The Board Equivalent of 'Mission: Impossible'

I wrote about Harvey Golub being elected to the board of AIG back in May of this year when his nomination was announced. At that time I revisited a past cover story he authored for Directors & Boards and highlighted several of his beliefs about best-practices board leadership that seemed particularly pertinent to the AIG setting — including this one: "Never surprise the board. Never ask it to vote on a complicated issue without explaining its nuances and risks." My conclusion at that time was that AIG was fortunate to have him as a new board member to help it emerge from the rubble, if such a feat is possible.

Well, Mr. Golub, who retired from American Express in 2001 after seven years as chairman and CEO, has now been named chairman of AIG. That's cause for even greater optimism for the chance of a reemergence of this once-mighty firm. "Harvey Golub is one of the most experienced and respected executives in the financial services industry today, known for his leadership, integrity, and business acumen," said outgoing AIG Chairman Edward Liddy of his successor.

On this auspicious occasion, I can't help but dip back into that article for some more archival Golub wisdom on board practices. As an example of his frankly confronting the toughest of challenges, he addressed what many chairman, CEOs, and directors have found to be a "third rail" in the boardroom — trying to get rid of a director. Here is what he had to say:

"Sometimes a board member just doesn't work out. He or she does not focus on the major issues, or fails to devote sufficient time, or is unable to work with the rest of the board in a collegial fashion. How to deal with this problem?

"More often than not, trying to remove a board member smoothly is the corporate governance equivalent of 'Mission: Impossible.' It is one of the more divisive steps that one can take on a board, one that can poison an atmosphere so as to not make it worth the effort.

"The one time I found that the American Express board was having a problem with a director, I discussed the issue with a senior board member. We talked about the options for dealing with that director, and both of us concluded that seeking his departure from the board would not be worth the internal difficulties it would cause."

That's a candid admission. He writes in his article that he favors either time limits or age limits as a way to address the problem. Some shareholders might not be happy to know that a board is tolerating an underperformer and is just waiting him or her out. But board effectiveness demands a degree of board collegiality. And board chairman survival requires not stepping on any third rails ... or taking on, as Golub calls it, a "Mission: Impossible."

This from the fellow who just became chairman of AIG. "Mission: Impossible," anyone? We stay tuned in.

Harvey Golub, Onward to AIG

It's good to see Harvey Golub's name among the six nominees announced last week for election to the board of AIG. He and the other nominees are taking on a huge challenge, but the briefest glance at his c.v. gives one confidence that he's got the right stuff for the task at hand. He retired from American Express Co. in 2001 after seven years as chairman and CEO, a tenure during which the company achieved record earnings and the price of its shares increased sixfold. Director experience comes from service on the boards of Campbell Soup Co. (including a period as nonexecutive chair), Dow Jones & Co., Warnaco Inc., and other public and private company involvements.

Confidence also comes from a rereading of the cover story he authored for Directors & Boards in 2004, in which he laid out key principles for CEO-board relations. Here are three that strike me as especially pertinent to the situation ahead at AIG:

• "The CEO should not try to be the board members' best friend. Some believe that by keeping up an extensive schedule of private dinners and special events with directors, a CEO can build an atmosphere of rapport and friendship that will carry over into the boardroom. But the board is not the CEO's friend — it is the CEO's boss. The board of directors is not just a collection of individuals — it is an institution with a responsibility for representing the interests of shareholders. Friendship should never allow a CEO to get concurrence when it otherwise wouldn't be coming."

• "The important challenge for the CEO is to keep the board on track. It is essential  that directors be able to focus on the overall strategic issues and understand the company's strategic goals and how the business processes help advance them. On a good board, there is too much experience and judgment sitting around the table to waste it on anything of secondary importance."

• "The last piece of advice I would give a CEO is to be completely open and honest. Be careful to discuss the failures as well as the successes. Never surprise the board. Never ask it to vote on a complicated issue without explaining its nuances and risks."

AIG got wrecked on the nuances and risks of its businesses — and the seeming lack of understanding of such in the boardroom. Anyone concerned about the soundness of the financial system and the return to health of essential players like AIG can only hope there is a lot more explaining that will be done in future board meetings under the demanding oversight of its new directors like Harvey Golub.