Boards need to help their companies grow. As Fred Steingraber and I note in our article, What Boards Need to Do to Remain Relevant, directors need to re-examine and even revise board committees and committee work to bring the level of attention that is required to better understand the companies they serve. While oversight of executive compensation has caused the greatest shareholder concern followed by too little attention to talent and succession management, boards have not paying enough attention to productivity, quality, growth and risk management—mechanisms by which companies renew their businesses, pursue sustainable growth and mitigate risk.
Directors, please turn to the New York Times Magazine of December 16 and read about Jump, a hybrid strategy firm focused on growth. Either charter a new committee to review organic growth targets and trends or add that to another committee’s responsibilities. Innovation is what will enhance a company’s and yes, even the country’s success. Directors who understand the broader developments in products and services, markets and channels, geography and relevant resource requirements can challenge and expand management’s thinking. This committee should oversee the due diligence related to acquisitions as well as post-merger audits. They would also be responsible for understanding and overseeing the targeted and actual growth in revenues from new products in the last three to five years.
After ousting HP CEO Mark Hurd for his indiscretion with a marketing contractor, falsifying expenses to conceal his relationship, and thereby failing to live up to the HP code of conduct, the Hewlett-Packard board has a chance to demonstrate to shareholders and the public that they intend to revive and enforce “tone at the top” of the storied Silicon Valley company.
Hurd and his predecessor, Carly Fiorina, who was also fired by the board, brought new meaning to the HP Way. Certainly, it was a different company than when brilliant engineers and founders William Hewlett and David Packard were at work in the company. Their instinctive style of “managing by walking around” would be almost impossible to replicate. Fiorina, ambitious and eager to make her mark aggressively drove the Compaq merger while a subplot revealed that the HP board had its own problems as chairwoman Patricia Dunn stepped down facing felony charges. After the scandal, Hurd’s success was welcomed even if he took a cost-cutting and execution style approach to management.
With Hurd occupying both the Chairman and CEO role, Robert Ryan has served as lead director since 2008. But it has been Mark Andreessen handling the Hurd resignation. As the founder of another storied company, Andreessen has the gravitas to insist on a leader that not only performs well but behaves well.
Andreessen is given to greater transparency as well as sensitivity to culture and a larger group of stakeholders including investors, employees and the larger public given that he is an under-40 wildly successful entrepreneur now leading a company that provides a platform for social networking websites.
Andreessen is the spark that HP needs at this time, setting the tone and communicating what the board is doing on behalf of shareholders and stakeholders.
“We’re seeing a sea-change in the environment of shareholder empowerment,” said Holly Gregory, Weil Gotshal partner and governance expert. “The Dodd-Frank bill accelerates a fundamental change, a new normal in the balance of governance power. “ She went on to note that the eighth anniversary of Sarbanes Oxley, enacted during the aftermath of WorldCom and Enron debacles, boards were seen as the solution to the failures in corporate accountability. “In sharp contrast the new legislation reflects the view that boards are the problem and shareholders must be empowered to hold boards accountable.”
Gregory made these remarks on a National Association of Corporate Directors and Weil Gotshal webinar attended by hundreds of directors on Friday as boards try to gain a better understanding of the requirements that the new legislation that President Barack Obama signed into law on July 21, 2010.
“I want to emphasize that the theme within the legislation is that boards are the problem,” said Gregory.
Boards are well advised to recognize that the implementation of the legislation will fundamentally change their interactions with shareholders. For directors who have eschewed any contact with shareholders, they must engage with shareholders in meaningful ways to elicit their support. The sooner and more intelligently that they begin this dialogue, the better for them.
Whether you are serving on a public or private company board, there is an important principle to guide you: doing the right thing, not just for the constituency that brought you to the board but for all the shareholders, according to Michel Feldman, partner in the Chicago office of Seyfarth Shaw, who has served on a number of private company and public boards.
“Especially when you are asked to be on a private board, be sure that you understand what you are getting into,” said Feldman at an NACD Chicago panel. In private companies, it’s especially important to beware of a dominant CEO.
“And always, do the right thing for all shareholders.”
Welcomed warmly by fellow directors and friends at the opening NACD Chicago Chapter meeting on September 18th, Ed Liddy gave board members the benefit of his eleven-month stint as chairman and CEO of AIG, his one dollar a year job that was called both hopeless and thankless by critics and supporters alike.
He had six suggestions. Continue reading →