Two NACD panels recently tackled issues surrounding sexual harassment in the corporate setting, and how directors should act and react to issues that could have profoundly negative impacts on company reputation and workforce satisfaction.
Key takeaways for directors ranged from careful CEO hiring to board composition. The following concepts could be readily applied to your own board’s conversation about overseeing this risk.
Aggregate Data to Spot Problems Before They Happen. Given that the board is ultimately responsible for overseeing company culture (including a culture that tolerates sexual harassment), the board should work to mitigate risks rather than taking up sexual harassment issues once a problem has surfaced, according to Michael Aiello, chair of the corporate department at Weil, Gostshal & Manges LLP. Lucy Fato, executive vice president and general counsel for American International Group (AIG), stated that boards should aggregate information to get the full picture, including:
Internal audit findings related to culture;
Employee relations/human resources reporting, including hiring trends, turnover statistics, and reports from exit interviews;
Hotline reporting, including whether there are too many or too few complaints; and
Company legal settlements and insurance payouts.
Board members should also probe whether the company’s investigative processes are fair and thorough.
Go the Extra Mile in CEO Hiring. In light of the board’s primary role of hiring and firing the CEO, along with the fact that fallout from CEO misconduct can significantly impact shareholder value, a board should take steps to ensure that its candidate of choice does not have a history of sexual misconduct or even tolerance for a culture in which harassment is an open secret. According to Sabina Menschel, president and chief operating officer at Nardello & Co., to really know who you are hiring into the corner office, conduct an investigation that includes public records, social media, and supplemented standard reference checks. With regard to CEO hiring, Fato stressed, “Ethics, integrity, and how you carry yourself as a public figure should be a factor in whether you can lead the brand.”
Risk Starts at the Top. The CEO and senior management are not alone in the potential spotlight of the #MeToo movement. Board members also must be vetted fully, and once in place, board members should receive code of conduct training, just as employees do, said Fato. In addition, the board should pick one corporate policy per year on which to do a deep dive as part of its oversight duties. Tabletop crisis preparedness exercises also should be conducted.
Superstar? Irrelevant. A board may face a difficult choice if a superstar CEO is found to have violated the company’s code of conduct, fearing that a dismissal could impact short-term shareholder value. According to Brenda Gaines, director, Tenet Healthcare, Southern Co. Gas, and NACD, superstar status is always irrelevant when investigating misconduct. She suggests that the board should take action to remove an offending CEO and then have a separate conversation about revenue and valuation implications. She added that the company must be clear about its culture and key principles, and should have zero tolerance for misconduct, applied to everyone in the company equally. “Board members have to keep each other honest,” she said.
Expand the Company’s Enterprise Risk Management (ERM) Framework. Sexual harassment should be a part of each company’s ERM framework, given that fallout from a misstep can be quite severe, emphasized Fato. Also, when doing employee surveys, ask specifically about harassment issues. To do so demonstrates that the company cares about these issues, said Menschel. Also, in terms of monitoring potential issues with long-tenured employees or even board members, consider updating background checks at regular intervals, stressed Fato.
Diverse Boards Matter. The #MeToo movement will have an impact on the boardroom, as well as on investor relations, according to Renee Glover, director, Fannie Mae, Enterprise Community Partners, and NACD Atlanta. Indeed, large shareholders are asking about diversity on the board, and they may request sexual harassment policies and pay equity measures. Gaines emphasized the clear-cut nature of the need for more diverse boards. “Diversity is good business,” she said, “and we are nowhere near where we should be. We need more gender diversity and more people of color on boards. Don’t miss this in the search for skill sets.”
Find an Ally. Rochelle Campbell, manager for board recruitment services at NACD, says that she encourages boards to have at least two diverse members on the board, as such boards tend to be more successful. For women and people of color who are new to a board, they can play an important role in discussions about sexual harassment and equal pay for equal work. When asked for practical advice for new board members, Gaines shared best-practice approaches to oversight of misconduct:
Get the facts right.
Take the emotion away.
Look for an ally on the board.
Glover summed up the issue: “We can do better. And when we do, we can get on with realizing the deeper value that a diverse board can deliver.”
Kimberly Simpson is an NACD regional director, providing strategic support to NACD chapters in the Capital Area, Atlanta, Florida, the Carolinas, North Texas and the Research Triangle. Simpson, a former general counsel, was a U.S. Marshall Memorial Fellow to Europe in 2005.
The challenges posed by the epic turbulence in the price of oil will highlight how effective the boards of directors of different companies are in providing meaningful guidance and counsel to their CEOs. The advisory role of the board is all the more essential because three decades ago, during the last upheaval of this magnitude, the current cohort of CEOs were only junior or middle managers. Little of what was successful for them then will help now that they must lead entire companies rather than merely manage a team as they did when they were more junior. Most CEOs thus find themselves in uncharted territory.
Based on my experience working with hundreds of boards and CEOs in a range of market environments, there are three essential things boards can do to help their CEOs in this uncertain time. And because many CEOs may not know to ask for them, boards need to take the lead and provide them proactively.
Increase interaction between chair and CEO. Boards should be sensitive to the fact that CEOs may subconsciously view the current environment as a “test” of their leadership ability, with any calls for help to be interpreted as weakness. Of course, the exact opposite is true: even in the C-Suite and boardroom, the survival of downturns is a team effort. Let the CEO know that if there is a test, it is of his or her readiness to draw on the experience and perspective of the board to find the best solution.
Hold up the mirror. Even the best leaders are human and can take on unflattering characteristics during periods of extended volatility. Watch for common leadership styles that derail CEOs: leading by decree, having unrealistic performance expectations, or only taking a short-term view. Provide empathetic but firm feedback to help the CEO continue to be his or her best self.
Don’t let the crisis go to waste. It’s been said that experience is a harsh teacher because it gives the test first and the lesson afterward. In the same way, the current turbulence serves as an unforgiving but highly effective finishing school for future CEO candidates. Both the board and the CEO have a vested interest in leveraging this reality. Make sure the CEO draws upon his or her team, letting them hash out possible approaches. The CEO’s job isn’t to solve the problems solo, but create the environment of discussion and creative tension that leads to innovative solutions. Every person involved will become a better leader because of it.
From activist investors to ongoing regulatory scrutiny, energy company boards have their own challenges. In the current environment, however, the board’s number one priority needs to be giving their CEO the guidance and care needed to be the leader this dynamic period demands.
Steve Goodman, based in Houston, leads Egon Zehnder’s Energy Practice in North America, serving clients across all energy segments, and he is active in the firm’s Private Equity Practice. He has a major focus on CEO and board placements along with succession planning and board effectiveness consulting.
Few issues invite more spirited discussion than the question of leadership style. Case in point: a roundtable discussion our firm hosted last month at the 2015 Fortune Most Powerful Women Summit in Washington, D.C., where a distinguished panel examined the behavioral patterns that individuals draw on when serving in leadership positions. Leadership style, the panelists agreed, is one of the most important keys for unlocking the full potential of the organization.
For directors, assessing leadership style is critical in discharging their most important responsibility: choosing a CEO. Although, as our panelists pointed out, the most effective leaders learn to flex
Anne Lim O’Brien
their style according to the situation, most nevertheless have a go-to style that dominates, especially when they face new challenges. Understanding and identifying the dominant styles of CEO candidates, rigorously and systematically, should be a part of every board’s succession process, enabling the selection of a chief executive whose leadership style is best suited to the organization’s business situation, strategy, and culture.
Pilot: strategic, visionary, embraces complexity. Pilots relish challenges and thrive in situations requiring visionary leadership. But they can sometimes leave little opportunity for others to lead, and charge ahead without learning from the past or thinking through the future.
Collaborator:empathetic, talent spotter, coaching-oriented.Collaborators take a team-first approach, share credit, and attract talent. But their focus on others may come at the expense of strategic vision and clear direction-setting, and they can have trouble holding others accountable.
Provider:action-oriented, loyal to colleagues, eager to provide for others. Providers are driven by two different, yet equally strong forces—the desire to lead from the front and to take care of those around them. Their teams may experience them as deeply caring and thoughtful, but also as confident in their own ideas to the exclusion of all others.
Harmonizer:reliable, quality-driven, execution-focused, inspires loyalty. Harmonizers prefer environments where everyone is using the same playbook to ensure reliable, efficient execution, and they are adept at finding the right people to make that happen. But while they are consistent and supportive, they may be cautious when it comes to large-scale, transformational change or significant shifts in the way business is conducted.
Forecaster:learning-oriented, deeply knowledgeable, visionary. Forecasters relish the chance to continually gather data, expand their knowledge base, enhance their subject-matter expertise, and generate new insights about the future. However, they tend to rely on the strength of their ideas to carry the day, shortchanging the importance of influencing skills.
Producer:task-focused, results-oriented, linear thinker, loyal to tradition. Producers value results, consistency, efficiency, and proven approaches. But their emphasis on reliable execution can get in the way of incorporating new perspectives, appearing rigid rather realistic.
Composer:independent, creative, decisive, self-reliant. Composers are often gifted problem solvers, with an instinct for innovation and trust in their ideas. But because they are most comfortable when operating independently they may find collaboration and relying on colleagues difficult.
Energizer:charismatic, inspiring, connects emotionally, provides meaning. Energizes combine a magnetic personality with an ability to create a strategic vision, build enthusiasm in others, and inspire strong performance. Nonetheless, their determination may at times blur into relentlessness that is perceive as dismissive of those who don’t think as they do.
These brief sketches only begin to suggest the richness that emerged from our research. A far more detailed analysis of each style—its particular power, its potential blind spots, and the work environments in which it may thrive or struggle—can be found in our recent Harvard Business Reviewarticle. There you will find not only a useful guide to the leadership styles of potential CEOs but also an opportunity to identify your own style, a thorough understanding of which can bring even greater depth to the succession decision.
Bonnie W. Gwin is vice chair and managing partner of Heidrick & Struggle’s board practice in North America. Anne Lim O’Brien is a partner in Heidrick & Struggles’ New York office and a member of the global Consumer Markets and CEO & Board of Directors practices.