Anatomy of An Exceptional Board
I recently attended an excellent presentation by Paul O’Neill, the former Secretary of the Treasury (from 2001-2002) and Chairman and CEO of Alcoa. Mr. O’Neill spoke on the subject of the Anatomy of An Exceptional Board at an event hosted by the Pittsburgh Chapter of the National Association of Corporate Directors and the Pittsburgh-based Association for Corporate Growth. A common thread throughout his talk was the importance of information, engagement, and communication to foster board effectiveness and good governance.
In his highly engaging talk Mr. O’Neill shared stories from his 30-plus years serving on the boards of Fortune 100 companies to illustrate his “maxims for prospective board members.”He also provided specific advice to companies and non-profits for ways to ensure they get the best out of their boards – I’ll summarize his advice to companies in a separate post. Although his audience was the business community, Mr. O’Neill suggested that the following rules apply, with modifications, to nonprofit organizations and board members.
1. Do your Homework—don’t rely solely on what company management tells you.
You want to learn about all the things – good and bad – that you need to know before you join.
- Interview the chairman of the board and two or more current board members. You are interviewing them as much as they are interviewing you.
- Find out what people who work in manufacturing plants or other parts of the company are saying. Search the internet and find voices of “insiders” who may not be part of the executive team. Mr. O’Neill cautioned that some of what these other people are saying may not be right, but it tells you about issues you would want to be aware of before joining a board.
- Study analyst reports and other publicly available information (SEC filings, for example) to learn about any legal, environmental or other issues.
2. Ask yourself: “Why do I want to join this board?
If your answer is for money or prestige, that’s not a good reason.
- Mr. O’Neill says his reasons were often to learn about things and industries he wanted to know more about.
- Ultimately, your motivation should be to bring your“accumulated experience to bear” to help the company improve and move towards what he refers to as “habitual excellence.”
3. Guard your reputation and integrity, and recognize that they are hostage to the boards you join.
Be prepared to resign if you find that the board doesn’t meet your value standards.
4. The board should not be a rubber stamp.
Don’t join a board that management treats as a ratification body.
5. Make sure you have the time. Don’t agree to be a director unless you can attend all meetings, including committee meetings, and do all your homework.
“There is nothing worse than an unprepared director,”Mr.O’Neill said.
- Board members should show up early to all meetings and not leave until they are over.
- Be engaged throughout the meeting, by turning off your cell phones and not checking them during the meetings.
- His final piece of advice: “Have enough control over your own schedule and time” so that you can give your board duties 100 percent of your attention when you are at meetings.
