairman and CEO of global insurance broker Willis Group Holdings. Speaking at the annual dinner of the Association of Insurance and Risk Managers on Dec. 10, Mr. Plumeri said that risk managers have never been more important than they are today in helping their companies evaluate risk and access capital.

I had the pleasure of interviewing Mr. Plumeri for a Directors & Boards cover story a few years ago. He calls it like he sees it, and this is picture-perfect vision.

I'm not sure how heroic it is to stare at a 30 to 1 leverage ratio and not recognize that there is, in the lyrics of my favorite movie musical, "trouble in River City." According to reports, Lehman Brothers was levered 32 to 1. Lehman is among the wiped out. 

But directors should appreciate the implications of Mr. Rizzi's risk equation and Mr. Plumeri's shining the spotlight on the role that risk managers can and should play in their deliberations on risk. The heroic nature of risk managers should come from keeping the leadership in a risk-aware state — note that I didn't say risk-averse state — and not from having to push back against a culture that, through ignorance or denial, could cause the board to preside over a wipe out.