Oct. 19, 1987—aka Black Friday—was noted for an historic 500+-point market plunge. But that day was not all bad. That evening, before a small crowd of staunch supporters impervious to market panic (including yours truly), the Hon. Juanita Kreps, past secretary of commerce, received recognition as the Director of the Year by the National Association of Corporate Directors (NACD)—the first award of its kind.
If the crash that resounded 25 years ago showed the fragility of capitalism, NACD’s recognition of Kreps showed its strength. One was all about alchemy; the other all about chemistry. Let me explain:
In his classic book the Alchemy of Finance, released shortly after the crash of 1987, financier George Soros cites the event as an example of “reflexivity.” Soros told us that in stock markets, as in the universe (per Dr. Werner Heisenberg’s uncertainty principle) perceptions influence reality. Soros calls this “alchemy,” referring to the old pseudoscience of the Dark Ages. He wanted to highlight the element of mystery behind markets. One cannot grasp them through science alone, Soros correctly implies.
By contrast, NACD’s choice of Kreps in 1987, as well as many other honored directors over the following 25 years, could be better compared to chemistry than to alchemy, given the significance of chemistry in the boardroom and governance community.
The award received by Kreps has grown to honor more than one category of director. NACD also recognizes a director each year for the B. Kenneth West Lifetime Achievement Award in honor of our late chair Ken West, who had been the CEO of Harris Bank and who at the time oversaw governance research at TIAA-CREF. In 2012, this highest accolade goes to Jack B. Lowe Jr., chairman, Zale Corp. and TDIndustries. The NACD Director of the Year awards, once given to one director per year, have expanded to recognize additional directors. In 2012, there are two recipients: William S. Ayer, chairman, Alaska Air Group and Puget Sound Energy; and Linda Rabbitt, lead director, Towers Watson and chairman/CEO, Rand Construction.
Additionally, the NACD Directorship 100 annually recognizes and honors both corporate directors and governance professionals. The number 100, unlike the 118 chemicals currently in the periodic table, is arbitrary, but the number is fitting, given the importance of “chemistry” in the boardroom and in the governance world. People rarely accomplish things in and of themselves. They interact with other individuals and institutions to create valuable compounds. Nominees for the NACD Directorship 100 and the NACD Director of the Year are evaluated for integrity, mature confidence, informed judgment, and high performance standards for the work of the board.
As I look back on that night, I remember how surprised I was that Kreps had invited her entire family to the event. At the time, I envisioned the successful woman as an Amelia Earhart flying solo. Not so for Kreps. In fact, she had resigned her commerce post early to attend to a crisis involving her husband, Dr. Clifton Kreps, who was despondent over the fact that their careers were forcing them to live apart. Unless my memory is playing tricks with me, Clifton Kreps and their three children were all at her table for the event. Compound chemistry indeed.
In the modern chemistry of the boardroom, we would have said the fundamental elements Kreps brought to her work, as a woman who rose from Kentucky coal town poverty to national leadership, were grit, integrity, and a sharp mind—as witnessed by her peers in the boardrooms. They too were there that night 25 years ago. I recall seeing representatives of some of her boards, which were no less than the teams overseeing corporations that brought us the enduring brands of AT&T, Citi, Chrysler, Deere, Kodak, Penney, Nabisco, and Zurn—as well as the investments of TIAA-CREF.
It’s a search to look beneath the surface of appearance to see the reality of character. That’s what makes the right chemistry in the boardroom and the right decisions for our long-term economic future. Stay tuned for more NACD Director of the Year and NACD Directorship 100 profiles in future blogs.
Ever since the rise of capitalism in post-feudal Europe, people have predicted its self-destruction. Private creation and ownership of wealth carries risks, and these risks have been spotted by advocates and enemies alike. Free-market proponent Adam Smith in Wealth of Nations warned against the dangers of separating ownership and liability in joint-stock companies. A century later, in Das Kapital, Karl Marx, a foe of capitalism, said capitalism would fail due in part to the inevitable decline of profits over time. And at the turn of this past century, capitalist icon and financier George Soros wrote of the “capitalist threat” in the Atlantic Monthly magazine, predicting that uninhibited pursuit of self-interest without concern for the common good would lead to a breakdown of the free-market economy.
In more recent times, however, we have not needed books or articles to sound the alarm. The current realitiesof persistent recession and excessive regulation say it all. Clearly, capitalism is under siege and we, its practitioners, are its only hope.
Fortunately, there are several existing communities devoted to this noble cause. One is NACD itself. At our national headquarters and in our chapters, we at NACD believe the organization is helping directors do their jobs well, which, in turn, strengthens companies and the economy.
But NACD is not alone in its dedication. A number of movements have emerged with the express purpose of saving capitalism from both itself and overregulation. One of the newest and fastest-growing is “conscious capitalism”—a movement that challenges business leaders and indeed all stakeholders to rediscover and live their companies’ true purpose—even while creating long-term wealth for owners.
The phrase was coined by Muhammad Yunus, who received a 2006 Nobel Peace Prize for founding the Grameen Bank, a provider of micro-loans. The term caught on quickly. Kip Tindell, CEO of the Container Store, and John Mackey, co-CEO of Whole Foods Market, co-founded Conscious Capitalism Alliance in 2007, which would join with an institute to become Conscious Capitalism Inc.(CCI).
The Conscious Capitalism movement, via CCI, has grown in less than half a decade to become a convening force—one strong enough to tear me away from my office! Last month I served on a panel at the Fourth Annual Conscious Capitalism Conference at Bentley University in Waltham, Massachusetts. The event focused on the importance of “love and care” in the workplace, along with similar topics, including the board’s role in corporate culture, the theme of my panel.
The conference brochure advised me that “conscious businesses have distinctive cultures that help to sustain their adherence to their higher purpose and their orientation towards maintaining a harmony of interests across stakeholders. Conscious cultures are self-sustaining, self-healing and evolutionary.” So far so good!
I assumed my purpose was to suit up, show up, and “carry the flag” for corporate directors. I could just picture myself as being the only “suit” among a sea of social activists and rising-star millennials, being a lone voice explaining that directors do care. In preparation for the panel, I had come up with what I call the 5 Cs:
code (help develop the code of conduct)
CEO (pick the company leader and successors with an eye to culture)
compensation (compensation committee sets incentives for nonfinancial and well as financial results)
controls (audit committee ensures compliance with laws, the code of conduct, and any other norms)
composition (nominating and governance committee selects the board, which then sets the tone at the top through all of the above)
But as it turns out, although I did intone my 5 Cs, I didn’t have to do much explaining about how the boardroom works. Directors and business VIPs were everywhere in the crowd of over three hundred—including some with strong NACD credentials.
Day 1 featured former Medtronics CEO Bill George, who co-chaired the NACD Blue Ribbon Commission on Executive Compensation, as a keynote panelist on the theme of love and trust in business.
On Day 2, the director community was also in evidence. The moderator of the corporate culture panel, Deborah Wallace, is an NACD Fellow, and her panel included NACD’s most recent Director of the Year, Jenne Britell, chair of United Rentals. Another director on the panel, Ralph “Bud” Sorenson, is the chair of the nominating and governance committee of Whole Foods. The conference also featured several notable CEOs, past and present (not only Tindell and Mackey, mentioned earlier, but also Ron Shaich, founder and co-CEO of Panera Bread; and Doug Rauch, former CEO of Trader Joe’s and current CEO of CCI).
Coming all the way from Australia was Ian Pollard, a prominent member of the Australian director community, active with the Australian Institute of Corporate Directors. And I couldn’t resist giving a shout-out to Steve Jordan, director of the U.S. Chamber of Commerce’s Business Civic Leadership Center. (BCLC advances businesses’ social and philanthropic interests through a variety of programs, including corporate citizenship awards and a disaster help desk that empowers businesses to help communities when natural disasters strike.) Like yours truly, Steve is a member of the advisory board of the Caux Round Table, which deserves its own full-length blog post—coming soon.
This star lineup told me that corporate America is already engaged in social responsibility, already devoted to making capitalism sustainable for the long term. Why else would such respected directors be there? And I noticed some knowing nods of agreement from the audience when I discussed the Global Reporting Initiative (GRI), the standard for reporting on company accomplishments in the environmental, social, and governance (ESG) realm—or “sustainability” for short. At NACD, we’ve been keeping our members in the know about such issues—which we will cover at our Board Leadership Conference in October 2012. As usual, our speakers and panels on sustainability-type issues will draw an appreciative crowd.
But Conscious Capitalism runs deeper than simply preaching to the choir about the importance of social issues. According to CCI co-founder Raj Sisodia, Conscious Capitalism has four defining characteristics: “First is a higher purpose. There needs to be some other reason why you exist, not just to make money. Second is aligning all the stakeholders around that sense of higher purpose and recognizing that their interests are all connected to each other, and therefore there’s no exploitation of one for the benefit of another. The third element is conscious leadership, which is driven by purpose and by service to people, and not by power or by personal enrichment. And the fourth is a conscious culture, which embodies trust, caring, compassion, and authenticity.”
Ideally, these values permeate the conscious corporation at every level, including all its employees. Keynote speaker Singh Kang, general manager of the Taj hotel in Boston, gave a good example. Taj is owned by the Tata Group, an $80 billion Indian conglomerate known for its benevolence to employees. Kang was general manager of Taj Mahal Palace in Mumbai during a terrorist attack on November 26, 2008, referred to as India’s 26/11. During the crisis, he stayed on duty, focusing on safety for all as his employees tried to protect guests, even taking bullets for them. Eleven employees died in the attacks. Their families received generous, lifelong survival benefits from their company, returning loyalty for loyalty.
This was Conscious Capitalism in action. These loyal employees and their equally loyal employer will remain forever etched in my mind, inspiring me to continue defending and protecting our economic system—along with the positive values it can foster.