July/August 2024

Chris Clark conducts interviews with leading corporate directors and subject matter experts for Stuart Levine & Associates, a global consulting and leadership development company. The Planet Governance™ interview series features the views of corporate directors, chief executives, and governance experts on timely issues from succession planning to board dynamics to stakeholder activism.

This well-known leader believes the key criteria for board candidates is their focus on continuous and deep learning…

Jim Grogan has noteworthy leadership experience in law and business and has served as a board member for both private and public companies. His role as the President and CEO of publicly traded (TSE) Sterling Financial has given him valuable insights into the responsibilities of an effective board member. Of note, Jim was appointed by the Governor of Arizona to the Board of the Arizona Tourism and Sports Authority, (TSA) a public body created to promote tourism and design, build, own, and operate a $500 million multi-purpose convention facility and NFL stadium. He was elected founding Chairman of the TSA by his fellow board members.

Jim’s active board memberships include U-HAUL HOLDING CO., (previously AMERCO); Drees Homes, a privately held national homebuilding company that has been honored twice as Builder Magazine’s “Builder of the Year;” and Bunafr, a company that is transforming the coffee experience from farm to cup.™

James J. Grogan

Chris: Jim, many directors feel that startup and private company boards are the most exciting places to be. Do you share that point of view?

Jim:  On a startup/private company board, you do have an enormous amount of input that is probably more operational than on a public board. However, I think board members who do their homework, who work hard, and who earn the respect of fellow board members on a public board have a significant amount of influence on the public board as well. If I were asked, what are the top three differentiators between being on a public board and a private board, operations wouldn’t be in my top three.

Chris: Please go on…

Jim: Number one, I think the major differences are the regulatory and legal environment of public companies. It’s a huge difference. On a public board, you have a sizable amount of SEC laws and restrictions, and you have layers and layers of state laws, regulatory laws, and restrictions. On a public board where you are offering your stock to the public, perhaps rightfully so, more restrictions and transparency are required.

I don’t agree with the depth, breadth, and scope of many regulations promulgated by the current SEC and I don’t agree that all of the rules and regulations, and laws make you a better company or even gives shareholders a more transparent view of the company. Sometimes they’re just incredibly expensive and not helpful at all to the shareholders. If you look at filings that people have to make today with the SEC, very few can even understand them.      

When you look at a private company, you don’t have all those restrictions. However, I think anyone on a private board does feel a fiduciary duty to the shareholders no matter how closely held the company is. Our job is to help that management do the very best job possible for the benefit of shareholders and to support the company’s profitability and make the economic success of the company a high priority.

Chris: It’s all about capital being deployed properly, yes?

Jim: That’s a key point that every board member has to always keep their eye on. However, the truth is there can be very broad views among shareholders on what’s the appropriate deployment of capital. Some stockholders, both in private and public companies, look at the quarterly results, while others are much more interested in building long-term shareholder value.

That happens in both types of companies. Yes, deployment of capital is key and protecting capital is a key the board members have to keep their eyes on. However, there can be very wide disparities among your stakeholders as to what that should be.

Chris: You’ve been involved in several different types of committees, public boards and private boards. When it comes down to creating director specifications, when you’re looking out over the horizon, do you see a difference for director criteria between private and public boards?

Jim: It won’t shock you that I have very strong views on this. There are lots of articles written that boards today need specialists. That you have to have a cybersecurity specialist on your board. If you don’t, you’re really at a loss when there’s a cyber event. I disagree with that. The reason I disagree with it is, where do you draw the line?

You’d have to have a talent specialist, you’d have to have a marketing specialist, you’d have to have a branding specialist. You’d have to have a finance specialist, maybe a legal specialist, or an accounting specialist. Where in the world do you draw the line? I think both private and public companies are much better served by having people who have a liberal arts background, who have a thirst for knowledge, who have good judgment and who want to learn more about the specifics of that company and use their background, world experiences and life experiences to help support management, the company and the shareholders.

To me, that’s the criteria. You want someone who is focused on learning, you want someone who does their work. Being on a board today requires an enormous amount of homework if you’re going to do your job well. It’s not just reading all the documents. It’s literally focusing on understanding them, doing research if you have to do research, and making sure that you are communicating with the senior executives so that they can help you understand issues that you might not understand.

It’s very important that you have this thirst for knowledge and that you work hard at the job of being a board member.

Chris: You’re spot on – and it’s evidenced in all of our firm’s recent public company board assessments.

Jim: There is one quality that I think is more important than any other in an excellent board member, and that’s listening. It’s very difficult. For classic type “A” compulsive overachievers, who most of us are, you have to listen, and you have to discipline yourself to just shut up and listen because we’re all problem solvers. As soon as we hear an issue, bam, we have a solution.

That’s not always helpful in a board meeting. Sometimes you have to just listen and get different perspectives and then use your judgment, your life experiences, and your powers of consensus building by listening to help guide the board however you think might be appropriate.

Chris: Not being heard or overshadowed in the boardroom seems to be a growing issue. What is your sense of things?

Jim: There’s no question about it. I think sometimes it’s appropriate to put your arm around a board member that maybe you’re not getting along well with, or you seem to have a communication problem and say, hey, why don’t the two of us go to dinner? Or why don’t we go to lunch? Why don’t we go have a bourbon together and just talk as human beings focusing on the fact that we both love this company, and we both care about this company. Let’s talk about how you think we can better our relationship so that we can help the company more.

I think people are afraid to talk to people these days and there’s lots of reasons why. There are often misunderstandings out there and there’s sometimes sharp elbows. On a good board, there should be no sharp elbows. I have found that the biggest problem, either if you’re managing people in a company or if you’re having difficulty at the board level, is insecurity.

Be confident in your strengths and acknowledge your weaknesses. It’s important to value your strengths without feeling the need to compete with or undermine others. We all have different areas of expertise, so it’s important to be secure in what you bring to the table. Insecurity can be detrimental to any organization. Have confidence that your skills and abilities contribute to the success of the team.

Chris: Whether you’re a public or private company director, an inquiring mind, and independent and mature judgment are the requisites.

Jim: I do think that there are tense moments where a sense of humor helps enormously and is appropriate. But you hit on something that I think is very important about being a great board member. Boards need members with independent judgment. You want someone who’s going to be honest, who’s going to be willing to speak up and express their independent judgment. But what you don’t want, and this is a bit subtle, is someone with an independent agenda.

Someone should not come into a board meeting or onto a board with their agenda for what they want this company to do or what they want this company to become. That is not appropriate and it’s an important distinction to make. Independent judgment, be independent, but don’t have an independent agenda.

Chris: Jim, something just came off your bucket list. What was it?

Jim: I’m happy to talk about it. It’s a startup. I found out about it at the Consumer Electronics Show. I go to the Consumer Electronics Show every year because of my thirst for knowledge and continuous education. If there’s one thing that is moving faster than me, it’s technology, and so I go, I always try to find booths where someone won an innovation award because the most innovative companies come there from all around the world.

I found this booth where they got all kinds of acclaim for innovation and the product is an in-home, smokeless, coffee bean roaster. I don’t even drink coffee, but I looked at this roaster and I saw it roasting green coffee beans. My wife loves coffee and I had to learn more. I saw an opportunity there. I introduced myself to the founder. We talked about my interest in helping because I believed that this was a kitchen appliance that in 10 years will be in many, many kitchens because of people’s love of fresh coffee. I have now joined the board. In our monthly meetings, we talk about strategy, operations, marketing and we talk about fundraising, of course, which is very important. The more I learned the more excited I became. The founder was a seven-year senior executive at Amazon and, of course, he wants to completely change the supply chain of coffee. He wants to disrupt the coffee business as there are layers and layers of inefficiency.

This company is going to buy green beans from the growers and sell them directly to consumers. The innovation comes in when the bags that come directly to a customer’s home are scanned into the machine. A  panel of experts has pre-programmed the roaster to roast those beans perfectly considering the altitude,  weather,  soil, and farming techniques of that particular grower. Every bag from different parts around the world will have a different scan and roast differently.

I’m very excited about it.

Chris: Are there one or two strategic moves that you’re most proud of?

Jim: At U-Haul, a ubiquitous brand and a major public company, our board created an independent committee, which I chaired, and we made a significant number of decisions. Under Nevada law, committees can make substantive decisions if the board allows that. Just one example, we changed the name from AMERCO, which was the holding company, to U-Haul Holding Company. It was a significant move because news about the holding company was hard to recognize if people just saw AMERCO. If you say U-Haul Holding Company, people get it.

All the decisions that we made were designed to increase the visibility of the U-Haul stock, get more coverage, and have the public understand the company better.

Chris: Jim, I’m going to give you the last word.

Jim: First, all need to understand it’s a great privilege to be on a board, and it requires significant work. The people who have asked you to become part of the board deserve that you do that work and that you’re prepared. Number two, you have to have trust and develop trust. You can’t demand trust. You have to earn the trust of fellow board members and management.

Again, you have to be a good listener. People may be saying something that you don’t exactly agree with the words, but listen generously to what they’re trying to communicate. Listening generously, again, is an important skill.

Further,I think it’s really important that you never undercut the CEO. I was at a governance roundtable where one of the board members said, “Oh, I often just drop in on the accounting department unannounced and go from desk to desk and talk to people.” I said, “well, but you, of course, tell the CEO before you show up.” He said, “Oh, no. I would never do that.”

I said, if I were a CEO, I would find that unacceptable. If you refused to check with me, I’d either resign or I would ask you to resign. I think, from my perspective, that’s inappropriate. To me, you build the trust of a CEO by never doing anything like that. You talk to them. “Hey, I’d like to talk to some of the accounting people. Can you go introduce me to some of them? Do you mind if I do this?” There has to be respect for the chain of command.

Chris: Jim, thank you for your time and your insights.

Chris Clark joined Stuart Levine & Associates as a senior consultant after a distinguished career at the National Association of Corporate Directors (“NACD”).

He is known for his prominent role in the creation of NACD’s “The Power of Difference”, “The Leading Minds of Compensation” and “The Leading Minds of Governance” conference series, “The Directorship 100”, and NACD Private Company Directorship.

Chris’ expertise includes corporate governance (with board assessments and committee charter reviews as cornerstones), conference management, and digital content creation.