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Home , Andrea Jung, Kenneth Chenault, Meg Whitman, Sam Nunn

Cover Story Boardroom ALL-STARS

Qualities that hen Rupert Murdoch handpicked 27-year- tional realities and the fact that boards act in concert, W old Natalie Bancroft for a seat on the News make it difficult, say recruiters, to single out great make great Corp. board following its acquisition of Dow Jones, board members from the corporate echelon. corporate few were singing the praises of the budding opera diva. Still, board advisers and search executives agree On paper, what seemed to be the Dow Jones heiress’ there are universal qualities that apply to the vast directors and only qualification for board service was her last name. majority of today’s high-performance directors, such as the individuals (As part of the deal, Murdoch had agreed to hold one courage, conviction, commitment, and intellect. “The who possess board seat for a Bancroft family representative.) The qualities of good board members don’t change with professionally trained singer has no business degree the environment,” says Pro- them. and no previous corporate or boardroom experience. fessor Jay Lorsch. “They need good judgment. They When asked about the corporate-governance experts need to participate and say what’s on their mind, and By Judy who said Bancroft’s inexperience could be “viewed as a they need to contribute until a decision is made on Warner disservice to News Corp. shareholders,” Murdoch what needs to be done. It’s almost that simple.” replied: “That’s rubbish! If you listen to corporate-gov- The responsibilities of board members have ernance issues, just remember what they said when evolved, however, giving rise to a new set of stan- Google floated [its IPO]. They said it was the worst cor- dards by which their ability to serve is gauged. porate-governance model they had ever seen.” “Board responsibility has shifted from advisory to One observer wrote that the choice of Bancroft monitoring, and not just because of Sarbanes- was “brilliant” reasoning that “Murdoch’s strategy for Oxley,” notes Richard Ziegler, a partner in the law News Corp. hinges on appealing to her generation. firm Jenner & Block. “It’s a really tough act to be an It’s not often you get to appoint someone that age to a adviser and a watch dog at the same time. It’s a chal- board. I think it’s a stroke of genius, really. Insight lenging role for anyone.” into younger generations is insanely hard to get, par- Such demands mean that board members need to ticularly at the board level.” have the time, willingness, and flexibility to deal with How Bancroft performs in her debut role as a cor- complex issues. Yet there exists a tendency to seek porate director, of course, remains to be seen. The “rock star” caliber board members, those like former circumstances around her appointment are more vice president or Avon chairman and CEO anomaly than norm, not because of her gender , whose impeccable credentials and

(although she is the first woman to serve on the News high profiles impress current and would-be share- ILLUSTRATION BY MIKE JAROSZKO Corp. board) but for her sheer lack of bona fides. holders. The opinion is that almost any board would And yet her appointment emphasizes an important benefit from the depth and breadth of their experi- aspect of assembling a great board: there are no for- ence. However, all board members and candidates mulas. Top recruiters say that one size does not fit all must be selective about where they invest their time, and an individual who would be a perfect match for and the ability to align that experience with the one board might be a disaster on another. Such situa- needs of companies is both the science and art of

22 Directorship April/May 2008

Cover Story

executive placement. Davis. “They can’t be. An inordinate the company and to the shareholder. They Some of the best directors toil in relative amount of time needs to be devoted to typically are not household names.” obscurity, oftentimes at lower-profile com- board service. Most of the very best direc- panies. “The best board members are not tors do the selfless work that shareholders Lead and Be Led rock stars,” says Egon Zehnder’s George truly appreciate. They are committed to In the aftermath of the corporate scandals The A List

Jeffrey A. G. Immelt Lafley

Directorship set out to assemble a list of well Widely considered one of the best CEOs: the backdating mess at Apple could keep known and, arguably, lesser-known board Jeffrey Immelt, 52, ninth chairman and him out of the Hall of Fame. members whose sterling qualifications and CEO of GE; a director of the Federal experience make them outstanding among Reserve Bank of . By GE rules, Less autocratic than Rupert, sunnier than their peers. We listened to board advisers he sits on no public company boards other Sumner? His knowledge of media and deal- and the top recruiters explain the screening than his own, but we’d send him out to the making prowess make Barry Diller, 66, criteria they use. mound as CEO. chairman and CEO of IAC Interactive, Admittedly, of the several thousands of chairman of Expedia, and a director of active board members, we present only a The undisputed king of technology and Coca-Cola and The Washington Post Co., small sampling. To emphasize the point lead futurist: Bill Gates, 52. His decision almost without peer. He hits M&A home made by Egon Zehnder’s George Davis, the to retire later this year may free him up to runs and runs down everything that comes best board members operate in obscurity sit on more boards. He is chairman of into left field. But Diller is also not without and keep their names out of the paper. That Microsoft; on the board of Berkshire Hath- controversy. His longtime dispute with Lib- we don’t know about their crises is a testa- away; and co-chair of the Bill & Melinda erty Media’s John Malone indicates he ment to their ability to keep them from esca- Gates Foundation. He’ll cover the tech- might be a distraction in the locker room. lating into large, public disasters. For that nology infield like Derek Jeter at short. reason, this list is by no means intended to “A nice guy who finishes first”—that’s how be comprehensive. He didn’t win the presidency, but Al Gore chairman and CEO has won everything else since. The former Kenneth Chenault, who sits on the IBM The All Stars Vice President, 59, is co-founder and board, has been described.You just can’t chairman of Generation Investment Man- be a jerk and be in the service business, Who better than the world’s most success- agement; author, and filmmaker; Nobel he has said. He’s so solid, he makes every ful investor: , 77, chairman Peace Prize and two-time Academy Award play at first. of , director at the winner; on the board of Apple; and senior Washington Post Co., and formerly on the adviser to Google. Environmental and cor- “Consumer-centric” and “-turner” boards of , Coca-Cola, and Capital porate social responsibility issues are A.G. Lafley, 60, president and CEO of Cities/ABC. On an all-star board, we want becoming an important specialty, and this Procter & Gamble and Gillette since him as our skipper and chairman. designated hitter is a ringer. One caveat: 2000; director of and

24 Directorship February/March 2008 earlier in the decade, integrity, independ- stand up to management to make sure One example of a board member with ence, and courage are essential. “A level of management is doing the right thing, but documented courage is Armando Codina, courage is required of every board direc- they must also stand up for management a member of the Merrill Lynch board, tor,” says Ted Dysart, managing partner of for doing the right thing when the results who is credited with leading the effort to Heidrick & Struggles. “Directors need to might not necessarily be there.” oust Stanley O’Neal. “Codina is definitely

Carl Icahn Andrea Jung

Meg Whitman

Dell Computer. When Immelt isn’t being than ever. Where else? Center field. tems Inc, Hovnanian Enterprises, Inc., named “best CEO,” Lafley is. With a Tenet Healthcare, Electric Data Systems, knack for generating hits with consumers, Apple could have picked anyone for a and The Eclipsys Corp. he’s our lead-off man. board seat—it chose Andrea Jung, 49, chairman and CEO of Avon Products; also “Nobody’s better on audit” than J. Michael “Brilliant strategic mind:” Rajat Gupta, 60, on the board of GE. Re-invention? Perse- Cook, 66, chairman and CEO emeritus, former managing director at McKinsey & verance? Like she has done at Avon, she’s Deloitte & Touche; on boards of Burt’s Co.; director at , Procter & our long-ball hitter, with the ability to turn Bees, Comcast, Dow Chemical, Eli Lilly, Gamble, AMR Corp., and LTD; the game around. and International Flavors & Fragrances. and special adviser on management reforms to the Secretary-General of the The Retired CEOs Club Lauded for integrity: William W. George, United Nations. There’s no one better 65, former chairman and CEO of coming out of the bullpen on strategy. “Understands both new and traditional Medtronic; professor of management prac- business models.” That’s Meg Whitman, tice, Harvard Business School; author of “Lead devil’s advocate” and consummate 52, soon-to-retire president and CEO of True North: Discover Your Authentic Lead- dealmaker: Carl Icahn, 72, CEO of Icahn eBay; on the boards of Procter & Gamble ership; and on the boards of Exxon Mobil, Management; chairman of Imclone Sys- and Dreamworks Animation SKG. Goldman Sachs, and Novartis. tems, XO Holdings, and Atlantic Coast Entertainment Holdings. He holds boards Dubbed “brand mechanic” by The Wall “Brand guru” Steven F. Goldstone, 61, for- accountable, so we’ve put him, naturally, in Street Journal, James Kilts, 60, former mer chairman and CEO of RJR Nabisco; the hot corner at third. chairman and CEO of Gillette; on boards managing partner, Silver Spring Group; of Pfizer, MetLife, MeadWestvaco, and non executive chairman, ConAgra; direc- Politically astute, worldly, and working to Co. tor, Trane, Greenhill & Co., and Merck. save us from nuclear annihilation: former Congressman , 69, director of The “unflappable” Edward Kangas, 63, “Magazine legend” Thomas O. Ryder, 63, Chevron, , Coca-Cola, and GE. Having has been the director of Intuit since July former CEO of Reader’s Digest; on the a director who is politically savvy and well- 2007. He is currently a director at The boards of Virgin Mobil, Starwood Hotels

PHOTO OF ANDREA JUNG /FRED PROUSER; CARL ICAHN REUTERS/CHIP EAST connected in both parties is more important NCO Group Inc., NCO Financial Sys- & Resorts, and Amazon. D

February/March 2008 www.directorship.com 25 Cover Story

someone I’d put in that category,” says guered Tenet Healthcare and Electronic both an opinion leader and an influence Charles Elson, director of the Weinberg Data Systems. To restore credibility and manager. “Opinion leaders can make Center for Corporate Governance at the rebuild confidence at Tenet and EDS, good judgments and, once they’ve drawn University of Delaware and a member of management and boards had to be a conclusion, they’re capable of getting the AutoZone and HealthSouth boards. “It replaced. Kangas helped convince Michael their opinion across as a point of view. must have been pretty tough to go against Jordan, the former chairman of EDS, to That ability comes with the kind of self- Stanley O’Neal. I give [Codina] a lot of come out of retirement to lead the turn- confidence in your own work that makes credit.” Elson insists that courage or agita- around effort at EDS. “Courage is some- you comfortable enough to hang your tion alone doesn’t make a great board times the ability to trust somebody else,” opinions out there for criticism.” member. “It’s never bad to have someone Kangas notes. Today, good corporate man- The best board members, says Michael who is occasionally a contrarian, but it’s agers understand that a room full of yes P. Kelly, managing partner of the board better when that person has leadership and men and women will not help them. They services practice at CTPartners in New persuasiveness—that is what makes a great want and need to be challenged. Success- York, “have a passion for doing the right director,” he says. ful directors bring both a spirit of inquiry thing. They have a strong moral compass.” Sometimes courage is defined not by and constructive dissent to their roles. one’s ability to lead but by one’s ability to Having the strength of conviction to The CEO as Director follow, says Edward Kangas, the former speak one’s mind is almost as important as CEOs are widely considered the most global chairman and CEO of Deloitte & having the ability to manage influence. desirable board candidates, based on their Touche. He, too, fits the profile of an all “It’s not the same as being an opinion range of experience and their capacity for star, given his prominent boardroom roles leader,” asserts Stephen Mader, senior leadership. “They tend to bring a sophisti- in helping to get troubled companies back client partner and managing director of cated knowledge of how companies work,” on track. Kangas is largely credited with board services at Korn/Ferry International. says Ziegler. They also bring a gravitas to helping oversee the turnaround of belea- Mader believes that every good director is the boardroom that levels the playing field Up and Comers (Or, in many cases, up and here.)

For audit committee consideration: Irene global manufacturing, Shell Oil Co.; direc- Campbell Soup Co.; director, Goodyear Miller, 55, CEO of Akim; former vice chair- tor at International Paper..., Tire & Rubber Co...Louise M. Parent, 57, man, CFO of Barnes & Noble; director at 48, president and director of Xerox; on general counsel, American Express Toronto Dominion...Charles “Chuck” the boards of American Express and ...Robert Pease, president Noski, 57, former vice chair and CFO of Boston Scientific. Cited as likely successor of Shell Trading Company AT&T; on board Microsoft and Morgan to Xerox Chairman and CEO Anne M. ...Sheila Penrose, 61, Stanley...Janet Clark, 53, CFO of Mulcahy...Ellen J. Kullman, 52, EVP, president of the Penrose Marathon Oil; former CFO of Nuevo DuPont Safety & Protection; on board of Group; non executive Energy Co...Cheryl Grisé, 55, former CFO ...Raymond J. McGuire, chairman, Jones Lang of Northeast Utilities; on the board of 51, managing director and co-head, glob- LaSalle; board member of MetLife...John “Jack” C. Pope, 58, chair- al investment banking, Citi Markets & McDonald’s...Patricia man of PFI Group; former CFO, United Banking; director at Wyeth...Patty Stone- Salas Pineda, 56, group Airlines; on the boards of Kraft Foods, sifer, soon-to-retire CEO of Gates Foun- vice president, Toyota Dollar Thrifty, and Waste Management. dation...Laura Stein, 47, general counsel, North America, primarily For governance and nominating: Clorox Co.; on the board of Franklin responsible for legal and Robert Essner, 59, chairman, CEO at Resources...Linda Koch Lorimer, 55, EVP, philanthropic affairs; Wyeth, on the board of secretary, Yale University; lead director, director of Levi Strauss & Mutual Life Insurance...Deirdre Connelly, McGraw-Hill; on the board of Sprint Nex- Co....Elizabeth J. Smith, 46, president, Lilly USA, Eli Lilly’s biggest tel...Denise Morrison, 53, SVP, North general manager, Infra- Ursula division...Lynn Laverty Elsenhans, 52, EVP, America, soups, sauces & beverages, structure Access Services, IBM. Burns

26 Directorship April/May 2008 between directors and top managers. A for- understand the skill sets they need to times, although before its downfall, Enron mer CEO often times can better relate to a develop,” says Kelly. was considered to have a superior board. sitting CEO because he or she counsels Not all CEOs who are courted to boards The Hewlett-Packard “leak mess” certainly and questions from similar experience. have been successful in their prior jobs. underscores the need for collegiality while Those who have led complex companies Almost as soon as Stanley O’Neal left the the massive nature of the backdating seem to have a greater capacity for dealing CEO post at Merrill Lynch following options scandal that nearly ruined United- with multiple issues simultaneously. In his record losses, he joined the board of Alcoa. Health Group suggests that directors could years sizing up candidates for board serv- “When we talk about finding CEOs or have been more independent and inquisi- ice, Kangas says he looks for “winners” and inactive CEOs,” Mader says, “we are very tive, Ziegler says. “those who have the emotional and intel- careful to diagnose the level of achieve- Surely, deciding what makes a great lectual buy-in” to serve the company. This ment of their work and how they feel director—and who is a great director—is a immeasurable characteristic also leads about that level of achievement. The highly subjective exercise. Patrick many board searches back to the lists of degree to which they have been successful McGurn, executive vice president and spe- former or soon-to-retire CEOs. is probably less relevant than their comfort cial counsel at the ISS Governance Ser- CEOs can be hard to come by. Corpo- and satisfaction with themselves as busi- vices unit of Risk Metrics, says he’s not a fan rations today are likely to restrict the num- nesspeople,” Mader says. What you don’t of best or worst director lists. He says it’s ber of outside boards on which their senior want is a board member who uses the incredibly difficult to tell from the outside managers can serve. With the average board seat to justify or redeem himself. who is performing and who is not. “A cou- length of tenure for a sitting chief execu- Then the seat becomes a podium. “If that ple of directors could be doing all the heavy tive now a mere 3 to 5 years, however, board becomes Stan’s forum for proving lifting, and it’s hard to tell them from the there is greater flux. that it was wrong for him to leave Merrill, 90-pound weaklings,” says McGurn. “The biggest change in the past 10 then you’ve got a problem, but given his That said, McGurn lists some years,” says Betsy Bruening, vice president experience, it might work out great.” identifying traits of great board members: of the Prout Group, a minority-owned Other attributes that keep directors from the “CIAO” test, which includes: search firm in Cleveland, “is every nomi- becoming great board members are candi- I Commitment: Do they have the nating committee wants a CEO. dates who are overboarded, egotistical, divi- time and energy to give to the board? Well, CEOs don’t say ‘yes’...and post-SOX, sive, or self-involved. A Directorship.com I Independence: Do they show will- their own companies say they can only online survey put the threshold for serving ingness to stand up to management? serve on one outside board.” Or, as is the on too many boards at four to five or more. I Attendance: Are they physically case with GE, none at all. As a result, nom- present and also mentally engaged? inating committees have become more Adviser and Watchdog I Ownership: Do they have a signifi- thoughtful about evaluating what skill sets It is more of a given today that directors cant stake in the company? are needed. represent the interests of shareholders. “Ownership is more important than it is Recruiters also pay close attention to That said, the role of board member has often given credit for,” says McGurn. management’s second and third string to evolved to be an adviser, monitor, and “There must be an alignment with share- identify up-and-coming board candidates. watchdog. “The watchdog role can only holder interests.” He also looks for integrity These include divisional presidents, oper- be discharged by someone who has an and interest. “One word you won’t find on ations managers, CFOs, and executives independent frame of mind,” says Jenner my list is ‘collegial,’” says McGurn. “Some running regional offices of corporations & Block’s Ziegler. “The challenge is to civil dissent in the boardroom is a very or nonprofits. What is typically sought is combine the two [with] a parallel quality good thing.” proven experience managing operations, of supportive inquisitiveness. You don’t Directors need to have strong personali- followed closely by a specific skill set or want someone who is going to be mistrust- ties but a proven ability to play well with functionality, such as audit or interna- ful of management, which is different than others, agrees CTPartners’ Kelly. “Being tional business experience. “Companies a healthy questioning of the assumptions on a board is one of the toughest things are doing a better job today of conducting that management is making.” This quality they will do in their career. They need to the kind of gap analysis, either themselves was absent from the Enron board, which have conviction, intelligence, and get or by using an outside adviser, to waived its conflict-of-interest code five along with people.” D

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