Recently I moderated a webinar that is part of the National Association for Corporate Directors (NACD) Boardroom Excellence Series entitled, “Boards and CEOs: Trust, Transparency and Constructive Tension. The participants, Kenneth Daly, President and CEO, NACD and The Honorable Kenneth M. Duberstein, Lead Director, The Boeing Company and Director, The Travelers Companies and Conoco-Phillips shared insights regarding boards and their cultures. Approximately 500 people registered for this program. Over 50% of the director’s questions during the program expressed their frustration in defining their role in the strategic planning process of the corporation.
A practical response to their concerns, based upon my experience, was a more focused and effective utilization of the board dinner. In many organizations this event is defined by the CEO. If designed properly, it can function as a pragmatic and important tool for the CEO to gather insights from the board.
A number of years ago, I participated in a board dinner that preceded the board meeting. The stated purpose from the chairman and the CEO was to have a strategic discussion and meet a succession candidate. The dinner was held at a trendy midtown restaurant in New York City. The table was oblong-shaped for twelve people in an open public space. The ambient sound precluded the sharing of ideas and the exchanging of perspectives with the succession candidate. In addition, the CEO invited his administrative assistant to join the dinner. Her presence defined the event as social in nature and inhibited meaningful dialogue. Many directors questioned the use of these events to discuss important strategic issues as there was no opportunity to have a real dialogue among colleagues – a lost strategic and governance opportunity. This well-meaning and costly event did not produce intended outcomes, and in fact, dampened the director’s appetite to participate in these pre-board functions. If board members are going to give up a night, they want to have both their time and brains respected and utilized.
On the other hand, on one of the boards in which I serve, the CEO recently invited the board to dinner. He organized it in a private room of a restaurant with a table configuration that allowed for human connectivity, with all present. He structured the agenda with one question regarding strategy and risk and distributed that question in advance of the dinner so that all participants could come prepared to contribute their clearest thinking. The CEO effectively utilized the board as a think tank where there was terrific give and take. This was also established as a healthy and constructive way to have challenging discussions around an important issue brought up by the CEO.
The eventual planned or sudden departure of the CEO is by far the most important and challenging responsibility of the board. Although 90% of board members agree that this is important as reflected in a recent Korn Ferry survey, only 30% are actually prepared for their CEOs departure. This lack of preparation creates increased risk and costs for the company as well as a loss of investor confidence. Ensuring that boards take enough time and care to understand the company’s strategy and to have a regular evaluation of more than two top candidates in the right setting – in their environment — is critical. With CEO tenure being down from ten years to below five, this issue becomes even more pressing to get comfortable with the company’s bench strength. How it is handled by the board on a consistent basis, reflects the board’s ability to handle this complex and emotional topic. I once heard this process likened to” planning for your own funeral or a new spouse – it’s messy.”
Clear thinking about the objectives of board dinners and engaging directors at the right level is a very practical way for people to contribute their thinking in an unencumbered environment. As directors gain deeper understanding of their roles and responsibilities regarding strategy, succession planning, culture and communication, I recommend a review of activities that allow for a common sense, practical engagement in a professional environment.
Getting the right things on the agenda on a regular basis, and ensuring that the right discussions are held in the right settings on both strategy and succession planning leads to board engagement and board effectiveness. Achieving well designed strategic planning and succession planning processes is a reflection of the culture of the board. I would suggest that boards review their processes to ensure that the culture has the courage to encourage these dialogues which reflect governance best practices.
Stuart R. Levine is Chairman and CEO of Stuart Levine & Associates LLC, a strategy, leadership and governance consulting firm. For more information, please call 516-465-0800 or visit www.stuartlevine.com.
