Category: Corporate Governance

Things Everyone Should Hear

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Dr. Reatha Clark King, a member of the NACD board and a former longtime director of Exxon Mobil, agreed to be filmed recently for a new product NACD will launch in fall 2010. Anyone who has had the joy of hearing from Reatha will know that her grace, passion for quality and excellence, and her wisdom shine through every word she utters. Luckily she is not short of words.

Reatha is a research chemist who was part of the space program in the 1960s. Her job? To make sure rocket fuel really had the firepower needed to get America, if not to the moon and back, then certainly into orbit. In the research labs of the National Bureau of Standards the young Dr. King learned how to test hypotheses, ask questions until she was sure of the answer, and manage risk—skills that have served her well in her subsequent work as a director.

I asked Reatha to share her thoughts on why leaders from all walks of life should consider board service. Our self-study, multimedia program is called “How to Be(come) a Director” and is intended primarily for C-suite executives who are on the brink of board careers, and so it’s possible that many of you are too experienced to ever sign up for it. That would be a shame, because I think even the most grizzled and world-weary director would learn something from Reatha’s response. Here, just for you, is a sample of what she said. Enjoy—and be glad American entrepreneurialism continues to benefit from her judgment and commitment, day in and day out.

How to Be(come) A Director will be available from NACD in the fall. Don’t miss this chance to explore director responsibilities and rewards with some of America’s leading governance experts—directors who can lead the way for you.

Why We Get Up in the Morning

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In the week when the SEC revealed its rule on proxy access, a director from the National Association of Corporate Directors (NACD) had his own say on pay.

Bill White told more than 100 directors at NACD’s Director Professionalism course that he wishes compensation committees could be renamed. “I’d like to see them known as contribution or motivation committees,” he said. Bill is an experienced public and private company director and former Bell and Howell chairman and CEO.

In addition to his board service, Bill also teaches applied psychology at Northwestern University in Chicago. “People work best when they love what they do and believe it matters,” said Bill. “Pay is only one part of what makes them turn up and work hard. The emphasis on salary for executives has not been helpful in recent times. Whatever your committee is called, spend more time coming up with innovative incentives and rewards and focus beyond the $$$.”

Bill has it right, I think. I wasn’t happy in the best-paid job I ever held. I understood the mission, but I wasn’t very clear about how I could contribute. I never quite believed what I heard myself saying to my team, partners and customers. I didn’t trust my boss. (This turned out to be good thinking—he later went to jail for taking huge backhanders from a soft toy manufacturer and distributor in the Far East—a giant fake fur fraud case. Real Hong Kong Phooey.) I left after a year and my salary has gently declined while my job satisfaction has risen ever since.

When “Pay Czar” Ken Feinberg imposed his salary cap on executives from TARP companies, many board members feared key executives would leave. Bill reported that in fact 87 percent were still in place. “Where would they go?” he said. Of course, there have been loopholes in the salary rules imposed by the special master for executive compensation that mean many of these bailout business leaders are hardly hurting. Nonetheless, people at the pinnacle of their executive careers are often somewhat siloed in their own industry niche and have to consider many factors beyond compensation when they are eyeing current competitors as future employers. For people at any level in any organization, location, culture, autonomy, ability to innovate, empathy, excellent support and many other factors are vital to job satisfaction and career success. Of course the money is important too—NACD’s CEO Ken Daly should not take this posting too, too seriously as year-end and bonus time approaches…

Thinking Beyond the Shareowners: Companies and Communities

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The prime responsibility of directors who sit on the boards of public companies is to create shareowner value, but the efficiency and effectiveness of big business has an impact on communities far beyond those who have invested in company stock.

I am writing this at Dallas Fort Worth airport on my way home from NACD’s Director Professionalism course at Laguna Beach, CA. (I know, hell being me). Airlines have  been in the news a lot in recent weeks with miraculous escapes from crashed aircraft, tragic deaths in Alaska, and of course the flight attendant who left his job via emergency chute.

These incidents were in the minds of more than 100 directors attending the Laguna Beach Director Professionalism course as Karen Hastie Williams spoke about the constituencies the board seeks to serve, advance and protect at Continental Airlines. Karen, who is also a director of NACD, has been a board member at Continental for 12 years and takes very seriously the board’s role in creating and advancing a strong corporate culture.

“It’s important for board members not to be in an ivory tower and to demonstrate that they value what operational people do in their day-to-day work to further the airline’s commitment to excellence,” she said. “For board members, talking to customers and employees is the best way of getting to know the business.”

Continental uses a series of metrics to track the performance of each part of the operational team, Karen says. “Employees receive checks in recognition of their commitment to the efficiency and effectiveness of the business. The board approved the CEO to go to our hubs in Houston, Newark and Cleveland to hand out the checks himself. It’s important to be visible. We incentivize and reward the behavior we want to see. Continental has an excellent safety record because we encourage collaboration. All our staff in the air, on the ground and in the back office want to do the best job they can, and they work together to keep our service safe, and to get our passengers to where they need to be.”

Karen believes that Continental’s culture of customer service and the value it places on its employees has contributed to the company’s bottom line.

“I make sure to speak with both pilot and the flight attendants when I fly Continental,” she said, explaining that she believes people work best when they know their skills and commitment are recognized and valued.

As Continental prepares for its merger with United this fall, Karen believes that the culture created at the smaller airline is one of Continental’s most important contributions to the deal. “Together, the two companies can produce cost efficiencies, and provide the most comprehensive schedule for travelers. Led by the principles and practices that have delivered excellent customer service at Continental, the new company can create the kind of frequent flyer loyalty that will create long-term shareowner value” she said.

Mary Pat McCarthy, Executive Director of KPMG’s Audit Committee Institute, an Alliance partner of NACD, also believes that board members should closely monitor the interests of not only shareowners but stakeholders. KPMG is the exclusive sponsor of NACD’s How to Be(come) A Director, a multi-media distance learning product which will launch later this year. Mary Pat is a key contributor. Click below to find out why Mary Pat thinks that a concern for the interests of employees, customers and communities is vital to the long-term sustainability of companies.

Mary Pat McCarthy

Mary Pat McCarthy (Click Image to Play Video)

The next Director Professionalism course will be held at the Sandpearl Resort, Tampa, FL on December 6 and 7, 2010. How to Be(come) A Director will be available later this year. For more details of 2011 NACD director education, click here.