I had the privilege of joining over 30 public company directors this week to discuss lead directors—what they do and how to pick them. Wow, what a lively discussion it was.
We were fortunate to have our partners from Heidrick & Struggles there—Ted Dysart and Stephen Miles, who are both vice chairmen for this leading executive recruitment firm. Through a very candid dialogue, we were really able to dig into this topic. At the session, and in many praiseworthy emails following this gathering of esteemed directors, I heard many common suggestions that all boards can put into action.
The key takeaways? Everything is subtle; just work through the details, expectations and preferences that fit for your situation.
Beyond the subtleties, three key themes did emerge for me:
- Role: Define expectations first. How will the CEO and management team work with the chairman or lead director? What do we expect him/her to do?
- Criteria: What skill sets and experiences are required, preferred and desired? Surprisingly, this aspect of the process is really no different from other director hire decisions, but many boards overlook this critical step.
- Process: Have a process and make it transparent. No need to keep your selection process a secret from your fellow board members. They can help you identify key criteria and you want them invested in the success of whomever you select as your next board leader.
While many other items were discussed, here are a few that rose to the top for me:
- Term limits/rotation: No consensus…all over the board: Yes, no, perhaps.
- Time commitment: Ensure this person is willing to make the commitment and has the time available after making that commitment.
- Crisis and succession: Ensure this person is willing to take on a key role in times of crisis. You never know what can happen, and the lead director needs to be ready to step up, whether as interim CEO or chair of a search committee.
- Experience: This leader should be seasoned and savvy (some felt, ideally, from the company’s industry), and can act as a sounding board for the CEO, management and others on the board.
- Trust: This is a “no kidding” area, but many emphasized the need to ensure the lead director check his/her ego at the door and not have a personal agenda.
- Collaboration: Near the top of requirements, the lead director needs to be a strong team builder with exceptional listening skills. Is he/she a facilitator?
- Raising the bar. One passionate participant even suggested that all boards separate the chair and CEO roles. Perhaps this director was thinking about asymmetric information risk. No matter; we assured the participants that NACD does not advocate for specific board structure, rather, it’s situation-dependent—
i.e., it’s subtle! Combined chair/CEO roles make sense for some companies, and separating the roles is appropriate for other companies.
In closing, I wish I had brought copies of page 10 from the Report of the NACD Blue Ribbon Commission on Board Leadership. The chart on page 10 summarizes the relationship of the leader of the independent directors and the CEO and their respective areas of responsibilities.
Net net: this topic is hot, and we are exploring the optimal next steps to help directors continue to advance exemplary board leadership.