Overseeing a company’s corporate governance process and structure, the nominating and governance (nom/gov) committee is essential to a company’s long-term success. In this BoardVision interview—moderated by NACD Director of Partner Relations and Publisher Christopher Y. Clark—Bonnie Gwin, vice chair and co-managing partner of the global CEO and Board Practice at Heidrick & Struggles, and Thomas Bakewell, CEO and board counsel at Thomas Bakewell Consulting, discuss the qualities of an effective nom/gov committee chair:
Sets the right mix between board culture and composition
Facilitates cross-committee communications
Performs effective board evaluations
Spots diverse talents in director candidates
Bonnie Gwin, vice chair and co-managing partner of the global CEO and Board Practice at Heidrick & Struggles (left) and Thomas Bakewell, CEO and board counsel at Thomas Bakewell Consulting.
Here are some highlights from the discussion.
Christopher Y. Clark: Depending on what your definition of best is, why should the best director on the full board be the chair of the nom/gov committee?
Bonnie Gwin: In my opinion, it is an incredibly critical role. You’re talking about a director who is helping guide the board in not just developing a great composition for the board that is strategic and focused…, but also a director who understands the culture of the company and the board that they’re trying to build. You really need an outstanding director who understands that mix between composition and culture and can work closely with the board to get it right.
Thomas Bakewell: Bonnie is spot on in terms of composition and having the right team around the table. The other magic that you need in a terrific nom/gov chair is somebody who can draw people out, spot talent, make sure everybody gets heard, [and] really…build the team. Coming from a baseball town where we have a pretty good manager [who] wins a lot of World Series, we know the value of having a great person who can draw everybody out and get the team to work together. It’s really [about teamwork] … and using a lot of the tools that are available today. One of the trends in tools is…much more thorough and in-depth evaluations. [These are] … not just check-the-box or check-the-list [exercises] but in-depth individual board evaluations to know what’s really going on in the boardroom and among directors.
Clark: NACD [held] a combined meeting of the NACD Audit Committee Chair Advisory Council and NACD Risk Oversight Advisory Council. … It was invaluable for both sets of committee members. How do you feel about [meetings between committees] … whether it’s audit and risk [or] compensation and nom/gov? Do you think those interrelationships of committees should be enhanced or promoted?
Gwin: Generally speaking, transparent communication across all the committees of the board is essential. It’s essential for a high-functioning board. And in particular where you have, for example, [the] nominating [and] compensation [committees], there’s a lot of interplay between them and the issues they’re addressing. I think it’s important to ensure that there [are not only] good transparent lines of communication between those two committees, but frankly across the whole board.
Bakewell: The magic ingredient is how people work together, and part of that key element is how they communicate. The old approach to boards was everybody showed up the day before the board meeting [and] went to the committees. A lot of times people went to every committee [meeting]. What’s the point [now]? You don’t have the time. You don’t have the energy. You don’t have the resources today. So how do you have a board where everybody trusts each other and they communicate? If you’re not on the audit committee and important issues come up…, can you simply pick up the phone and reach out to the audit committee chair, or is there another process that’s very helpful for you to get the information you need?
Clark: Please give us one last piece of wisdom.
Gwin: The piece of wisdom I would share is the importance of long-term succession planning. We’ve talked about that several times, but I really think, looking at board composition [and] board dynamics… over the next four or five years…is very important.
Bakewell: I would say my secret sauce is [that when looking at director candidates] it’s not so much [looking at] … particular talents, [because] everybody can look at a resume and see what somebody has. They’re going to see if they’re a CEO, [or] they’re skilled in marketing. The real magic is [asking], “What is their true personality? Are they a ‘driver’ personality? Are they a curmudgeon?” Sometimes boards need curmudgeons. … Is somebody a strategic thinker, or is their skill set not [being] a strategic thinker but taking strategy and converting it into action? What have they done in their past experience that really makes them qualified for this role?
Clark: Well I think we’ve got all the synapses popping. I wanted to thank the both of you for joining me today.
What happens when a company places service before leadership? Wawa Inc. did just that, and its chain of convenience stores has soared as a result. Jeffrey M. Cunningham, founder of NACD Directorship magazine and professor of leadership and innovation at Arizona State University, spoke with Wawa Chair Richard D. (“Dick”) Wood Jr. on the main stage at NACD’s 2015 Global Board Leaders’ Summit about the inner workings of the regional convenience-store chain that has grown into a $9 billion empire.
Originally an iron foundry established in New Jersey in 1803, the Wawa company has weathered many rounds of disruption to become one of three genuine cult businesses in the country, the other two being In-N-Out Burgers and Chic-fil-A. Wood ascribed his success at the privately-owned company that he has served since 1970 to the concepts of servant leadership and being a steward of investment in advanced technologies and innovations. A member of Wawa’s legal counsel at the beginning of his career, this descendant of the founder now serves as non-executive chair of the company’s nine-person board.
For the first half of the event, Cunningham interviewed Wood about the history of the company and Wood’s commitment to the philosophy of servant leadership. In a business context, this philosophy puts service to every stakeholder before any other facet of the enterprise. Wood takes justifiable pride in Wawa’s commitment to its 26,000 employees, including their ownership in the company. Wawa’s Employee Stock Ownership Program (ESOP) has created such value for employees at every level that the organization last year received 300,000 applications for its available 3,000 open positions. The Wawa model has proven to be profitable not in spite of but because of its commitment to family and service.
Once the conversation opened up to questions from the floor, Wood described some of the business challenges he’s faced over the years and how he has surmounted them. When asked about his reputation as “Chief Paranoia Officer” and how even good CEOs often misread the signs, Wood said, “Every time it comes back to hubris. It always comes back to hubris. CEOs didn’t have enough paranoia.”
Wood’s observations on a form of CEO self-awareness that some dub paranoia was fascinating in relation to the earlier keynote presentation by Kwame Anthony Appiah on honor’s place in business. One way that Wood practices honor in his business is to ensure that Wawa’s six core values—Value People, Delight Customers, Embrace Change, Do the Right Thing, Do Things Right, and Passion for Winning—are so thoroughly woven into the company culture that every employee can recite them; and dozens of times each month, Wawa employees recognize their peers in writing for exemplifying those values day to day. Wood’s leadership of Wawa illustrates the type of professional ethics that Appiah touched on in his keynote speech.
Before closing, Wood addressed Wawa’s next step in its innovation cycle: a move toward diesel fuel. “Two big products are going to disappear,” Wood declared. “One is cigarettes, and the other is gasoline. We’re looking into alternatives to replace a commodity we think will disappear.” To support diesel as the anticipated new market source in fuel, Wawa plans to retrofit its filling stations.
Katie Grills is assistant editor at NACD Directorship magazine.
The final session of the Diversity Symposium at NACD’s 2015 Global Board Leaders’ Summit focused on the Report of the NACD Blue Ribbon Commission on the Diverse Board and how directors can implement recommendations from that report in their own boardrooms. Kapila Kapur Anand, a partner at KPMG LLP and the firm’s national partner-in-charge of Public Policy Business Initiatives, led the discussion with panelists that included Anthony K. Anderson, retired Ernst & Young LLP vice chair, executive board member, and Midwest and Pacific Southwest managing partner; The Hon. Cari M. Dominguez, a director at ManpowerGroup, Triple-S Management, Calvert SAGE Fund, and NACD; and Karen B. Greenbaum, president and CEO of the Association of Executive Search Consultants.
As the Blue Ribbon Commission that produced this groundbreaking 2012 report observed:
[A] company’s ability to remain competitive will rely on its understanding of global markets, changing demographics, and customer expectations. Diversity is a business imperative, not just a social issue. The new business landscape will require boards to cast a wider net to find the very best talent available. As a natural corollary, the board’s mix of gender, ethnicity, and experiences will likely increase.
Dominguez noted that structural, social, and habitual barriers may prevent boards from becoming more diverse, and she offered this key advice: Don’t rely solely on the company’s CEO to lead this conversation. It’s the responsibility of every director to move the discussion forward.
So why aren’t boards as diverse as they could be? Greenbaum addressed this question by referring to data she collected via a survey of both boards and search firms. Her findings surfaced five issues:
Candidate pool. Boards contended that it was difficult to find diverse candidates. Horn countered this claim by asserting that a failure to find qualified candidates is more a function of boards not searching correctly. Boards should demand that search firms provide a diverse list of candidates. Conversely, search firms take their cue from boards and expect them to be vocal about the importance of having a diverse candidate pool.
Term limits. A lack of term limits results in a situation in which boards cannot be routinely refreshed with new directors. If term limits are restricting opportunities to bring on new talent, consider expanding the board.
Experience: Boards resist adding members who are not current CEOs or CFOs. Boards need to be open to first-timers and should develop strong mentoring programs to bring newly minted directors into the fold.
Succession planning: Build a pipeline of diverse talent in your own company so that these leaders can serve not only in your boardroom but also in those of other organizations.
Status quo. Boards can become complacent about how they operate, especially when they feel no pressure from shareholders or other stakeholders to change.
“All of us must be conscious that this is a leadership issue,” Anderson said. “If the leadership of a company doesn’t believe in diversity initiatives, the ability to make much happen is grossly inhibited.” Companies with a diversity strategy that touches on leadership, employment, and procurement are reinforcing the importance of diversity as part of company culture, Anderson added..
Creating change takes time, effort, and formal processes. Putting diversity on the agenda may require a shift in thinking and habits, but, as all of the panelists agreed, diversity is a business imperative that will only grow in importance over the coming years.