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A JOURNAL OF COMMUNICATIONS AND CORPORATE RELATIONS m ISSUE 10 m SPRING 2016

THE BOARDROOM ISSUE View from the top table

sarah hogg Confessions of a serial director

chair at two tables Sony & Chugai’s osamu nagayama

ceos change rank – power sharing in brazil

Ford Foundation’s darren walker drives the agenda against inequality

quite contrary Save a seat for dissent

open for business The diversity debate

good samaritan To the rescue of a Portuguese institution

Plus the language of business dress how unicorns risk extinction Brunswick is an advisory firm specializing in critical issues and corporate relations

To download and share Brunswick Review stories go to www.brunswickgroup.com/review Download the iPad app at www.brunswickgroup.com/review/app You can follow us on Twitter @BrunswickReview Highlights from this and previous issues are also available on LinkedIn

editor-in-chief Jackie Shorey [email protected] print production deputy editor MerchantCantos Carlton Wilkinson designer printed by The Brunswick Review is printed Mia Song CPI Colour on Redeem 100% Recycled, made using post-consumer waste fibers cover illustration associate editor and manufactured without the use Francesco Bongiorni Edward Stephens of any secondary bleaching project manager feedback Mallory Merge [email protected] Copyright © Brunswick Group LLP 2016

decades ago, the boardroom felt like a cozy, wood- list must be employees, customers and suppliers, all of paneled club for the rich and powerful. Today, there whom can express themselves increasingly effectively. is no safe haven, and boardrooms are under scrutiny Any one of these stakeholders, or combination of them, from almost every one of their stakeholder groups. are there to test a board, often to breaking point. In this issue of the Brunswick Review, we hope you will The connected world has been central to creating find some stimulating perspectives on how boards are this environment of perpetual exposure and challenge. dealing with this demanding new reality. The truth is, we The most effective leadership not only recognizes this, could have created a whole publication on almost any but embraces it. As William Blake said, “Opposition of the topics covered. But by viewing them collectively, is true friendship.” through the lens of our global contributors, these topics The good news is that there is a trend toward a dynamic help outline an emerging international best practice. ecosystem for management and non-executive directors Brunswick has built its reputation on dealing with the to work together to tackle a complex world. Alongside toughest challenges and most critical moments that the traditional oversight of operational and financial corporate leadership teams face. It has often been during performance, the boardroom is often the place where periods of intense pressure that we have had the privilege the bigger issues of purpose and broader social value are of being in the boardroom, witnessing at first hand the debated. And executives are looking to non-executives difference between high-performing, cohesive teams and for insight and perspective, experience and judgment, ones fractured by dysfunctional relationships. and even – dare one say it – wisdom. What has become clear is that routine competence in Boards must act as a mirror of the outside world, one governance and fiduciary duty is necessary but no longer that is only getting more complex. The evidence is sufficient for a board’s survival. Directors have to be increasingly clear that companies that fail to embrace able to grasp internal and external issues, agendas, and diversity and inclusion, or to engage with the big issues dynamics in order to navigate the complicated currents in our society, will lose out. surrounding major organizations. In all of this, our deep-seated belief is that while there Poorly structured or ineffective boards are now much is not a single formula, the underlying values of honesty, more likely to be ruthlessly exposed. Our clients in transparency and openness to change are crucial. all sectors are facing increased and more vociferous At times of stress these qualities will be tested more shareholder activism, particularly in the US. But even than ever. We believe that the most successful boards in this environment, meeting the demands of equity will walk toward risk and challenge with a boldness investors and debtholders – who for a long time were and honesty that defines them as part of the solution, the dominant interest group for boards – is now only not part of the problem. one consideration of many. Multiple stakeholder In a way, the board itself needs to be seen as an activist groups expect to be heard and properly engaged with, seeking out the best possible solutions to the challenges and are increasingly effective at voicing their concerns. its organization faces. Never before has so much Regulators have activist agendas, as all our financial been expected of board members, but equally the services clients will testify, as do politicians and the opportunity to contribute and provide leadership media. Digital and social media have helped other has never been greater. stakeholders such as NGOs and special interest groups to adopt an activist approach. And at the top of the activist sir alan parker – Chairman, Brunswick Group brunswick review · issue 10 · spring 2016 3 guest contributors

Edward Speed Siobhan Sweeney Osamu Nagayama Sarah Hogg — Chairman, — Business lawyer — Chairman, Sony; — The first woman to chair Spencer Stuart and academic Chairman and CEO, a FTSE 100 company PAGE 8 PAGE 13 Chugai Pharmaceutical PAGE 20 PAGE 16

Pedro Moreira Salles Janina Kugel Adi Ignatius Justus O’Brien — Chairman, — Chief Human Resources — Editor-in-Chief, — Co-leader, Board & CEO Itaú Unibanco Officer and Managing Harvard Business Review Practice, Russell Reynolds PAGE 22 Board member, Siemens PAGE 38 PAGE 41 PAGE 30

Tito Mboweni Sukhinder Singh Cassidy Richard Fenning Darren Walker — Former Governor, South — Founder and Chairman, — CEO, Control Risks — President, Ford Foundation African Reserve Bank Joyus PAGE 60 PAGE 64 PAGE 42 PAGE 51

Adrian Ellis Michael Eissenhauer Duncan Pescod Eduardo Stock da Cunha — Director, Global — Director General, — CEO, West Kowloon — Interim CEO and Chairman, Cultural Districts Network Staatliche Museen zu Berlin Cultural District Authority Novo Banco PAGE 72 PAGE 73 PAGE 73 PAGE 76

George Crumb Kathryn Sargent — Composer — Tailor

PAGE 80 PAGE 82 FIELD PORTRAITS: PETER ALL

4 brunswick review · issue 10 · spring 2016

contents THE BOARDROOM ISSUE

BR10_00_spencerstuart_v23_ms research

6 Introduction 35 Mind games 53 Tilting the scales Brunswick CEO Susan Gilchrist The puzzle of personality types The UAE leads efforts GLOBAL BOARD TRENDS says scrutiny of the board can affect a board’s success in the Middle East to put Board members must adapt or risk becoming obsolete, says Spencer Stuart’s edward speed has never been more intense women in executive roles

separated roles oards of listed companies LEADERSHIP are operating under greater scrutiny than ever before, Where CEO and chairman are combined B in a political and social climate increasingly characterized by cynicism 70% While there is a global trend and a mistrust of business. Directors 8 Globalto split the chairman trends and CEO 37 The end of the party 54 Solitary seat 60% are exposed and accountable to an roles, France, Spain and the US are obvious exceptions. 50% unprecedented degree. BoardsCombining the must roles can be anadapt or risk How nonprofit boards Making progress in India, Under the weight of legislation, 40% effective temporary strategy, as long as the chairman governance codes and listing 30% becoming obsolete, says became more professional one woman at a time requirements, it is easy for a board is capable of stepping back when the time comes to get bogged down in compliance 20% Spencer Stuart’s Edward Speed issues instead of dedicating sufficient 10% attention to strategy and the ability of 0% US UK Spain management to execute it successfully. France Canada Belgium Germany Every board has a responsibility Hong Kong Singapore to oversee management with active questioning, constructive challenge, The role of chairman has changed in Second, running the board and recent years as board work has become running the company are two distinct and support, wherever needed. But more onerous and there is a growing belief activities, requiring different skills. to do this effectively, the board has to that the roles of chairman and CEO are 13A good Sympathyindependent chairman will focus for the devil 38 The new math 56 Higher authority be agile, engaged, responsive, diverse best separated. on time-consuming board governance and above all, relevant. First, concentration of power in one issues, freeingAll theboards CEO to take care need of a contrarian Harvard Business Review’s Shariah takes a seat A board cannot fulfill its pair of hands heightens risk. Board the day-to-day running of the business. responsibilities without deep members should always feel free to Boardsdirector, that promote the outgoing according to business Adi Ignatius on a different way at the board table knowledge of the company and the challenge the CEO’s decision-making CEO to the role of chairman need to process. When the chairman is also consider very carefully a dynamic in context in which it operates. That the CEO, directors can feel uncomfortable which alawyer chairman is sitting Siobhan in judgment Sweeney of measuring CEO performance means it needs to keep pace with and at a disadvantage – although the over his or her successor. This can such things as disruptions to the presence of a lead director (or senior introduce a layer of complexity to what business model, digital transformation independent director) can mitigate is clearly the most important relationship and cybersecurity. this problem. in the business. Investors are responding to those pressures by monitoring board view from the us effectiveness and calling for more S&P 500 COMPANIES frequent changes in board composition. 14 The big ask 41 Goodbye, old boys’ club 60 No risk, no reward These pages show some statistics 2005 2015 and trends that define the state of BoardsThe chairman andneed CEO roles to pose the right Boards need to look beyond Instability can make good boards today. It is important to note CEO is also chairman 71% 52% are still frequently combined that boards are having to deal with a questionsin the US. However, a aboutgradual, cybersecurity the usual suspects, says companies better, says constantly changing agenda. They are yet remarkable shift toward separating the functions Independent chairman going to have to be prepared to adapt 9% 29% has taken place over the Russell Reynolds’ Justus O’Brien Control Risks’ Richard Fenning even faster than they have in recent past 10 years years – or risk becoming obsolete.

8 brunswick review · issue 10 · spring 2016

16 Two-seater 42 Tito Mboweni 62 China and sustainability Chugai’s Osamu Nagayama Corporate responsibility Companies are racing also chairs Sony – to the benefit is reshaping boards to shape strategy of both companies and the global economy around social needs

20 Sarah Hogg, serial director 45 WOMEN IN THE BOARDROOM 64 Ford Foundation The first woman to chair Darren Walker wants business a FTSE 100 company to join him in tackling Seven stories that address recalls some tricky times  the really big issues women’s place at the top table

22 The power of two 46 The 30% Club Pedro Moreira Salles on How a movement second section sharing control after the merger for gender balance spread of Itaú and Unibanco around the world 70 Healthy reputation Communications can cure public distrust of the drug industry 25 The meaning of diversity 47 Ushers of diversity Business leaders Nominating committees 72 Culture club see the benefit hold the key to equality A lively city needs an artistic heart of a broad definition 76 Good Samaritan Eduardo Stock da Cunha on rescuing 70.0% a Portuguese banking institution 26 Open For Business 60.0% 49 A look at the numbers 50.0%

Open, diverse and inclusive 40.0% Spencer Stuart research 79 Don’t believe the hype societies are better for business, 30.0% shows parity remains 20.0% Silicon Valley “unicorns” economies and individuals a long way off 10.0% can be their own worst enemies 0.0% Belgium Canada France Norway Sweden South Africa Spain Switzerland UK USA

Percentage of female board directors (all) Percentage of women among new board members 80 Opus focus 30 Horizontal approach 50 Quality versus quotas George Crumb’s scores take Siemens’ Janina Kugel says The executive pipeline musical notation successful communication is the most important target to another dimension drives good leadership 82 Bespoke suits her Kathryn Sargent cuts through the language of business dress 32 Tri-sector athletes 51 Silicon Valley solution Strong leaders are confident The tech industry can 86 Critical moment in the nonprofit, government close the gender gap, The Wright brothers, the first and business worlds says Sukhinder Singh Cassidy flight … and a deafening silence

brunswick review · issue 10 · spring 2016 5 hen discussing “the boardroom,” we are in fact talking about many W thousands of boards, each shaped by different cultures, industries, and political and regulatory environments. Yet despite their differences there is one thing on which most directors and business leaders would agree: the spotlight on them has never been more intense. While business is regaining some of the trust lost after the financial crisis, the pressure on boards to continuously improve remains acute. Directors have to lead businesses that are increasingly global, complex and fast-paced, and contend with political, social and environmental pressures. Undoubtedly, these circumstances also present opportunities. Boards able to look beyond their basic responsibilities and adapt to this dynamic environment not only help their companies, they also communicate – both internally and externally – about themselves and their businesses to a large, attentive audience. Importantly, successful boards help shape the agenda, rather than just react to issues as they come.

6

Diversity is one of the most significant issues on the board’s agenda today. Progressive companies are focusing on what it means to be inclusive, as opposed to simply ticking boxes and fulfilling quotas. It is an effort that encompasses far more than gender alone. True diversity involves different sexual identities, religions, socio- economic backgrounds, professional experience and personality types. Fostering this inclusive culture in their own ranks, and in the businesses they lead, is now a core responsibility of those in the boardroom. Tabling the issue or ignoring it altogether is no longer a viable option for those who want to compete for millennial talent, win new customers and generate transformative ideas. This challenging landscape calls on those in the boardroom to keep upping their game. This issue of the Brunswick Review offers a broad range of perspectives, as told by the men and women serving on boards, as well as those advising them. susan gilchrist – CEO, Brunswick Group research

GLOBAL BOARD TRENDS Board members must adapt or risk becoming obsolete, says Spencer Stuart’s edward speed

separated roles oards of listed companies LEADERSHIP are operating under greater scrutiny than ever before, Where CEO and chairman are combined B in a political and social climate increasingly characterized by cynicism 70% While there is a global trend and a mistrust of business. Directors to split the CEO and chairman 60% are exposed and accountable to an roles, France, Spain and the US are obvious exceptions. 50% unprecedented degree. Combining the roles can be an Under the weight of legislation, 40% effective temporary strategy, as long as the chairman can governance codes and listing 30% requirements, it is easy for a board step back when the time 20% comes. In some countries, to get bogged down in compliance such as Germany, governance issues instead of dedicating sufficient 10% law requires that supervisory boards be independent of attention to strategy and the ability of 0% US UK management, so the CEO Spain management to execute it successfully. France Canada Belgium Germany cannot serve as chairman Every board has a responsibility Hong Kong Singapore to oversee management with active questioning, constructive challenge The role of chairman has changed in Second, running the board and recent years as board work has become running the company are two distinct and support, wherever needed. But more onerous and there is a growing belief activities, requiring different skills. to do this effectively, the board has to that the roles of chairman and CEO are A good independent chairman will focus be agile, engaged, responsive, diverse best separated. on time-consuming board governance and above all, relevant. First, concentration of power in one issues, freeing the CEO to take care of A board cannot fulfill its pair of hands heightens risk. Board the day-to-day running of the business. responsibilities without deep members should always feel free to Boards that promote the outgoing knowledge of the company and the challenge the CEO’s decision-making CEO to the role of chairman need to process. When the chairman is also consider very carefully a dynamic in context in which it operates. That the CEO, directors can feel uncomfortable which a chairman is sitting in judgment means it needs to keep pace with and at a disadvantage – although the over his or her successor. This can such things as disruptions to the presence of a lead director (or senior introduce a layer of complexity to what business model, digital transformation independent director) can mitigate is clearly the most important relationship and cybersecurity. this problem. in the business. Investors are responding to these pressures by monitoring board view from the us effectiveness and calling for more S&P 500 COMPANIES frequent changes in board composition. These pages show some statistics 2005 2015 and trends that define the state of The chairman and CEO roles boards today. It is important to note CEO is also chairman 71% 52% are still frequently combined that boards are having to deal with a in the US. However, a gradual, constantly changing agenda. They are yet remarkable shift toward separating the functions Independent chairman going to have to be prepared to adapt 9% 29% has taken place over the even faster than they have in recent past 10 years years – or risk becoming obsolete.

8 brunswick review · issue 10 · spring 2016 research

rise of outside directors INDEPENDENCE

Independent directors (%)

In many countries, board committees are required to have a majority of independent directors, with the audit committee comprising only SwitzerlandFinland US Norway Denmark NetherlandsSweden UK Germany South AfricaFrance India Italy Hong KongBelgium Spain Russia Turkey independents. Boards with two-thirds or more 88.3 84.0 84.0 80.0 76.0 66.8 62.0 60.9 60.0 58.1 58.0 52.8 49.2 47.0 43.3 39.0 35.0 33.0 independent directors find it easier to populate an increasing number of committees

For companies to be listed on the world’s the interests of all the shareholders at heart and exchanges, authorities often demand that a continually asks: what course of action will yield majority of directors are independent. To be the greatest chance of success for all investors in classified as independent, directors should be the long term? free of conflicts of interest. If a director is not prepared to question or, when However, independence is more than that: it necessary, challenge the executive on strategic is an attitude. Independent thinking is essential issues, he or she brings little value to the board. if outside directors are to challenge and support On the other hand, relevant experience executives properly, and avoid groupthink. The among non-executive directors is essential. best outside directors identify closely with the It is a mistake to rule out potentially useful board business while bringing objectivity to the board’s members because they do not comply with deliberations. The truly independent director has an overly rigid definition of independence.

international diversity NATIONALITY

Foreign directors Average number of

nationalities per board 70% Swiss boards have not only

60% the highest proportion Switzerland of foreign directors, but 50% 6.1 also the highest number 40% France 4.6 of different nationalities. 30% Globalization and a shift 20% UK 3.2 in world trade toward the 10% East is likely to result in Germany boards becoming even more 0% 2.8 UK US India Japan internationally diverse France Russia Germany Italy Switzerland Netherlands 1.7

In many countries, non-nationals now account to create or to maintain – especially when the See for more than a quarter of board directors, often element of long-distance travel is factored in to “Talking about diversity” offering much-needed experience in strategic an already steep commitment. For that reason, Page 25 markets, in addition to technical expertise. the majority of foreign directors for any given “A look at the numbers” But international diversity may not be easy company tend to hail from the same continent. Page 49 DATA: SPENCER STUART BOARD INDEXES / 2016 GLOBAL BOARD DIRECTOR SURVEY: SPENCER STUART, WOMENCORPORATEDIRECTORS FOUNDATION, HARVARD BUSINESS SCHOOL’S PROF BORIS GROYSBERG BORIS PROF SCHOOL’S BUSINESS HARVARD FOUNDATION, WOMENCORPORATEDIRECTORS STUART, SPENCER SURVEY: DIRECTOR BOARD GLOBAL 2016 / INDEXES BOARD STUART SPENCER DATA:

brunswick review · issue 10 · spring 2016 9 research

talent RENEWAL

Average ages of directors (US and UK)

In an era of accelerating 2005 2015 change, growing complexity Non-executive directors 60.8 63.1 and unprecedented US disruption, the fact that CEOs 55.4 57 today’s boards are older than Non-executive directors 57.8 59.2 a decade ago is a source of UK concern. While boards need CEOs 50 53.7 experience and maturity, they also need to be continually refreshed. The best boards Over the past 10 years, boards have gradually to have the same people on your board year after encourage individual directors been getting older, for a number of reasons. year in an era when demographics, technology to think critically about their own contributions and Fewer serving executives have time to commit and consumer behavior are constantly changing whether the experience they to an outside directorship; not all countries and business models are getting disrupted. bring is as relevant today as have term limits for directors; and mandatory Boards need to step back and think as an when they joined the board retirement ages, where they exist, have steadily activist would, asking themselves whether the been going up. diversity of skills around the boardroom table As boards age, investors often become reflects the strategy of the business and its frustrated. They question whether it is sensible stakeholder universe.

S&P 500 boards with mandatory Annual turnover retirement age of 75 or higher of S&P board seats

2005 2015 8% 34% 7%

effectiveness ASSESSMENT

How well a board does its job cannot easily be An external assessment conducted by an captured in numbers. Statistics don’t tell us how experienced and neutral facilitator will provide well a board is run, the nature of the debate, how a far richer and more nuanced picture of how directors are relating to each other, how well the board functions and how effective it is 36% they really understand the business or whether than one that is internally managed and purely of directors they have the confidence of management. questionnaire-based. surveyed have Even so, annual board assessments are Many governance codes often recommend served on a becoming more common and they play using an external facilitator every three years, board that used evaluations an increasingly critical role in improving although some companies prefer such a review to remove board effectiveness. When done well, every year. Despite a growing acceptance of the a director assessments can result in improved processes, practice, few guidelines exist and the standards greater accountability, more transparent of how assessments are conducted vary. This communication, enhanced trust and better is surprising given how much is at stake for the decision-making. company – and the potential benefits.

10 brunswick review · issue 10 · spring 2016 research

payment DIRECTORS’ FEES

Breakdown of non-executive fees in Europe and US (€000)

The compensation of outside directors should 250 be in line with experience and the time commitment 200 expected, but it should not be equal to that of top 150 executives, as this could compromise the directors’

100 independent view of the organization. An outside director whose lifestyle 50 depends on fees from a single organization 0 UK US Italy cannot be regarded as France Spain Germany totally independent Netherlands Switzerland

Retainer Total fees Fees converted to euros use average conversion rate for 2014

Fees paid to non-executive directors vary retainers, board and committee meeting fees, enormously around the world, with the US and share grants, bonuses and other emoluments. Switzerland compensating their independent This can make comparisons difficult. In addition, board members most generously. disclosure requirements are thorough in some In most countries, directors earn additional countries, but patchy at best in others. fees to chair committees or serve as a The chart above shows the wide range committee member, lead director or senior of retainer and total compensation available independent director. to non-executive board directors in a Compensation methods for non-executive selection of markets where this information directors can include any combination of is readily available.

effectiveness ASSESSMENT

Board evaluations done by an external agency

Boards that have a positive view of annual assessments 50% 67% are more likely to improve. 40% Many board directors view of directors external board evaluation surveyed think that 30% negatively, as a process a director with 20% designed to reveal their whom they have shortcomings. By embracing served should 10% constructive criticism, a board have been removed can show investors that it 0% from his or her UK US Italy is functioning effectively France Russia directorship Sweden Germany South Africa While 98% of S&P 500 boards conducted an evaluation, only four companies (0.8%) disclosed that the evaluation was externally facilitated

brunswick review · issue 10 · spring 2016 11 research

who’s next? SUCCESSION PLANNING

aving the best possible talent Succession planning is about far more multichannel operations, cybersecurity, around the boardroom table than the CEO, of course – it needs to sustainability, regulation or government really matters. Boards need to span the whole board. And it takes time. relations. In such cases, it may make more H be fluid and adaptable, capable It is still all too common for boards to sense for the board to add an expert in a of focusing on short- and medium-term address director succession only when particular area, rather than confront the issues while safeguarding the future facing an impending vacancy. By thinking challenge with the current team or seek health of the business. Boards with a about the big picture and planning advice from outside consultants. long-term vision tend to be the ones further ahead, boards increase their taking succession planning seriously. options and make it easier to secure the Let’s start with the CEO. A carefully very best talent when it is most needed. planned and rigorous succession process can last between one and four years. STRATEGIC PERSPECTIVE Because most non-executive directors Some nomination committees are unlikely to be involved in a process maintain a skills matrix in order to like this more than once or twice in their fill gaps in directors’ competencies to career, they need to be supported by an the benefit of the business. Since the experienced adviser who can escort them balance of skills changes with each through the procedure and draw on best new appointment, this matrix needs practice. For the most part, the mistakes to be reviewed continually, identifying that lead to hasty appointments or to opportunities for fresh perspectives the unnecessary departure of internal that would be most relevant to the candidates can easily be avoided. organization’s future. Boards achieve the best results when Board composition has to be aligned they tackle succession planning well with strategy. Any new appointment in advance, with the full support of should always be viewed in the the CEO. Some boards are reluctant broadest possible context, taking into consideration the company’s goals, term limits, and the EDWARD SPEED The ideal time to discuss the topic relevance of each director’s skills of succession is shortly after and experience, both today and Edward Speed is Chairman of Spencer three to five years from now. Stuart and active on CEO succession a new CEO has taken up the post and board searches globally. He has This point cannot be 25 years’ experience in recruiting made too strongly. When chairmen, non-executive directors, to raise the issue mid-way through the the company’s strategy shifts, tough CEOs and top management for leading CEO’s tenure and thus delay the process, questions need to be asked about the public and privately owned companies. creating unnecessary stress. suitability of the present board to SPENCER STUART The ideal time to discuss the topic of support and monitor management while Spencer Stuart is a global executive succession is shortly after a new CEO that new strategy is being executed. search and leadership advisory firm. has taken up the post. When succession This is particularly true during Founded in 1956 and privately owned, appears regularly on the board agenda it a period of disruption or when the it works with clients across a range of industries, from major multi- is understood as an aspect of planning business is facing a new external nationals to emerging companies, rather than a question mark over the challenge that requires some board-level to nonprofit organizations. CEO’s competence. expertise – for example in digital strategy,

12 brunswick review · issue 10 · spring 2016

SYMPATHY FOR THE DEVIL Business lawyer and academic siobhan sweeney says all boardrooms need a “contrarian” director to challenge the majority view

it would be unthinkable for a prisoner personality. Instead of being regarded as to be sentenced without the defense being troublesome or subversive for sharing given an opportunity to speak. Only in the concerns, contrarian directors would be least fair, least open and least democratic understood to be doing their job. states would such behavior be tolerated. There is precedent for this kind of And yet, across boardrooms in the most role working successfully. The Advocate advanced economies on earth, such General of the European Court of Justice one-sided examination of issues is all too delivers impartial opinions on contentious common, resulting in flawed verdicts and cases. The ombudsman role serves a avoidable errors of judgment. similar function, hired by a government The reason for this sorry state of affairs to investigate on behalf of its accusers. may lie in one word: comfort. From the Perhaps the best-known position is people they choose to surround themselves one which no longer exists: the “devil’s with, to the procedures that guide board advocate,” a role created by the Catholic meetings, leaders often go to great lengths Church to argue against a candidate to avoid being challenged in front of being canonized. The devil’s advocate others. Knowing that dissent can be seen as identified any potential gaps in a case for disloyalty, many directors choose to remain term. An institute should be established to sainthood – an unpopular duty, but one silent (and employed). help companies choose contrarians with the that was essential to the integrity of the The boardroom needs to become less right experience and skills. canonization process. cozy for directors. A good place to start While the contrarian’s recommendations The best leaders should welcome a would be for the principles of the courtroom would not require action by the company, modern-day devil’s advocate into the – a balanced discussion and examination of they would make leaders aware of ideas boardroom. Asking tough questions facts – to find their way to the board table. and risks they had not yet considered. At and challenging assumptions may be To that end, every company board should best, having a contrarian in the boardroom uncomfortable, but it is the price for appoint a “contrarian” director. could institutionalize skepticism and informed decisions. A robust discussion On any important recommendation, improve a board’s ability to make decisions on difficult issues is the hallmark of great the contrarian would consider a complete and manage risk. leadership, not the work of the devil. range of outcomes, including “extreme” Some may argue that independent scenarios, investigate the issues without directors play this kind of impartial role SIOBHAN SWEENEY bias, and recommend a truly independent already. But they face the same pressures and impartial course of action. The and incentives as other board members and A Fellow at the Centre for Risk Studies at the University of Cambridge’s Judge Business contrarian would outline the case against are prone to the same mistakes. At Enron School, Siobhan C. Sweeney previously the recommendation through a written and WorldCom, 80 percent of the directors worked at corporate law firm King & Wood report that would then become the basis were “independent.” Mallesons. Her paper on contrarian directors for a board discussion. Why should the position of contrarian won the 2015 Cambridge-McKinsey Risk Prize. She is also an entrepreneur. To make sure the contrarian director was director be any more effective? Because acting in the company’s best interests he or it makes uncomfortable discussions Siobhan Sweeney spoke with rosheeka field,

ILLUSTRATION: OTTOILLUSTRATION: STEININGER she would serve a non-renewable three-year the product of a position, rather than a a Director in Brunswick’s London office.

brunswick review · issue 10 · spring 2016 13 BIG ASK: WHAT DON’T YOU KNOW ABOUT CYBERSECURITY? Boards need the best information. For that, they need to know the right questions, say Brunswick’s george little and sofia mata-leclerc

n the past three years, But in the end, the responsibility a growing number of high- for the effects on the company rests profile attacks in a broad range with the board. of sectors, including financial “Ultimately, the ‘business I and healthcare, have exposed judgment rule’ should apply to any the personal records of millions decisions regarding oversight of and propelled cybersecurity to cybersecurity issues,” Gregory says. the top of the corporate board In other words, “directors should agenda. The concern is real. abide by the core standards of care, A recent study by IBM found that loyalty and good faith that apply to 94 percent of C-suite executives board actions generally.” believe it is probable their Regular dialogue about a companies will experience a company’s cyber risk management significant cybersecurity incident helps ensure this remains a priority in the next two years. for leadership. The form and A breach can result in a loss frequency of board briefings will of data, intellectual property vary according to the company’s and customer trust. In more size, type of data collected and severe cases, a breach can cripple the nature of the cybersecurity a company’s ability to operate. issues it faces. Aftershocks include reputational Each board must decide for itself damage, resignations, fines, how to structure that conversation regulatory action, lost business and among its members. Some may class action lawsuits. The average cost of Meanwhile, the stakes are getting choose to appoint a cybersecurity director a data breach has risen 23 percent since personal. Data-breach related lawsuits or create a specialized committee. 2014, according to the Ponemon Institute, have been filed against the boards No matter how it is handled, a data security research organization. of Target, Wyndham Worldwide and an effective cybersecurity strategy Recent Brunswick Insight research Home Depot. Plaintiffs claim that board requires more than just one decision finds 74 percent of board directors agree members failed to fulfill their fiduciary or discussion. Boards must make that it is important to understand the duty to protect customers’ information. a commitment to regularly review cyber risks. Yet Gavin Patterson, CEO Cybersecurity is a complicated and update their understanding of of telecommunications group BT, told issue that can arise out of any business the risks. delegates at the World Economic Forum decision, not just those involving IT. They may not need to be experts, in Davos that most boards still lack the While board directors aren’t expected but they must be informed. For that, experience to handle such challenges. to be experts, they do need an advanced they need to know what to ask. “The risk is changing in its nature and understanding of the risks facing the is becoming more sophisticated,” he said. company and a familiarity with the george little is a Partner in Brunswick’s “While I think there is a recognition at procedures in place to handle a cyber Washington, DC office, specializing in crisis, board level now, I’m not always convinced attack. Boards should seek outside cyber cybersecurity, reputational and public affairs. sofia mata-leclerc is a Director when I talk to other CEOs that there is a expertise, says Holly Gregory, a Partner in San Francisco, specializing in crisis, high technical understanding.” at corporate law firm Sidley Austin. cybersecurity and corporate reputation.

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Five questions every board should ask

1. What procedures 2. Have you tested your 3. Do customers 4. How do you decide do you have in place to preparedness plans? understand your how much to invest manage a breach? A table-top simulation allows data collection in security - and where? An ideal response will a business to stress test and and usage practices? One hundred percent security demonstrate that the company improve how it would handle You don’t want customers is not possible and the number has thought through multiple a crisis. This exercise helps to learn about the data you of possible avenues of attack scenarios. Plans for handling companies uncover areas have from a breach notice or alone prevents an ironclad a breach should go beyond where more preparation is media coverage. Instead, your defense. In addition, some simply escalating the situation needed. Who should be company should periodically companies may choose to to the IT and legal teams, in charge of these simulations evaluate its data collection take on more risk in order and should include customer will vary from company and uses, and assess how they to improve the customer service, public and government to company. But the trials could be putting the business’s experience. In light of this, relations and employee should include high-level reputation at risk. Make sure companies need to weigh the communications. Board participation across your data story is clear and degree of security against directors, management and the organization, including that you’re articulating the the needs of the business. the business’s various the CEO. The group has to value that the usage provides The smartest companies departments all need to make sure the simulation to customers. Increasingly, are thinking about security understand their role within incorporates a response organizations are writing their early in the product the overall plan. Multinational that addresses affected privacy policies with this in development cycle. corporations must consider stakeholders, taps into mind, clearly outlining what Companies should organize reporting requirements all relevant resources and they collect and why. security into tiers, focusing and account for additional procedures, and points out additional resources on the coordination complexities the unforeseen problems that most sensitive data and across regions. actions in one department can working outward from there. cause in another.

Increasingly, a company’s employees Threat Report. That’s a 40 percent are seen as the weakest link in any data increase over the previous year. security regimen. They are vulnerable to To counteract such scams, more “spear-phishing” attacks, when an email companies are choosing to educate from what appears to be a trusted source employees about common cybersecurity – an individual or business – requests risks. These programs should secure information about the company. complement the use of any hard controls, The hope is that the recipient will reply such as mandatory password strength automatically, handing over the keys requirements. The goal should be to 5. Are you educating to the castle in the process. Five out of empower employees by arming them with employees on the best every six large companies – those with basic knowledge: how to spot an attempt cybersecurity practices? more than 2,500 employees – were hit by to breach security, where to go to ask

spear-phishing attacks in 2014, according questions, and who to inform when they

ILLUSTRATIONS: JUSTIN MEZZELL JUSTIN ILLUSTRATIONS: to a recent Symantec Internet Security identify a potential threat.

brunswick review · issue 10 · spring 2016 15 THE VIEW FROM OUTSIDE osamu nagayama leads the board of two companies, to the benefit of both, he tells Brunswick’s daisuke tsuchiya osamu nagayama divides his time between pharmaceutical company Chugai, where he holds both the CEO and Chairman posts, and electronics giant Sony, where he is an independent director and Chairman of the board. In an interview in a conference room in Chugai’s Tokyo headquarters, he says that while the two businesses are very different, the responsibilities of their boards are the same, making the transfer of his skills from one to the other a natural step. In addition, working with the leadership of the two companies has allowed him to enhance his own experience and expertise, to the benefit of both businesses. Sony and Chugai are both international companies and have governance structures that require external directors on their boards. Traditionally however, Japanese boards have been almost exclusively comprised of executives and insiders. Nagayama sees that changing quickly, despite cultural resistance, spurred in part by governance reforms instituted by Prime Minister Shinzo Abe’s administration. Contrary to what most people might think, Nagayama says the main function of a board is not to make money for the company. Instead, it is to create transparency. The relationship between the board and executive management provides an important set of “checks and balances” to the benefit of all stakeholders, including shareholders. In light of the board’s oversight function, Nagayama makes the case that the CEO and chairman should be on good terms, but says a close friendship is “dangerous.”

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Being CEO and Chairman of Chugai is a very demanding position. What led you to also take on the Chairman role at Sony? I joined Sony’s board in 2010 and was appointed its Chairman in 2013. The management and Yotaro Kobayashi, Chairman at the time, invited me to consider the post. Because Sony is quite a large, diverse, globalized company, I instantly thought about the challenges I would face, being a board member. I knew I had a perspective to bring – life experience and business knowledge. I also thought that being on the Sony board might benefit Chugai, providing insight into ways to improve its management and governance. I was a little hesitant, but in the end, after some consideration, I accepted. I have also been a fan of Sony for a long time. Over the years I have loved products such as the Walkman and its digital cameras. I had a Trinitron TV, for instance, and still use my Sony DVD/Blu-ray player. To be fair, I think it would be hard to find Japanese people who have not used Sony products. The company is somewhat iconic here. Some of the products, such as the Walkman, helped define parts of popular culture worldwide.

Coming from the pharmaceutical business at Chugai, were there any big surprises when you got to Sony? The biggest surprise was how closely scrutinized it is. Sony’s businesses cover everything from electronics to entertainment to financing and insurance – and the company is all very consumer focused. Any company action, any issue about Sony, attracts huge amounts of public attention. That doesn’t happen at Chugai, where our customers are mostly medical professionals. That was a big surprise, but in fact, it helped me at Chugai. We now spend more time looking beyond our professional customers for ways that our products impact the users. As a result of my Sony experience, we are more sensitive to the needs of those who see the benefit of our products – to patients and society. In other ways, too, being on the board of Sony has broadened my perspective, particularly in the way global operations are run. Chugai is much smaller, but our drugs are designed for the whole world. brunswick review · issue 10 · spring 2016 17 Do you feel pressure to prioritize shareholders’ No matter how many external directors a board interests over other stakeholders, such as has, its role is to look after the interests of all customers or workers? stakeholders and ensure the necessary transparency When people talk about shareholder interest, of management. usually they are really talking about profitability and increasing the stock price in the short term. Do you feel some companies would be better off Long-term shareholders, on the other hand, expect without adding external directors? there will be some ups and downs, trusting that the Japanese business has been reliant on this internal company will grow soundly over time. board style for so many years. I don’t see anything My experience tells me that no global company particularly wrong with that, but the business can make a short-term profit unless it also invests environment is changing quite rapidly. With a in the long-term future. On the other hand, many greater supply of potential directors and with more companies might keep a losing division because it time, I think we will see companies moving toward represents the future of the business. That’s fine for more external directors. losses of two or three years, but not more than that. Right now though, a lot of people are still Saying that you are investing for the future doesn’t skeptical about the role of external board members allow you to go on losing money each year. – not just people in Japan but outsiders as well. Some business leaders of large companies, As a CEO, I might think, why do I want a board such as GE, primarily think about the long-term member who doesn’t know about my business? But future. But, of course, they never forget to satisfy that misunderstands the role of the board, which shareholders and stakeholders through dividends is really to judge management’s effectiveness. It’s or increasing the value of the company. about ensuring transparency. That is something So you don’t have to choose short-term or long- external directors can do very well. term success. You have to achieve those in tandem. What do you think makes a good external In Japan, traditionally only a small group of listed “… changes director? What do you look for? companies have had multiple external directors. in Japan are It’s not like a university test, where if you score so The new governance code recommends each many points on each item, you pass. In general, board has two or more. Is that a positive move? happening you need someone with experience managing Who can say what is right in this case? It is a all of a sudden a business and someone who knows what challenge but it is promoted vigorously by Prime transparency is. The role of an external board Minister Abe’s administration. These changes in – demand member is not to coach the management to make Japan are happening all of a sudden – demand for external more money or succeed in the business, but to for external directors is growing but the pool of check what management has promised to achieve candidates is still limited. directors and to consider whether they are doing it right. The reality is that the domestic market is is growing but shrinking. As businesses look to expand overseas, Even in a company like Sony, there are still they have to adapt to the cultures or requirements the pool of relatively few women and few foreigners on the of those countries. Putting two outsiders on the candidates is boards. Do you see that changing? board is a first step toward internationally accepted As companies adopt the new governance code, they governance where external board members are a still limited” will realize they need to have a more diverse board. key element. Some large companies are already recruiting more Now, whether it’s better to have more external outside and non-Japanese board members. The board members or more executive board members opinions of non-Japanese directors can be very – that depends on the organization. There is no different and that’s valuable. one-size-fits-all solution. Sony has 10 external Women are coming to executive and board directors out of a board of 12, but that fits with positions, but a little slower than in the West. There its diverse international agenda. is not yet a critical mass of women eligible for those So, we should not be too dogmatic about the roles and Japanese companies have only recently style of corporate governance. Certainly for Sony, begun to recruit and train them. As a result, the which is running a diverse business, it is better to numbers are growing rapidly and more women are have the experience of people in different industries gaining experience. It’s only a matter of time before or with different viewpoints. they come up through the ranks.

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In light of the board’s checks-and-balances relationship with management, should a board with external directors be involved in forming specific business strategy? That’s a challenging question for any outside board member to answer. Our primary mission is to judge whether management is serving the best interests of all the stakeholders. For business matters, internal OSAMU NAGAYAMA directors will typically know better. Osamu Nagayama currently serves Sony has gone through a little turbulence in the as Chairman and CEO of Chugai last couple of years and had a very difficult time Pharmaceutical. He led Chugai in the with some poor financial performance – we’re establishment of a strategic alliance making a recovery now. As outside board members with Roche in 2001 and now manages Chugai as a Roche Group unit. Since of this diverse company, we had to think a lot 2006, he has been a member of the about whether each business was worth keeping Enlarged Corporate Executive or whether we should get out of it. Committee of Roche as well. He has also Sometimes we had to demand enough material been a member of the board of directors at Sony since 2010, and was appointed information for us to judge. In those moments, to the Chairman position in 2013. when a critical decision is required, there’s no way to draw a clear line or to say board members should CHUGAI PHARMACEUTICAL or shouldn’t be getting deeply involved in the One of Japan’s leading research-based business. So it’s a difficult question. We just have to pharmaceutical companies with a focus on biotech, Chugai was founded in 1925. try to do what’s best for stakeholders in each case. “The role It specializes in prescription drugs and of an external is one of the sector’s largest companies At Chugai, you serve as both Chairman and CEO. on the Tokyo Stock Exchange. As a At Sony they are separate roles. Ideally, should board member member of the Roche Group, Chugai is involved in research and development they be split? is not to coach activities in Japan and abroad. If the chairman has good management and transparency in mind, then it doesn’t really matter the management SONY whether he is an outsider or an executive. In a to make more Founded in 1946, Sony has grown into critical period, stakeholders might demand more a leading global maker of electronic equipment and software for consumer transparency and objective judgment. In those money or and professional markets. Its businesses cases, the chairman might have to be an outside succeed in the include mobile communications, game board member. and network services, imaging products, When the roles are split, it’s very important business, but entertainment and financial services. Sony is headquartered in Tokyo, Japan. that there is a spirit of cooperation between to check what management and outside board members. But that should not be translated into a close friendship management necessarily. That can be dangerous. Boards have to has promised make judgments – cooperation with management has to translate into objective conclusions. to achieve” A board of outside members may even have to dismiss the management. That’s an extreme example of the board’s function. Our mission is to help improve the running of the company. On the other hand, I think you can push it too much, keep the CEO at too much of a distance – you could wind up making a wrong judgment. That’s dangerous too.

daisuke tsuchiya is a Partner in Brunswick’s London office. Previously, he worked for 15 years as a diplomat

ILLUSTRATIONS: FRANCESCO BONGIORNI FRANCESCO ILLUSTRATIONS: with the Japanese Foreign Ministry.

brunswick review · issue 10 · spring 2016 19 what makes a bad board. However “bad” is harder to define. The Anna Karenina principle applies: like families, all happy boards are broadly alike; every unhappy board is unhappy in its own way. Yes, it’s easy to list some disaster signs. Beware the boards where the chairman sits in the CEO’s pocket, or has his hands around the CEO’s throat. I once sat on a board where “NXD” spelled “psychotherapist”: no meeting day was complete without evening calls from both chairman and CEO to complain about each other. But sometimes signs are misleading. Quite small trouble spots can suddenly make a board dysfunctional, while large defects can still allow CONFESSIONS it to operate well enough. All things considered, it’s better to concentrate on common factors that make boards good than to try to draw lessons OF A SERIAL from the bad. It may seem a cliché to start with the chairman, BOARD DIRECTOR but it is that person’s job to make sure the board runs well – that’s what the separation of powers sarah hogg, the first woman between chairman and CEO makes clear. Never join a board if you don’t fancy the chairman to chair a FTSE 100 company, recalls (in a strictly business sense, of course). some tricky times at the top table However, the whole triangle of leadership is important – chairman, CEO and lead or senior independent director (SID). The SID was a great invention of modern corporate governance, almost as important as the separation of chairman and on really sleepless nights, when the sheep CEO. He (now, sometimes, she) is the anchor in a just won’t go through the gate any more, I start storm. The SID can, indeed must, speak truth to counting the different boards I’ve been on over the power, and tell the chairman or the CEO to change past 20 years. Nine big, publicly quoted companies, behavior or go. But more than that, the SID can from energy businesses to a chocolate-maker. One facilitate board debate and ensure that a paid-up big private company (British retailer John Lewis). member of the “awkward squad” (a vital board Public sector institutions, from the BBC to Her component) gets a fair hearing. Majesty’s Treasury. Investment businesses, above all After the financial crisis, when I was at the FRC the private equity investor 3i, where I found to my and responsible for reviewing the UK Corporate astonishment that I was the first woman to chair a Governance Code, I talked to many former bank FTSE 100 company. A historic engineering business NXDs, smart and respected people. They were (GKN); a brand new economics consultancy asking themselves, how had their board failed to see (Frontier); a dual-listed ocean cruise group trouble coming? Had they given up too easily, or (Carnival); and a national charity (The Queen not wanted to make trouble? Had the chairmen and Elizabeth Diamond Jubilee Trust). CEO simply brushed them aside? Those who had I’ve done startups, mergers and de-mergers; I’ve spoken up plainly felt they were struggling alone: even chaired a regulator – the Financial Reporting too isolated to make much impact. Lesson: a good Council (FRC). In fact, I sometimes think the only board is one on which the NXDs work together, kind of organization I’ve managed to avoid is a not always in agreement, but in tacit understanding football club, and it’s going to stay that way. that their colleagues must be properly heard. All those years of experience as a non-executive Which depends, of course, on mutual trust and director (NXD, or NED) really ought to have taught respect; and that, in turn, depends on knowing me something about what makes a good board. each other reasonably well. That doesn’t mean You’d think. The temptation is to focus instead on coming from the same mold, because a diversity of

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thought, approach, culture and gender is essential “The Anna Karenina principle applies: like families, to a lively – that is, well-functioning – board. It does mean spending enough time together to forge an all happy boards are broadly alike; understanding. It’s the leaders’ job – the chairman every unhappy board is unhappy in its own way” and the SID – to ensure that happens. That needn’t mean more of those weeklong board jamborees to far-flung parts of the corporate empire. Facilitating short visits by groups of NXDs Above all, I believe the chairman’s responsibility can be much more productive, for both learning is to make the board fun. If the debate is lively, and bonding. Like so much in board life, all these if members have the confidence to give and take processes and rituals benefit from being constantly vigorous challenges, if left-field questions are changed and refreshed if they are to add value. welcomed and enjoyed, then members will turn Which is why I am a strong believer in board up well-briefed, fully engaged and spoiling for evaluation and a good test of a chairman is to see if action. If it’s dull, pre-cooked, process-driven and they share in that belief. Twenty years ago, a FTSE led by people who resent challenge, directors will 100 chairman expressed his conviction that formal be tempted just to go through the motions. And evaluation wasn’t needed thus: “A chap generally you’ll hear the noise that an experienced chairman knows when other chaps are doing a good job.” told me you learn to dread most: the sound of the So much is wrong with that sentence that one can board briefing pack being ripped open only as the only rejoice at how much has changed since. directors sit down at the table. But evaluation doesn’t relieve the chairman of the continuous task of assessing and refreshing. BARONESS HOGG

Identifying the right NXD to slot into the mix is Sarah Hogg is Lead Independent Director of the Treasury, like a hunt for unicorns: they’re easy to describe but a member of the Takeover Panel, Non-Executive Director hard to find. And as the business changes, so does of the Financial Conduct Authority, Chairman of the Audit the appropriate mix of directors. Committee at John Lewis Partnership and an Independent Director of Times Newspapers. She is also a member What’s more, board members, like wine, mature of the House of Lords. From 2010-14 she was Chairman at different rates. It’s wise not to leave anyone in of the UK Financial Reporting Council and before that a committee chairmanship for too long: either Chairman of 3i Group and Frontier Economics. She led they get so good that others become lazy, or they Prime Minister John Major’s Policy Unit from 1990-95. themselves become lazy and run round the same Sarah Hogg spoke with michael harrison, a Partner

ILLUSTRATION: OTTOILLUSTRATION: STEININGER track each year. in Brunswick’s London office.

brunswick review · issue 10 · spring 2016 21 THE POWER OF TWO pedro moreira salles tells Brunswick’s marcos caetano how the merger that created Brazil’s Itaú Unibanco involved sacrificing control for the greater good

n 2008, Pedro Moreira Salles helped orchestrate the While Pedro chose to follow in his father’s footsteps, his Southern Hemisphere’s largest-ever deal in the financial brothers went into very different endeavors. Walther Junior, sector: the merger of two leading Brazilian banks, Itaú and better known as Walter Salles, directed Central Station, which I Unibanco. Moreira Salles, then CEO of Unibanco, credits won many international prizes, and the Academy Award-winning the success of the deal in part to his constructive relationship with The Motorcycle Diaries. Another brother, Fernando, co-owns his opposite number at Itaú, Roberto Setúbal. Now, with Moreira one of Brazil’s largest book publishers and also runs CBMM Salles as Chairman of Itaú Unibanco and Setúbal as CEO, which produces niobium, an element most commonly used to Moreira Salles says they have built a constructive institutional strengthen steel. Youngest brother João makes documentaries environment that allows the combined bank to thrive. and publishes the respected Brazilian magazine piauí, often Moreira Salles is a member of a Brazilian family, prominent compared to The New Yorker. in both business and the arts, that has run Unibanco since Pedro has chosen to focus on culture of a different sort: its founding as the Moreira Salles Banking House in 1924. in the boardroom. Here, he discusses the creation of Itaú His father, Walther, grew the company into one of the most Unibanco, the influence of his father and the decision to important components of modern Brazil’s banking system and give up his CEO seat. It is the culture of the merged company, also served as the country’s Minister of Finance as well as its where “one plus one is greater than two,” that he feels is his Ambassador in Washington, DC. greatest achievement.

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Just how difficult was it to decide to merge “It is the board’s need for an intense, almost daily interaction – so Unibanco and Itaú? much so that my desk was moved into the room Every major fork in the road, every critical decision, role to define of the Executive Committee, close to Roberto’s. is complex for a business – and a boardroom. and safeguard But having been a CEO before, I recognized that Certainly for me, the decision to create Itaú we also needed a degree of separation, to make it Unibanco was the most challenging I have faced. a vision, clear that the new organization was not going to On the one hand, it was an exciting prospect to a direction. be run by a two-headed hydra. form a company with such enormous potential. On the other, it would create a new dynamic, one The company’s Was the decision to split the Chairman and CEO where independence – and therefore influence – culture can’t roles partly symbolic? could be substantially diminished. Yes. We wanted to show everyone that the merger be defined by an was in fact a merger, to reject the perception that So both you and Roberto Setúbal had to give up executive who, there had been winners and losers in the process. some control as a result of the merger? It was a tremendous effort to try to create a culture Yes. I became the Chairman and he became CEO. by definition, that would represent the two organizations. For this For both of us, although in different ways, the has a temporary to work, the situation demanded something more merger meant an exercise in letting go. At the time, than the traditional setup of a board. we had to make the decision to share control, and mandate” that is exactly what we did: we shared. How so? Before the deal, right or wrong, we could make The agenda that I led went beyond the scope of a decisions with a low level of consultation and a normal board and focused on people and culture. high degree of independence. So you relinquish We wanted to create a personality for the bank that some control. At the end of the day, you give up was neither Itaú nor Unibanco. Everyone needed to power and that’s not easy. recognize this as a new era for each organization. That was the example we wanted to set: one plus How were you able to make it work? one is greater than two. And that’s what ended up We invested a lot of time. We spent almost a year happening. Looking back, seven years later, it was and a half discussing the merger before deciding to an extremely good decision. The organization is go through with it. As our relationship developed, much better than the companies that formed it. it became very clear how we complemented each other and exactly what our roles should be. It was a unique dynamic and, quite frankly, I don’t know if the model we created could be replicated.

Why not? It had a lot to do with chemistry, with trust. We committed to something unique that has been successfully tested many times: we agreed to agree. Now we have a board that has been functioning for nearly eight years and many more people are involved in the process. The trust we have today is PEDRO MOREIRA SALLES more institutional, it depends less on the two of us. When we started, we had an idea of a joint project; Pedro Moreira Salles is the Chairman of Itaú Unibanco. Prior to the merger with today we have a single project. Itaú, he was Unibanco’s Chairman from 1997 to 2004. He was CEO from 2004 to Did you outline what the limits of each role 2008. He is also a Partner and co-CEO of investment firm Cambuhy Investimentos. would be? No. We spoke at length about how the roles would ITAÚ UNIBANCO work, but we never wrote anything down. There Itaú Unibanco is the largest financial were very few doubts about how it would be done, group in Latin America and a publicly held company. The bank was formed in 2008 by about what the process would be like. We also knew the merger of Itaú and Unibanco. Unibanco that we would learn as we went along. We had no was founded by the Moreira Salles family

ILLUSTRATIONS: BJÖRN ÖBERG BJÖRN ILLUSTRATIONS: road map. During the first few years, there was a and Itaú by the Setúbal and Villela families.

brunswick review · issue 10 · spring 2016 23 Has the dynamic changed at all between you CEO is the decision maker – and so the relationship and Roberto? returns to us two, the Chairman and the CEO. That We’ve never had a conversation such as, “Look, relationship is a key element in the quality and stop doing that, start doing this, this is my space, effectiveness of any board. that’s your space.” Never. We obviously have dealt with different points of view, but we have always You worked with your father when he was reached a consensus. Naturally, things change over “That was Chairman of Unibanco. Was he a big influence? time and our roles have moved accordingly. Today, the example Yes. One of the most important skills I saw in what we do isn’t the same as it was in early 2009. him was precisely this effort to attract people we wanted with complementary skills, to get everyone to What about the Itaú Unibanco board – how has to set: one plus contribute. He left day-to-day activities to the that evolved? executive team, but he most definitely gave We’ve changed the board substantially over these one is greater direction to the company, most importantly past few years. Some members retired, some were than two. through his emphasis on relationships. changed simply because we needed to represent It was my father who changed the bank’s name different points of view. And that’s from Banco Moreira Salles to Union of Brazilian Today, we do yearly peer reviews. Each director is what ended up Banks, or Unibanco, removing our family name. He evaluated by every other director. We have a much wanted to get rid of the focus on personality, so the clearer picture of what works and the kind of profile happening” bank could grow as an institution. It worked, and we want. We try to create a mix of people: some that led directly to the creation of Itaú Unibanco. with years of experience in the industry, CEOs from other sectors, individuals with strong academic Are there other companies whose culture backgrounds and some former central bankers. you admire? There are plenty, from Silicon Valley to some of Looking back to your time as CEO of Unibanco, the more traditional sectors. Google’s culture is you had a good record with really strong growth. distinctive. So is Goldman Sachs’. Then, of course, It was a period in which the bank did well. We there is Anheuser-Busch InBev, with its extremely assembled a group of people and gave them a strong culture – something at which it works very new mandate. That created a sense of enthusiasm hard. More companies are coming to appreciate about what could be achieved, a new aspiration for the difference culture can make. If you truly believe innovation, growth and profitability. that people make a difference, then culture is the As part of that, it made sense for me to assume ultimate comparative advantage. To stand out in the the CEO role then. I’d been involved with the bank talent recruiting war, you have to define yourself. for nearly 20 years. Being CEO, it was easier to make decisions. I had all the company reports; How important is communications I didn’t have to try to influence one individual in establishing a culture? to get things done. The responsibility would be Very. The more complex, the bigger, the more mine. But it wasn’t something that I had ever had geographically dispersed the organization, the as a career goal, to be the bank’s CEO. more crucial the role of communications becomes. It’s impossible to speak with everyone in person; What are the differences between the chairman you need a way to reach them. But corporate and CEO roles? communications is much more than the sum The chairman and the board set the tone for the of distribution platforms. You need a set of key company’s culture and values. This means the messages – and actions. board should also set the standard for the type of Growing a company is not an easy process. people the organization recruits, and who, among Many people cling to the past and refuse to change. its employees, is promoted or given incentives. To implement a change in culture, you have to It is the board’s role to define and safeguard a have a strong communications strategy. It’s very vision, a direction. The company’s culture can’t be easy to talk about culture. The real challenge is defined by an executive who, by definition, has a getting it right. temporary mandate. Although directors do change, the board in its institutional role doesn’t. It is marcos caetano is a Partner in Brunswick’s São Paulo crucial to guarantee continuity. But of course, the office. He previously worked for Itaú Unibanco.

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WHAT WE TALK ABOUT WHEN WE TALK ABOUT DIVERSITY The most progressive business leaders see the benefit of a broad definition, says Brunswick’s jon miller

across the world, in all sectors of those practices. As the company’s with anti-LGB&T laws (see “Open For business, the subject of diversity is moving President at the time, Thomas Watson Business” on the following pages). up the boardroom agenda. Companies Jr., wrote: “It is the policy of this Today, the conversation about diversity are advertising their diversity credentials organization to hire people who have is led by some of the most progressive in order to compete for the best talent, the personality, talent and background companies. At the forefront Apple, appeal to millennial consumers and necessary to fill a given job, regardless of alongside companies such as Cisco and foster a culture of innovation. They are race, color or creed.” National Grid, has shifted to focus on saying: we are a modern business with This bold statement set out a inclusion rather than diversity, pushing an open, accessible culture, a progressive business’s position on diversity more the conversation forward: what matters workplace, and a global mindset. than a decade before the US Civil Rights isn’t checking boxes and filling quotas, From Davos to Milken to the Clinton Act. The company’s similarly progressive but creating a culture where everyone can Global Initiative, diversity is up for stand on women’s rights guaranteed make a contribution. discussion. Business luminaries such as equal pay for equal work in 1935, almost See “Women in the boardroom” Page 45 Warren Buffett, Tim Cook and Richard three decades before the US Equal Pay jon miller is a Partner in Brunswick’s global Branson are expounding on it. It is a hot Act. And now, IBM is a proponent Business & Society team and co-author of topic, but what, exactly, does it mean? of LGB&T rights, even in countries the Open For Business report. What are we talking about when we talk about diversity? DIFFERENCES THAT MAKE A DIFFERENCE Understandably, “flashpoint” group

differences, such as race, gender, sexual IDENTITY preference, religion or socio-economic Gender Race class, attract most of the attention. Religion Nationality Sexual orientation These all carry a history of oppression in Gender identity some form. But numerous other forms are nearly or equally as important for a dynamic workplace: diversity in health, experience, opinions, skills, personality, CAPABILITIES BELIEFS BEHAVIORS languages, wealth, values and many more. Skills Assumptions Working style Many businesses already have a Languages Values & preferences Personality proud history of working to allow Expertise Perspectives Motivating factors Functional knowledge Interests Habits Physical abilities Cognitive styles everyone to participate in business life. Ideological beliefs In the early 1950s, as demand for IBM computers exploded, the company opened manufacturing facilities in the BACKGROUND heart of the racially segregated southern Experience Tenure US, where laws required separate Social class Culture housing, medical care, education and Lifestyle Networks transportation for white and black

IMAGE: BETTMANN, GETTY citizens. IBM refused to comply with

brunswick review · issue 10 · spring 2016 25 research

OPEN FOR BUSINESS By Brunswick’s jon miller and lucy parker

n recent years, parts of the world have seen a growing culture of respect for lesbian, gay, bisexual INCLUSION CORRELATES WITH ECONOMIC DEVELOPMENT I and transgender individuals, and their ability to fully participate in society More prosperous economies tend to have the most respect for LGB&T rights is often protected by law. Elsewhere, 100 however, there is rising antagonism toward LGB&T people, who are suffering discrimination at the hands of politicians 80 and lawmakers. There are now more than 80 countries 60 with laws that are repressive to sexual minorities and hostility is growing, fueled by a toxic mix of religious 40 fundamentalism and populist politics. The growth of anti-LGB&T sentiment

% LGB&T friendly (Gallup poll) (Gallup friendly % LGB&T 20 has become a concern in the boardrooms of many leading global businesses. Open, diverse and inclusive societies have 0 6 7 8 9 10 11 proven better for business, and better for GDP per person economic growth. Log GDP per capita: less developed economies are represented toward the zero end of the scale To stem the spread of anti-gay laws, Source: Richard Florida, “The Global Map of Homophobia” 20 international corporations have come together to launch Open For Business, a Express, AT&T, Barclays, Brunswick, coalition that seeks to make the business Economist Richard Florida, in his article Burberry, EY, Google, IBM, Inditex, and economic case for LGB&T rights. “The Global Map of Homophobia,” notes LinkedIn, Linklaters, MasterCard, The partners are Accenture, American a positive correlation between economic McKinsey, Microsoft, Royal Bank of development and the degree of LGB&T Scotland, Standard Chartered, Tesco, acceptance (the red trend line above). In a separate study, Kees Waaldijk, Professor Thomson Reuters and Virgin. Each PORTFOLIO IMPACT of Comparative Sexual Orientation Law contributes its time, resources and at Leiden University in The Netherlands, reputation – the first time businesses have found that on average, one additional right joined together to tackle this challenge. $10,000 invested in companies ranked for LGB&T people is associated with $1,400 highly for LGB&T equality would have more in per capita GDP Alongside the moral case for LGB&T consistently beat the S&P 500 over 10 years rights, there are powerful business and $50,000 $41,155 economic arguments. A comprehensive $40,000 In its Corporate Equality Index, the Human report published by the coalition, “Open Rights Campaign (HRC) rates companies $30,000 For Business: the Economic and Business $20,425 according to workplace policies that $20,000 support LGB&T fairness. In 2014, HRC Case for LGB&T Inclusion,” finds awarded 304 publicly traded US companies $10,000 evidence on three levels: its top score of 100 percent. Comparing n Economic performance LGB&T $0 2004 2006 2008 2010 2012 2014 those companies with the S&P 500 discrimination often goes hand-in-hand S&P 500 Index Index over a similar period shows HRC 100 companies, equally weighted a strong correlation between share price with a culture of corruption, lack of Source: Equality Funds performance and LGB&T inclusion openness, and weak civil society. LGB&T

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open for business is a coalition for global LGB&T the report is the most comprehensive collection inclusion, comprising Accenture, American Express, of evidence yet published on the economic AT&T, Barclays, Brunswick, Burberry, EY, Google, and business case for global LGB&T rights, IBM, Inditex, LinkedIn, Linklaters, MasterCard, and shows that inclusion improves performance McKinsey, Microsoft, Royal Bank of Scotland, Standard for individuals, for companies, and for economies Chartered, Tesco, Thomson Reuters and Virgin www.open-for-business.org

In the Open For Business report, the case for LGB&T inclusion is made on three levels: Economic Performance, Business Performance and Individual Performance. These are divided into 23 Propositions:

ECONOMIC PERFORMANCE BUSINESS PERFORMANCE

Researchers have found Propositions 1 to 9 Some 89 percent of Fortune Propositions 10 to 15 a number of close correlations Open For Business proposes 500 businesses have Open For Business proposes between economic that on an economic level… explicit policies against that businesses that are more

development and LGB&T discrimination based on diverse and inclusive… 1. Urban economic growth inclusion, particularly sexual orientation. Of the …inclusion signals a diverse and 10. Attracting talent economic output per person – 20 biggest companies in creative environment, which …are better able to compete for considered the basic measure creates the right conditions the US, 14 earned the highest talented employees of economic development. score in the Human Rights for urban economic growth 11. Retaining talent They have also found that 2. Entrepreneurship Campaign’s Corporate …have higher rates of retention positive attitudes toward …inclusion results in higher Equality Index (CEI), which of talented employees gay and lesbian people levels of enterprise, creativity rates workplaces based on 12. Innovation are associated with a wide and innovation LGB&T equality. …have higher levels of range of other indicators of a 3. Corruption LGB&T inclusion is innovation and creativity region’s economic and social …discrimination often goes also strongly correlated to 13. Collaboration progress, including the level hand-in-hand with corrupt performance in capital markets: …create an atmosphere of trust of entrepreneurship, overall practices and a lack of openness over a 10-year period, data and communication, which is well-being, life satisfaction, 4. Foreign direct investment shows shares of companies essential to effective teamwork human development and …inclusion is associated with who score 100 percent on the 14. Customer orientation urbanization. countries which attract higher CEI strongly outperform the …are better able to anticipate High-income countries are levels of foreign investment S&P 500 Index (see “Portfolio customer needs and to access more likely than either low- 5. Global markets Impact” on facing page). a broader client base or middle-income countries …discrimination may inhibit The link between 15. Brand strength to have decriminalized local companies from business performance and …have greater appeal homosexual acts or prohibited connecting to global markets LGB&T inclusion holds true and loyalty with consumers who want socially discrimination based on 6. Brain drain across the business world responsible brands sexual orientation or gender …discrimination results in a in sectors as diverse as law, “brain drain,” the emigration of identity. High-income banking, manufacturing, talented and skilled individuals countries are also more likely mining, transportation 7. Health to have legally recognized and energy. …discrimination leads some of the rights of same- Research by Harvard to negative economic Business Review shows that sex couples. consequences as a result of Of course, these are poor health outcomes companies with greater correlations and do not prove diversity outperform and 8. National reputation causation. Yet it seems clear …discrimination can shape are better innovators. HBR from multiple studies that perceptions on a world stage, found inclusive companies development and inclusion with a negative impact on were 45 percent more likely go hand-in-hand. tourism, attracting talent and to report market share developing export markets growth over the previous year, 9. National productivity and 70 percent more likely …discrimination leads to lower to report that their business levels of national productivity captured a new market. CHARTS: OPEN FOR BUSINESS / CITYLAB, / ATLANTIC THE BUSINESS FOR OPEN CHARTS:

brunswick review · issue 10 · spring 2016 27 research

inclusion is associated with higher levels of entrepreneurship and is correlated to economic growth. INDIVIDUAL PERFORMANCE n Business performance Companies that support LGB&T inclusion are better Evidence suggests that individuals Propositions 16 to 23 able to compete for talent, the evidence working in open, diverse and inclusive Open For Business proposes that shows. They are also more innovative, environments tend to perform better. individuals in open, diverse, inclusive more collaborative and perform better. Most strikingly, a culture of inclusion environments…

and diversity can boost individual n Individual performance All 16. Authenticity individuals in a company, not just the performance for everyone, not just …are able to be themselves, instead LGB&T ones, have much higher levels of LGB&T employees. of concealing important aspects engagement and satisfaction in inclusive The crucial link between individual of their identity performance and LGB&T inclusion environments. They are also more likely 17. Motivation is employee engagement – the Holy …have higher levels of motivation to speak up with new ideas. Grail for today’s business leadership. 18. Affinity The world’s most respected business Creating a culture where employees feel …have greater affinity with the values leaders are speaking up for LGB&T motivated and confident is increasingly and culture of the workplace rights. Apple’s CEO Tim Cook added a key strategic issue in the boardroom. 19. Satisfaction his voice in an opinion piece for The An open embrace of LGB&T …have higher levels of satisfaction Wall Street Journal, entitled “Workplace individuals sends a clear signal to all 20. Health employees that they are accepted …are free from discrimination that Equality Is Good for Business.” He argues and valued, that they are free to be can cause poor mental health that equality is a critical part of the themselves and that their contribution and physical violence creativity that drives Apple. In a piece for is welcome. A business that manages 21. Speaking up Bloomberg Business on his own sexuality, diversity well is likely good at managing …are more likely to speak up with Cook says that equality in business is people overall. suggestions to improve performance good for society. “Part of social progress Evidence suggests that people 22. The extra mile working in open and inclusive …are more likely to go beyond their is understanding that a person is not formal remit and make a contribution environments are more productive, defined only by one’s sexuality, race to the culture of the company resilient, innovative and likely to go the or gender,” he says. 23. Productivity extra mile to contribute to the life of …have greater productivity – more It’s not just boardrooms in the the company. As Apple CEO Tim Cook efficient work with higher-quality outputs West that are discussing this issue. writes, “when people feel valued for who Multinationals based in emerging they are, they have the comfort markets are also enacting explicit and confidence to do the best work of policies against LGB&T discrimination. their lives.” Companies such as ArcelorMittal, DP World, Embraer, Lenovo, Mahindra, Sasol and Tata, are among those that recognize how to get the best out of its people. LGB&T rights from the multinational the need for inclusion and diversity to Promoting diversity and inclusiveness corporate boardroom: “The promoters compete in the global marketplace. clearly signals an open and progressive of hateful laws often hide behind ‘cultural In fact, the way a country behaves workplace for all employees. differences’ and complain that we are toward the LGB&T community can All the evidence shows that trying to impose our Western values. serve as a “canary in a coal mine.” discriminatory policies are bad for They can’t do that anymore. We’ve moved Evidence suggests that discrimination the reputation, productivity and the argument on. It’s no longer just about is accompanied by corruption and a economic well-being of countries and values – it’s about good business sense broader lack of transparency. Inclusion, businesses. Countries with low levels and good economic policy.” on the other hand, signals a healthy of corruption and high levels of market in which to do business. innovation, entrepreneurship and foreign lucy parker and jon miller are co- LGB&T inclusion is also a bellwether investment, tend also to be the most authors of the report, “Open For Business: for talent – another indicator of the actively inclusive. the economic and business case for global LGB&T inclusion.” They are Partners in health of a company. A business that Richard Branson, founder of Virgin Brunswick’s London office, where they embraces LGB&T staff is likely to know Group, sums up the current view for lead the firm’s Business & Society practice.

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It is no coincidence that the most creative and lawyers, as well as people in design, cities – such as San Francisco, New York, education and the arts. Members of this group São Paolo, London and Berlin – all have are attracted to cities where they are able to vibrant LGB&T communities. Urban economic integrate easily and to flourish – and LGB&T growth requires the right mix of professions inclusion sends a strong signal that a city is CITIES AND and skills – particularly the so-called “creative open and diverse. In turn, they become agents THE CREATIVE class” of scientists, technologists, architects of economic growth, fostering innovation. CLASS

support for inclusion

CONSUMERS ARE READY TO ACT Open For Business commissioned a survey exploring the attitudes of the general 42.5 percent would Nearly half public toward companies (47.5 percent) would be unlikely to buy doing business in countries support a boycott of a product, such with anti-LGB&T laws. 47.5% companies working 42.5% as coffee, imported The results, published in the in countries with from a country Open For Business report, anti-gay laws with anti-gay laws show popular support for global LGB&T inclusion. In addition to the responses shown left, more than half of the respondents More than half More than half (51 percent) indicated they (52.5 percent) say they (52 percent) would would be unlikely to take would be unlikely to be unlikely to work a holiday in a country with 52.5% support international 52% for a company that anti-gay laws development aid going does business to a country with in a country with anti-gay laws anti-gay laws

Source: Brunswick Insight

Arne Sorenson Tim Cook Howard Schultz Nandita Gurjar Marriott Apple CEO Starbucks CEO Infosys Head of HR International CEO “Part of social progress “Sell your shares” “The focus has been is understanding that to ensure employees “The cost of inequality a person is not defined Replying to an investor have a safe and is a price businesses only by one’s sexuality, who complained about harassment-free cannot afford to pay” race or gender” the company’s support workplace for LGB&T equality irrespective of their sexual orientation” PHOTOGRAPHS: ARNE SORENSON, FLICKR, WORLD TRAVEL & TOURISM COUNCIL, 13996201055 / TIM COOK, FLICKR, THE CLIMATE GROUP, 15429557055 / CHINAFOTOPRESS, GETTY / NANDITA GURJAR, INFOSYS GURJAR, GETTY NANDITA / CHINAFOTOPRESS, / 15429557055 GROUP, CLIMATE THE FLICKR, COOK, TIM / 13996201055 COUNCIL, TOURISM & TRAVEL WORLD FLICKR, SORENSON, ARNE PHOTOGRAPHS:

brunswick review · issue 10 · spring 2016 29 A SIDEWAYS LOOK AT LEADERSHIP

s a board member and Head core – they unite us. We say exactly what down to them. Leadership needs to of Human Resources at we stand for and what our strategy is. become more horizontal. international conglomerate Leaders then adapt this to their teams. Siemens, Janina Kugel is Explain what you mean by “horizontal?” A responsible for more than People tend to associate large Horizontal leadership means that the 340,000 employees. When she took companies with rigid, top-down manager doesn’t need to make every over human resources for America, the reporting lines. You have said you favor decision personally, but is able to involve Middle East and Africa in 2013, Siemens a different style of leadership. people in the organization based on their was heading into extensive reforms of its Yes, I do. I recognize every company know-how and experience, and not purely businesses and strategies that required needs structure and reporting lines, on hierarchy. A horizontal leader takes new forms of leadership. She now has but an organizational chart should not the time to listen to employees in order to a global role and joined the Managing dictate how a person leads. Naturally, understand exactly where the problems Board in 2015. different circumstances, cultures and and barriers lie. They also take the time to Kugel is open, quick-minded and easy processes call for different leadership clearly communicate their expectations as going. She questions “quasi-dictatorial” styles. A large-scale construction site well as feedback. notions of authority and emphasizes should be managed differently from an But let me be clear: involving a larger effective communication. Modern leaders, accounting department. number of employees in the decision- she says, need to see themselves more as But the world is changing – quickly and making process does not necessarily mean integrators. We spoke to Kugel about the profoundly. I am firmly convinced that an every single individual’s opinion must challenges she encountered at Siemens and autocratic leadership style has no future. be taken into consideration. Horizontal the changing directions of leadership. Our world moves too quickly, and the leadership is a balance. problems we face are too complex, for With so many employees, how do you a hierarchical, quasi-dictatorial style That sounds great on paper, but how do anchor leaders in a common culture? of top-down leadership to work. you make it work in practice? We start by recognizing that there cannot People today are less interested Take social media, for example. Even be a single culture in a company that in working for the “right company” within a hierarchical structure, social operates in more than 200 countries. and more interested in being part of media allows leaders to communicate Siemens Chile has a different culture than a team and feeling they belong. If leaders faster and more frequently with Siemens China or Siemens Germany. That want to retain great people, they need colleagues, and to keep their teams being said, our values are our common to find ways to involve them, not talk informed and involved.

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Siemens’ janina kugel tells Brunswick’s katrin meyer-schönherr and carl graf von hohenthal that leadership needs a more “horizontal” approach

At Siemens, employees can contact Can this style of leadership be taught? me directly through our internal social To some degree, yes. We have different network. And I reply to each employee leadership training programs on all levels who emails me. I don’t always reply within of the company. When we talk about 24 hours, and if they send me three pages performance management, we make it I may only respond with three sentences. clear to our managers that not only the But they will receive an answer. “what” is important, but also the “how.” But not everyone is capable of You keep emphasizing the role of horizontal leadership – and they don’t communication. need to be, either. As I said before, a Absolutely. For me, good leadership leadership style must be authentic, and means successful communication. appropriate for the business, the situation JANINA KUGEL At Siemens, we want to motivate our and the culture. employees by creating an open and Janina Kugel is a member of the Managing friendly atmosphere to communicate How should this change the Board of Siemens and serves as its Chief Human Resources Officer. From 2001 to 2012, expectations of leaders looking and to speak up. she served in Siemens in Strategy, Executive Some of the most important leadership to bring people into their teams? Development and Human Resources. From changes start from the bottom up; It should change their expectations 2012 to 2013, she was at lighting company the French Revolution did not start fundamentally. Problems arise when Osram as Chief Human Resources Officer. with the king. By the sheer force of managers gravitate toward employees SIEMENS their numbers, our employees have the who are similar to them, just because With headquarters in Berlin and Munich, strength and opinions to initiate change they feel comfortable around them. Siemens is the largest engineering company processes themselves. That isn’t the best criteria to choose in Europe and a global provider of energy and medical technology, with employees in more But communication – no matter how someone. A great team has members than 200 countries. frequent or open – is empty without with complementary strengths, as well follow-through. It is critical that we as a leader who understands this and katrin meyer-schönherr is a Partner practice what we preach. If we claim delegates accordingly. Having people in Brunswick’s Munich office and Head of to be tolerant of mistakes, we need to with different views and skills may lead to the firm’s Insight practice in Germany. carl graf von hohenthal is Brunswick’s actually admit mistakes when we make spirited debates and sharp disagreements, Senior Adviser in Berlin, with a focus on

ILLUSTRATION: FRANCESCO BONGIORNI FRANCESCO ILLUSTRATION: them ourselves. but it will certainly produce better results. public affairs.

brunswick review · issue 10 · spring 2016 31 For instance, in 2008 and 2009 when the financial crisis threatened to wreck the global economy, the response was led by tri-sector athletes such as Hank Paulson and Tim Geithner in the US, Mark Carney in Canada, and Adair Turner in the UK. And some of the most successful CEOs in today’s business world have played important roles in addressing major social challenges – people like Indra Nooyi at PepsiCo on water security, Paul Polman at Unilever on environmental TRAINING sustainability, and Howard Schultz of Starbucks on the development of jobs and skills. TRI-SECTOR Yet as the tri-sector leaders who are needed to address such challenges are becoming more valuable, they are also becoming harder to develop. ATHLETES This is the result of a widening disparity between salaries in business, government, and at nonprofits, Society needs leaders confident and the differing incentives and cultures of the in the nonprofit, government three sectors. As Jack Donahue, a professor at and business worlds, Harvard’s Kennedy School observes, “government is impermeable and business is sticky.” says Brunswick’s nick lovegrove That’s unfortunate, because research suggests that people who have succeeded in crossing sectors have had notable careers as leaders. Many have consciously sought to broaden their career experience and professional capability by doing what do these issues have in common: so, and as a result have developed and applied six international terrorism, income inequality, climate distinguishing traits of tri-sector athletes: change, infrastructure, education, healthcare, crime and corruption? Clearly, they are among the most Moral compass Successful tri-sector athletes vexing challenges of our time. But more than that, find ways to pursue overlapping and potentially they represent complex, multi-disciplinary conflicting professional goals. They do so by problems with various stakeholders who hold applying a very robust moral compass that enables contrasting views on cause and effect, and have even them to build their career with a coherent purpose greater disagreements about possible solutions. and secure sense of “right and wrong,” so that For that reason, such problems cannot be solved they can navigate through conflicting motivations solely by governments or any other single sector of when they need to. Tri-sector athletes in business our society. They can only be effectively addressed pursue not just shareholder value, but also “public by government, business and civil society working value” – gain for society as a whole, not just for the together to provide lasting, sustainable solutions. corporation. As Bill Gates has argued, a “hybrid For that, we need more leaders to be tri-sector engine of self-interest and concern for others serves athletes – able to engage across the divisions a much wider circle of people than can be reached between the private, public and nonprofit worlds. by self-interest or caring alone.” While they will likely have developed their broad capability by working in each of the three sectors Intellectual thread Many tri-sector athletes at various stages of their careers, these individuals concentrate on a particular issue or theme are distinguished as much by their mindset as by over time, building subject-matter expertise in their experience. They can appreciate the needs, the process. This bolsters their credibility and aspirations and incentives of people in all three capacity to cross sector boundaries, magnifying sectors; they can speak the local language. When their effectiveness when they do so – they are challenges arise for our organizations, we need no longer a “jack of all trades, master of none.” leaders with those skills to help navigate the In turn, by moving between sectors, they also complexity of the modern world. increase the salience and impact of their subject-

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“Tri-sector athletes … recognize the similarities in seemingly unconnected situations, and sometimes identify unorthodox solutions”

matter expertise. This was illustrated by Julius identify unorthodox solutions. (See the example of Genachowski who spent more than a decade Steve Rattner on the next page.) at IAC, the innovative media and technology company, before returning as Chairman to the US Contextual intelligence To select the right tools Federal Communications Commission, where he in their repertoire, tri-sector athletes must not had started his career. only see parallels between the sectors, but also accurately assess the differences and translate across Transferable skills Business executives excel at them. This is rooted in the very simple observation allocating scarce resources to capture attractive that context matters. Success often depends on market opportunities. Government officials bring an elevated ability to understand and adapt to competing interests together to create legal and different types of environments. For instance, the policy frameworks. Nonprofit leaders devise distinguished businessman and environmentalist creative ways to further the social good. Tri-sector Roger Sant took the style and approach he used athletes acquire elements of all three skill sets in his early career in government and successfully and, as they apply them to new challenges, they applied it to a large energy business when he strengthen their ability to work across sectors. founded and ran US company AES. He used it This enables them to recognize the similarities in again in another context when he chaired the World

ILLUSTRATION: OTTOILLUSTRATION: STEININGER seemingly unconnected situations, and sometimes Wildlife Fund and other environmental nonprofits.

brunswick review · issue 10 · spring 2016 33 Integrated network When you ask people about “To paraphrase But in most parts of the world, the tri-sector the secrets of their success, they typically talk about athlete is not yet the prevailing model for other people – mentors who helped their careers, President leadership success. For those who are willing partners and collaborators who helped them tackle Kennedy … to embrace the challenge, it requires tough a difficult problem and friends who helped them choices, sacrifices and discipline. The result for through difficult times. Each of us has a network. people choose the individual will be a more consequential and Tri-sector athletes build broader and more diverse to be tri-sector fulfilling life and career. Society, in turn, will gain networks in order to strengthen their leadership a leader with more robust and creative approaches teams, convene the groups needed to address athletes to our most vexing problems. knotty problems, and widen their own range of not because To help achieve those results, we need to professional opportunities. change the way we select and develop future it is easy, leaders in business, government and the social Prepared mind Tri-sector athletes build their but because sector. We need to incorporate tri-sector issues careers according to the principle laid out by in formal academic and executive training; Louis Pasteur, “In the fields of observation, chance it is hard” set up exchange programs so that mid-career favors only the prepared mind.” They recognize leaders can build cross-sector networks; and that they must be prepared to make professional make the tri-sector experience a talent and personal choices – to be ready emotionally, development priority for business leaders intellectually and financially. and prospective CEOs. Only then will we create more of the tri-sector To paraphrase President Kennedy in his athletes we need to tackle the challenges of the declaration of America’s commitment to go to the 21st century. moon, people choose to be tri-sector athletes not because it is easy, but because it is hard. It is always nick lovegrove is the Managing Partner of Brunswick’s inspiring to meet exceptional people who are US practice. He joined from McKinsey, where he spent more than 30 years working with clients in the public, building brilliant careers dedicated to addressing private and nonprofit sectors. He is the author of some of our society’s most difficult problems. The Mosaic Principle, to be published later in 2016.

STEVE RATTNER, THE “CAR CZAR”

Successfully leading n 2009, without a day of experience in the leadership roles. When the economic crisis the government’s effort car industry, Steve Rattner was appointed US hit in 2009, Rattner was asked by the incoming to save the automotive “CarI Czar” by President Obama. In the midst Obama administration to lead the task force industry drew on all of a full-blown economic crisis, Rattner went on that charted the auto industry’s recovery the skills in his broad, to lead a turnaround in the fortunes path. “It turned out this was a tri-sector background of the US automobile industry. problem we could fix,” Rattner His story illustrates the capacity says. “The financial restructuring to transfer skills and experiences skills that I and others had brought from one sector to another. Now to government were directly a high-profile financial news relevant.” But that financial commentator and Chairman of the background was only one part investment company for Michael of a broader skill set, drawn from Bloomberg’s philanthropic assets, work in public, nonprofit and Rattner began as a reporter on private business.

politics and economic issues with Steve Rattner led “That’s why they wanted me,” The New York Times. President Obama’s Rattner says. “They thought that That led him to investment Task Force on the Auto I could navigate this sensitive set banking, where he spent more Industry in 2009 of issues. I was certainly not hired than two decades, while also because of my auto experience, taking on nonprofit and political which was precisely zero.”

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MIND GAMES Social dynamics that embrace a variety of personality types can be critical to a board’s success, say Brunswick’s robert moran and sarah salky

hat sort of training do board members believe accomplished and comfortable with power. But if you put would be most useful for them? Succession planning? them into a group that discourages dissent, they nearly always Negotiation skills? Leadership development? start to conform.” W According to a 2014 survey by the International An abundance of research suggests diverse boards outperform Finance Corporation, a unit of the World Bank, most directors homogeneous ones. Traditionally, diversity has been defined want to improve their “ability to deal with different personalities” by categories easily seen and measured: experience, gender and – a sentiment shared by three out of every four who were polled. ethnicity. And these certainly do help create a balanced, inclusive This makes sense: we prefer working with people who are leadership team. But diversity in appearance does not always similar to us. Yet leaders should be wary of the inclination to see translate into diversity of thought, particularly where differences difference as an obstacle. Easy agreement, with little or no debate, of opinion are not properly valued and encouraged. can blind directors to important alternatives. The ability to appreciate such personality differences can run “I’m always amazed at how common groupthink is in counter to human nature. For instance, a study by the Industrial corporate boardrooms,” Jeffrey Sonnenfeld of the Yale School and Organizational Psychology journal found that while only half of Management says in a 2002 Harvard Business Review of the general population are extroverts, 96 percent of executives

ILLUSTRATIONS: BJÖRN ÖBERG BJÖRN ILLUSTRATIONS: article. “Directors are, almost without exception, intelligent, display extroverted personalities. Given that most boards are

brunswick review · issue 10 · spring 2016 35 staffed by former or current executives, the ratio in most involved, diligent, value-adding boards may boardrooms is fairly similar. or may not follow every recommendation in the Yet introverts have proven to be exceptional good-governance handbook. What distinguishes leaders. Both Abraham Lincoln and Mahatma exemplary boards is that they are robust, effective Gandhi are considered to have been introverts, social systems.” based on their writing as well as the observations For executive assessments, Saporito and his of their contemporaries. Research indicates that team rely on rigorous strategies, often involving introverts also serve as a counterbalance: they psychometrics and cognitive functions analysis. invite more conversation, exercise more caution To avoid disturbing the nuanced dynamics of and entertain more analysis than their risk-prone, the boardroom, however, keen professional extroverted counterparts. judgment needs to be employed in a less Even such a cursory look at these broad types clinical approach. of personalities and the ways they interact can be “So, what would we interview for? It would beneficial to the interactions of a group. Psychiatry depend on the dynamics of that particular board,” pioneer Carl Jung first observed this when he he says. “There is no standard checklist.” classified people as extroverts or introverts in the The foundation is a clear, detailed company 1920s. Building on Jung’s work, the Myers-Briggs strategy, he says, with the overall board makeup Type Indicator was created in 1943. Leaders should always in mind. “Strategy drives leadership models, Myers-Briggs proposed 16 distinct personality be wary of the drives culture, and ultimately drives the question of types that describe the way people interact with the fit,” Saporito says. “Not only how this person will fit world. These are still widely known and used today. inclination to the company and the culture as it is today, but also But while they can provide interesting insights see difference the culture as it needs to evolve.” into patterns of interactions between personalities, Obviously, a difference in personality or point they are far from a definitive predictor of how such as an obstacle of view alone isn’t enough, he says. Executives who interactions will fare. “like to fly solo,” for instance, without regard for the “Myers-Briggs is information that is used opinions of the group, should be flagged. “Good to facilitate development and discussion,” board members bring a point of view and they says Thomas Saporito, Chairman and CEO of know how to debate that point of view in a way management psychologists and consultants RHR that helps advance the discussion, as opposed to International. “Those tests can be really helpful, if creating a dissonant atmosphere,” he says. used in the right way. But they should never be used If there’s one thing leaders could do to ensure as the basis for a hiring decision.” that the conversations of its board are constructive, Plenty of other tests have been created since Saporito says, it would to be appoint a “wise, Myers-Briggs. The Wall Street Journal reported in inspired and trustworthy lead director.” Open 2014 that workplace personality testing was a communication can unleash the power of the $500 million dollar industry, growing between board, he says, and the lead director is “the key 10 and 15 percent per year. A Swiss startup, to focus the complex underlying dynamics.” Karmagenes, is even experimenting with DNA The results from the International Finance testing to determine aspects of personality. Corporation study suggest that directors appreciate Yet none have definitively solved the issue of the importance of social dynamics in the personality screening, even for low-level employees. boardroom. But it also shows they need to aim And creating a good mix of personalities in the for a standard higher than simply being able to boardroom is a far greater challenge. work together and “deal with” those who they “What we know from our experience and from deem different. our research is that the dynamics of the board In the survey, board members seemed to are the differentiators,” Saporito says. A board equate “different” with “difficult.” Training might functions best when its different personalities are be a good idea, but the truth is that different in tune with one another, regardless of personality, personalities should not be seen as a problem he says. “The devil is in the dynamics.” to overcome, but an advantage to be embraced. Sonnenfeld, in his Harvard Business Review article, goes further, placing concerns for dynamics robert moran leads Brunswick Insight, the firm’s public opinion research function and above even those of corporate governance. “The key is a Partner in Brunswick’s Washington, DC office. isn’t structural, it’s social,” Sonnenfeld writes. “The sarah salky is an Associate in New York.

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Mary Anne Alhadeff, CEO of North Texas Public Broadcasting, a nonprofit media organization, agrees: “If someone is searching for a board seat to raise their profile or for personal gain, we are not the right fit. I need businesspeople who are passionate advocates for what we do. My donors are my shareholders, and I need to keep them happy. The right board can make that happen.” The professionalization of the nonprofit board brings inherent challenges that would seem familiar to any publicly traded corporation, such as succession planning, term limits and director evaluation. Putting best practices into place can make all the difference. “The term for a board chair can have THE NONPROFIT LIFE a significant impact on an organization,” says Alhadeff. Term limits and other structural parameters need to be balanced to deliver the organization’s vision, she IS NO PARTY says. Board member responsibilities A board seat on a nonprofit used to be and measures of effectiveness need to be spelled out for the relationship with more of a social function. Today it is all business, management to be successful. says Brunswick’s lisa singleton “At The Family Place, in vetting potential board members, we The author serves on several nonprofit “It’s not just well-intentioned people communicate the expectations clearly, up boards in Dallas, Texas. Here she investigates running these organizations, as in the front,” says Flink. “Then, a board ‘report how boards have become more professional. past,” says Paige Flink, Executive Director card’ is compiled at the start of each year as the economy tightened after 2008 of The Family Place, the largest service – did they do what was outlined? Did they and corporate boards came under intense provider for victims of family violence in deliver against expectations? There is very pressure to deliver for shareholders, the the Dallas area. “What we are seeing now real accountability.” nonprofit world was also struggling. are nonprofit leaders with distinct skills Both Robinson and Alhadeff stress that Charitable giving dwindled, straining suited to advancing the organization.” effective executive or advisory committees the ability of organizations to fulfill their Rowland K. Robinson, President of the are critically important. While the full missions, and more donors sought closer Baylor Health Care System Foundation board can be effective as ambassadors accountability for their contributions. in Dallas, says expectations are changing. for an organization, these smaller panels Nonprofit boards were forced to evolve. “The nonprofit business is extremely function as advisers for the CEO and Once considered pastimes for the leisure competitive,” he says, “and the board management staff and are often where class, today they operate much more as needs to reflect the environment where the real work gets done. for-profits do, with strong businesspeople dollars are under pressure.” In the end, getting board dynamics at the helm and rigorous expectations for Robinson looks for directors who can right is critical to the ability of any members. No longer can they afford to be offer an exact mix of resources and skills nonprofit to fulfill its mission. seen as volunteer opportunities or social to best support fundraising efforts. “The board of directors can be the stepping stones – the purview of those “I look for three characteristics: single biggest threat to a nonprofit,” who want to use the board to broaden a connection with my organization; says Alhadeff, “but also its single biggest their network or increase their standing in passion for what we do; and resources – opportunity to achieve its goals.” the community. Donors who want to have either their own or from elsewhere, but their name on the board but do little else they need access to the means to give. lisa singleton is a Director in Brunswick’s

ILLUSTRATION: RAMIILLUSTRATION: NIEMI are finding few open doors. I need all three from my members.” Dallas office, advising on critical issues.

brunswick review · issue 10 · spring 2016 37 #1 Lars Sørensen, Novo Nordisk

#2 John Chambers, Cisco Systems #3 Pablo Isla, Inditex

#1 Jeff Bezos, Amazon

#87 Jeff Bezos, Amazon

if you consider a company’s share price to be the best measurement of leadership, you are way behind the times. That was the thinking behind our decision to change the way the Harvard Business Review compiles its annual calculation of the world’s 100 best-performing CEOs. Last year, for the first time since we debuted the ranking in 2010, we factored in environmental, social and governance (ESG) performance. Even weighted at 20 percent, adding ESG to the equation changed absolutely everything – it upended the WELCOME TO rankings more than we anticipated. Amazon CEO Jeff Bezos fell from No. 1 to No. 87, for example, and Reed Hastings of Netflix fell off altogether. THE NEW MATH, The results surprised me, but they didn’t make me second-guess our methodology. In the past, we’d compiled the list based solely on country-adjusted MR BEZOS shareholder return and market capitalization. That was scientific and objective, which felt right, yet A change in a Harvard Business Review something felt increasingly wrong. calculation shows how society is We write so much in HBR about how leadership redefining leadership for the 21st century, means more than investor returns – how could we says Editor-in-Chief adi ignatius keep putting out a leadership list that relies solely on financial metrics? We needed to walk our own walk. To do that, we worked with Sustainalytics, a

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CHANGING PLACES “Measuring ESG obviously isn’t as simple In 2015, Harvard Business Review changed the way it or as reliable as share price, but it is ranked its 100 top CEOs. For the first time, it factored in environmental, social and governance (ESG) certainly more profound and needs to count” performance, in addition to financial performance. ESG was given a 20 percent weighting which had a big impact on the rankings

sustainability research and analysis consultancy with 2015 a 20-year track record of working with investors and Ranked for financial performance plus environmental, social and governance financial institutions. Their methodology relies on ■ 1. Lars Sørensen, Novo Nordisk a rigorous, fourfold combination of a company’s handling of ESG: risk preparedness, disclosure ■ 2. John Chambers, Cisco Systems according to international best-practice standards, ■ 3. Pablo Isla, Inditex and quantitative and qualitative performance. Within those categories, the analysis looks at a ■ 4. Elmar Degenhart, Continental broad range of indicators for some 4,500 companies ■ 12. Howard Schultz, Starbucks around the world. Since the list came out, people have asked me ■ 16. Carlos Brito, Anheuser-Busch InBev whether a CEO could be ranked No. 1 in both ■ 38. Blake Nordstrom, Nordstrom financial performance and ESG, or whether the two

are mutually exclusive. ■ 42. John Martin, Gilead Sciences It is a fair question, but if you look at the full list ■ 46. Marc Benioff, Salesforce.com on our website, which discloses CEOs’ rankings in

both arenas, you will see that Lars Sørensen, CEO of ■ 60. Robert Iger, Disney

Danish pharmaceutical giant Novo Nordisk – our ■ 87. Jeff Bezos, Amazon new No. 1 – came in sixth on financial metrics and

15th on ESG terms. Both are fairly high rankings ■ (101. Warren Buffett, Berkshire Hathaway*) and that is not typical. That is how he ended up at the top of this year’s list. On the whole, though, I *See “Nice guys finish last?” on next page don’t think that doing well on ESG punishes people or acts as a counterbalance for doing well financially. 2014 A few comparisons between 2014 and 2015 Ranked for financial performance alone provide some additional evidence that the ranking system change isn’t a form of sabotage. John ■ 1. Jeff Bezos, Amazon Chambers, CEO of Cisco, held nearly the same rank ■ 2. John Martin, Gilead Sciences in both years, moving from No. 3 to No. 2. Robert Iger, CEO of Disney, held his rank at No. 60 on the ■ 3. John Chambers, Cisco Systems list in both years. Other best-performing CEOs ■ 5. David Simon, Simon Property from 2014 benefited from the inclusion of ESG in the ranking calculation in 2015. Carlos Brito ■ 6. Lars Sørensen, Novo Nordisk

at Anheuser-Busch InBev, for instance, rose from ■ 14. Pablo Isla, Inditex No. 46 in 2014 to No. 16 in 2015. Warren Buffett’s case, as we explained in ■ 15. Marc Benioff, Salesforce.com

the article “Where’s Warren Buffett?” in HBR, ■ 19. Elmar Degenhart, Continental is a bit more complicated as he wasn’t eligible for the list in 2014 according to the way the ■ 23. Reed Hastings, Netflix

ranking was calculated. He was included in 2015, ■ 46. Carlos Brito, Anheuser-Busch InBev but came in at 101 – just missing the cutoff. That ■ 54. Howard Schultz, Starbucks, tied with was due largely to the shift in the metrics. Buffett’s Blake Nordstrom, Nordstrom very low ESG placement was enough to pull him ■ 60. Robert Iger, Disney

ILLUSTRATION: OTTOILLUSTRATION: STEININGER down dramatically.

brunswick review · issue 10 · spring 2016 39 One lesson learned from the changed rankings “How could we decisions: offering insulin at a steep discount to is that American and European companies consumers in developing countries; transparent may not be directly comparable. In Europe, keep putting out and limited political lobbying practices; and a Sørensen benefits from the fact that Scandinavian a leadership list responsible policy on animal testing. corporate governance requires companies to meet Measuring ESG obviously isn’t as simple or certain ESG yardsticks. That’s fairly common that relies solely as reliable as share price, but it is certainly more in Europe, but such standards in the US are on financial profound and needs to count. My view is that we as more discretionary. a society are going to be thinking more about ESG Other aspects of the leadership position at Novo metrics? We as the world comes to grips with curbing emissions Nordisk seem a bit out of place in the US. Sørensen’s needed to walk and combating climate change. salary, while higher than that of his employees, is We also live in an age of proliferating sensors one of the lowest of the top-rated CEOs on our list, our own walk” and the “Internet of Things” that will help us for instance. In an interview after the rankings were measure environmental and sustainability published, Sørensen told HBR that his relatively impact in new ways. Our new methodology low compensation is a reflection of “the company’s gives us confidence that we’re doing a better job desire for internal cohesion.” of dealing with the many facets of what makes Sørensen believes cooperation within the company a good leader. is easier to achieve when CEO compensation is To read the full report go to: www.hbr.org closely aligned with other employees. “I have a Scandinavian leadership style, which ADI IGNATIUS is consensus-oriented,” he says in the interview. Editor-in-Chief of Harvard Business Review since “That principle is enshrined in our management January 2009, Adi Ignatius previously was Deputy procedures. I’m obliged to reach consensus with Managing Editor for TIME magazine. He worked for my colleagues on all decisions, and if we can’t, any many years at The Wall Street Journal, serving as the newspaper’s Bureau Chief in Beijing. objection needs to be reported to the board.” According to Sustainalytics, Novo Nordisk’s Adi Ignatius spoke with sarah lubman, a Partner ESG ranking benefited from some key leadership in Brunswick’s New York office.

NICE GUYS FINISH LAST? THE SPECIAL CASE OF WARREN BUFFETT

n Harvard Business Review’s 2014 list of 100 have ranked in the top 25, out of the 907 CEOs Top CEOs, Warren Buffett was nowhere to considered. However, Buffett’s ESG ranking Ibe seen. By HBR’s own estimation, the Oracle was 798 out of 907 CEOs, putting him just of Omaha has delivered “astronomical” returns below last place in the final 2015 tally. HBR for investors during his 45 years at Berkshire says Berkshire had poor social and governance Hathaway. The 2014 HBR ranking was based reporting, low incorporation of ESG issues into entirely on financial performance. So why was investments, and weak sustainability initiatives. he excluded? That red ink on the Buffett social The reason is that industry-adjusted returns responsibility ledger seems ironic, as he The Berkshire Hathaway are unavailable for any company prior to 1995. famously pledged in 2006 to donate 99 percent leader is one of the That means HBR had to choose: include CEOs of his Berkshire Hathaway stock holdings world’s most successful based on career performance since 1995, or to charity. In 2010, he started the “Giving CEOs, a man Forbes remove CEOs whose careers began before Pledge” with Bill and Melinda Gates, asking called a “corporate that year. In 2014, the editors chose exclusion; billionaires to give away more than half of their deity.” He also is a Buffett was left off. wealth, while alive or in a will. As of 2015, 137 leading philanthropist. In 2015, HBR decided to calculate the financial billionaires had joined the pledge. So why didn’t Warren returns of these CEOs “as if they began on According to Forbes, Buffett’s lifetime Buffett make HBR’s list? January 1, 1995.” This still penalizes Buffett, as it donations so far top $25.5 billion. For those ignores the value he created during his previous keeping score, that still leaves him with a net decades at Berkshire Hathaway. Even so, based worth estimated at around $60 billion. on financial performance alone, Buffett would — sarah lubman PHOTOGRAPH: PAUL MORIGI, GETTY MORIGI, PAUL PHOTOGRAPH:

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GOODBYE, OLD BOYS’ CLUB The key to filling board seats with the right people is to look beyond the usual suspects, says justus o’brien of search firm Russell Reynolds

in the early days of our Board & CEO might not be available now, but they could Practice, companies typically filled board be in a year or two. The only way to know vacancies by making a list of available, for certain is by maintaining a dialogue. retired or active CEOs from the upper As demand increases, we’re always echelons of the business world. This “old on the lookout for new places to find boys’ club” approach, focusing on a small candidates. For example, universities, pool of talent, doesn’t really exist anymore large foundations and nonprofits are big, and hasn’t for a while. global institutions with hefty budgets In addition to three or four CEOs, and lots of employees. The people who you now see boards where directors have run them are often very impressive, with expertise in accounting, cybersecurity great experience, from public policy to or communications, as needed. And communications. All this translates well in today’s global market, international to the needs of a corporate board. experience is particularly valuable. To find And how do we make the case for a these specialized skills, you need a much mean, exactly? Consumer interaction, new face? You’ve heard of six degrees more rigorous approach than simply back-end systems and data security are all of separation. We find that even for an dusting off a Rolodex or thumbing through digital, but they are different skill sets. obscure candidate, someone on the board a stack of résumés with familiar names. Similarly, the topic of diversity has will know someone who knows them. It’s Our process begins with a close become more nuanced. Most companies just a case of reducing the perceived risk. analysis of a board’s strategy, dynamics expect us to produce a diverse pool of Building this familiarity helps boards and culture. This gives us a clear picture candidates, but each one has to be able be more confident in their decisions. of what skills and personalities the to make an important contribution to That’s one of the reasons the old boys’ board requires, and allows us to create a the board. That comes first. The few club lasted as long as it did: people thoughtful succession road map. We find companies who still have a “check the gravitate to those they know and feel that clients themselves don’t always know box” mentality on diversity continue to comfortable with. It’s human nature. exactly what they need until we have done miss the point – and the opportunity. that analysis together. Well ahead of a potential vacancy, the JUSTUS O’BRIEN For example, one might have a large best boards are busy “soft recruiting” presence in a certain country and say – identifying potential candidates and Justus O’Brien co-leads Russell Reynolds’ Board & CEO Practice, advising global clients that they want a director with experience introducing them to other directors, ranging from Fortune 500 corporate boards from there. But our analysis could reveal often at social gatherings. By constantly to startups. that instead, they need someone with the expanding their network of personal skills to navigate the regulatory challenges relationships, these boards are able to russell reynolds Founded in 1969, Russell Reynolds works with facing their industry. plan ahead and choose from a robust list, organizations around the globe in succession Clarity is essential throughout the rather than scramble to fill an empty seat. planning and recruitment of board directors, entire process. Two clients may use the Making contact is important; staying CEOs and other executive positions. same word yet mean very different things. in contact might be even more so. It is a Justus O’Brien spoke with nicole reboe, Everyone wants a “digital” person on the very competitive market. A CIO, a Google a Partner in Brunswick’s New York office who

ILLUSTRATION: OTTOILLUSTRATION: STEININGER board, for instance: but what does that executive, a Fed vice-chairman – they leads international senior-level recruitment.

brunswick review · issue 10 · spring 2016 41 n goldman sachs’ campus in the affluent Sandton section of Johannesburg, Tito Mboweni arrives AFRICA’S for the interview dressed in a colorful O silk shirt, a style worn by the late Nelson Mandela and known as a “Madiba” shirt after the LION AT LARGE affectionate nickname and clan name of the iconic anti-apartheid leader. Mboweni worked alongside Mandela for decades during his rise to power. When Mandela became the first black President Former Reserve Bank Governor of South Africa in 1994, Mboweni served in his cabinet as Labour Minister and from 1999 to 2009 tito mboweni tells Brunswick’s as South African Reserve Bank Governor. marina bidoli how corporate Today, Mboweni is best known as an responsibility is reshaping boards independent businessman and adviser. But his and the global economy government experience in particular has given him a powerful voice in international business and financial affairs and made him an unofficial emissary for his country. He appears to relish his freedom to influence opinions and policies, particularly in Africa. “I do not have any mandate to do this but I have an important role to play,” he says. “My role is a thinking role. My reports are to those who care to listen.”

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Mboweni regularly meets with investors “If some of these institutions were in Africa, Europe and the US who are private sector companies, lots of people interested to hear his observations beyond would be fired by now because it’s basic TITO MBOWENI South Africa itself, he says. “We also talk dereliction of duty, maladministration, From 1999-2009, Tito Mboweni about Kenya, Ghana, Nigeria and other bad corporate governance; we can’t have was Governor of the South markets. I get a sense of how they view that kind of thing,” he said. African Reserve Bank. He is the region and how this impacts their He doesn’t limit his criticisms to Chairman of the pan-African investment decisions. This is a useful public officials or even his countrymen. packaging group Nampak, oil feedback loop. I convey this back to In June of the same year, a dispute and gas company SacOil, and Accelerate Property Fund. He is corporates and governments as I meet erupted on Twitter between Mboweni also an International Adviser at them around Africa.” and Jonathan Moyo, Education Minister Goldman Sachs and serves as On social media, he reaches an even for neighboring Zimbabwe. The two a non-executive director on the wider audience. With 5,000 Facebook men engaged in a heated exchange while board of the BRICS-financed friends (the maximum allowed) and trading jabs over politics and economic New Development Bank. around 140,000 followers on Twitter, policies. The battle made headlines he has used digital platforms to spur for weeks before they publicly called In a 2015 editorial in South African action on everything ranging from a truce. newspaper Business Day, Mboweni South Africa’s national debt to the repair described the International Monetary of local roads in his native Tzaneen, in BANK FOR THE BRICS Fund and the World Bank as bullies that the province of Limpopo. His remarks Formerly Chairman of AngloGold force “all forms of conditionalities and frequently go viral. Ashanti, one of the world’s largest gold policy dictatorship” on BRICS countries. “I complained and complained about producers, Mboweni currently invests The New Development Bank, he writes, the condition of a certain road,” he says. in a variety of enterprises and serves as “seeks to develop the ‘next practice’ “Potholes everywhere. They were giving Chairman at packaging group Nampak, because the ‘good practice’ of old has me a long story, not giving me a straight Accelerate Property Fund, and oil and gas not been sufficient.” The BRICS bank’s answer. So I went to Twitter and posted, explorer SacOil. He’s also a non-executive approach to development financing will ‘This road is a crime against humanity.’ director at health insurer Discovery and be one that “shows some respect” for Now the road is being fixed. They cement supplier PPC. emerging market countries. responded because of pressure they got In 2014, he took on a role likely The headquarters of the NDB from the public as a result of that tweet. to make him even more visible officially opened in Shanghai in 2015 It was no longer just me complaining.” internationally when he was named a and the institution hopes to start Mboweni is not afraid of rattling non-executive director on the board lending in 2016. The launch is corporate and national political leaders, of the New Development Bank (NDB) particularly timely for South Africa, including those in the African National – or “BRICS bank” – created by leaders as Mboweni and others have publicly Congress. The former South African of the five top emerging economies, warned of the threat of economic Reserve Bank Governor is chair of three Brazil, Russia, India, China and South recession and a possible downgrade boards and a director on several others. Africa, as a financing alternative to of the country’s debt. That would make He is also an International Adviser the World Bank. it even harder to get funding for new for Goldman Sachs. In every role, he businesses and projects. South African emphasizes the same overarching theme: utility Eskom has already said it would financial and corporate discipline must be approach the NDB for much-needed grounded in economic and social reality. “The boards of these infrastructure development. His opinions are sharply worded and his tone usually blunt. In late 2015, he companies need to see PRESSURES OF ACTIVISM warned that South Africa and state-owned themselves as responsible The establishment of the BRICS bank enterprises were at risk from a possible is part of a growing awareness that downgrade of the country’s debt and corporate citizens” financial and corporate practice are blamed the leadership, according to South inextricably linked to social conditions,

ILLUSTRATIONS: SEAN MCCABE SEAN ILLUSTRATIONS: African media outlet Eyewitness News. Mboweni says. That trend is pushing

brunswick review · issue 10 · spring 2016 43 boards toward transparency in emerging markets more responsive to a broader selection of just as it is with their counterparts in the US stakeholders, not just major shareholders, he says. and Europe. “Most companies today are “We are a long way from the days when boards transnational,” Mboweni says. “The boards of directors were representatives of a family who of these companies need to see themselves as were the owners, just looking after the interests of responsible corporate citizens.” the family,” he says. “Those days are gone. In fact, That means they need to comply with local laws, for publicly listed companies, it is frowned upon adopt best-practice principles of governance, and The BRICS when the board of directors is only made up of the align the needs of shareholders with the needs of representatives of the biggest shareholders.” the environment, workers, customers and partners. bank’s Boards and executives often point to the difficulty “Responsible companies have to address all of approach to in balancing profits and social responsibility, but that and it is up to the board, no matter where they Mboweni has little patience for that argument. are, to hold the executives accountable,” he says. development “It is very clear: no corporate can survive in a sea In emerging markets, as in the US, institutional financing of poverty,” he says. “Who will buy your goods? If funds act as shareholder activists and sharpen you make beer, you want people to have income so the focus on accountability where governance is will be one that they can buy your beer. Otherwise the economic concerned, he points out. “In Cape Town, they “shows some wheel will not be able to turn at all.” follow the same approach as in Boston. The Mboweni remains in demand as a board expectations are everywhere the same.” respect” member and enjoys the influence those roles Social activism is also creating pressure. Mboweni for emerging bring. He complains only about having to juggle remembers when Goldman Sachs was surprised by compensated and non-compensated positions. a group of nuns and religious investors that showed market “You need a balance and the balance is never up at the annual general meeting to protest the way countries there,” he says, with characteristic humor. the Wall Street bank compensated its executives. “You’ll get 10 invitations and six will be for non- Environmental activists continue to challenge compensated positions. It’s pro bono for them, boards and make headlines worldwide, forming but you spend a lot of your own money. It can “a global platform” to scrutinize corporate behavior drive you to insolvency. And then, if you’re and influence votes at annual general meetings, insolvent, nobody wants you around anyway.” Mboweni says. This global pressure on standards of corporate marina bidoli is an award-winning former journalist governance and the makeup of the boardroom and Head of Communications at oil and gas company means that companies have necessarily become Sasol. She is a Brunswick Partner in Johannesburg.

BUILDING THE BRICS

he acronym, BRIC, was coined in 2001 to highlight BRICS officials, however, say the coalition is about more than similarities between the fast-growing economies of four economics. Russian Deputy Foreign Minister Sergey Ryabkov, T disparate countries: Brazil, Russia, India and China. Since quoted by Russian news agency TASS, says the BRICS disturb 2006, the heads of state of those countries have met each year the West’s comfortable paradigm of global dominance. “I want to explore paths to further cooperation. As a bloc, they seek the to say that critical remarks themselves are the best sign of the reform of Western-controlled institutions such as the UN, the BRICS’ importance and the significance of this structure for World Bank and the International Monetary Fund, whose policies international relations. If this had not been the case, BRICS are often viewed as unfair to developing nations. South Africa would have been simply ignored,” he says. became a member in 2010, adding the “S” to BRICS. In 2014, the BRICS leaders established the New The original BRIC countries have long been expected to join Development Bank for financing of infrastructure and the US as the leading economic powers of the world by 2050. sustainability projects in BRICS and other emerging markets Slower growth among the BRICS has shaken that view, however. nations, as a direct challenge to the US-led World Bank. The The Wall Street Journal declared “BRICS’ New World Order Is NDB marks the first joint institution created by the BRICS Now on Hold” and cited an international finance official who countries and is an important symbol of their cultivation of termed estimates of BRICS future growth “overblown.” solidarity and economic partnership.

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WOMEN IN Boardrooms around the world lack diversity and a growing consensus believes more women should have a seat at the table. In the following pages, THE BOARDOOM we look at how this imbalance is being addressed women in the boardroom

fter the 2008 financial crisis, the business world was FOR WOMEN, forced to take a hard look at corporate governance and reassess conduct it had previously taken for granted. One area in particular – the under- THE WORK A representation of women at senior levels – became glaringly apparent. With each passing year, the pressure on boards to increase the number of women directors has grown. IS NOT YET DONE Today, gender diversity is widely seen as a starting place for diversity of thought on the board and for senior management. The 30% Club has dramatically The 30% Club is an organization spearheading the increased the representation movement for gender balance. Founded in the UK in 2010 with of women in boardrooms, a committee of seven board chairmen of FTSE 100 companies, says Brunswick’s dania saidam, this group set a target of 30 percent women in FTSE 100 board seats, a number suggested by research as a threshold for but its successes are not enough adequate representation. Through the concerted efforts and commitment of senior business leaders, the 30% Club has successfully made its goal a core business issue in the UK. At the same time, the group’s influence has expanded far beyond the UK. Clubs have been launched in the US, Hong Kong, Ireland and Southern Africa. In 2015 alone, new branches appeared in Canada, Australia, Malaysia, Italy and Middle East countries of the Gulf Cooperation Council. Membership includes some of the top business leaders in each country. Among the chairmen and CEOs in the US branch are Berkshire Hathaway’s Warren Buffett, Facebook COO Sheryl Sandberg, and Xerox Chair and CEO Ursula Burns.

46 brunswick review · issue 10 · spring 2016 women in the boardroom

In the UK, the group’s earliest efforts were buoyed by a 2011 government review led by Mervyn Davies on women in the boardroom. USHERS OF DIVERSITY The Davies Review called for 25 percent Nominating committees can determine the representation by 2015. A follow-up report last year showed the proportion of female FTSE 100 pace and success of gender equality at a company, directors had risen from 12.5 to 26.1 percent. says Brunswick’s ginny wilmerding All-male boards no longer exist among the FTSE 100. In 2011 there were 21. “We have been very fortunate in the UK to he bedrock of any board is the appointment, rotation and retirement have had fantastic support from government,” of competent directors – tasks handled by the nominating says Brenda Trenowden, the 30% Club’s Global (or nomination) committee. Pressures for diversity are felt most Chair. “Our founding chairmen have been real keenly here, as the committee continually looks for the right mix and active advocates for the cause, recruiting their T of skills to cope with business challenges and build value. peers, and we have had a great deal of support I serve on the Steering Group for the 30% Club Hong Kong, founded in from the media.” 2013 in the footsteps of the original UK launch in 2010. Although board Fiona Woolf, former Lord Mayor of the City diversity encompasses more than gender alone, our mandate is specific: of London, emphasized in a recent article in The to bring more women on to Hong Kong corporate boards. Guardian how much work remained to be done. One of my fellow Steering Group members is David Eldon, who “This is no time to rest on our laurels and think was formerly Chairman of HSBC Asia Pacific, and currently chairs the the job is done. The figures of 26 percent … are nominating committee of Noble Group, an Asian commodity, mining still far too low when you consider 47 percent of and shipping company. the workforce and 53 percent of our graduates are female. The figure of 9.6 percent in relation to executive positions shows how much room there is for improvement.” “Boards in Similarly, Trenowden views the campaign’s Hong Kong are success as only a first step. “In order to have sustainable change, we need to build a strong coming to grips pipeline of women to take on executive leadership with gender, roles,” she says. Trenowden outlines new 30% Club training partly because initiatives “from schoolroom to boardroom” of the 30% to help prepare more women for leadership positions. These include a scholarships initiative Club raising with Oxford’s Saïd Business School and seven awareness of others, and programs to inspire young women, such as a partnership with UK charity, Speakers the issues” for Schools. The group also aims to encourage David Eldon, more disclosure regarding the development of 30% Club, Hong Kong female executives beneath board level. Gender diversity on boards is good news not just for women and businesses, but for society as a whole. As the 30% Club’s efforts gain momentum on an increasingly global scale, they are helping to deliver change that resonates far beyond the boardroom.

dania saidam is a member of the 30% Club Technology Group Steering Committee and a Director

ILLUSTRATIONS: MIKEY BURTON MIKEY ILLUSTRATIONS: in Brunswick’s London office.

brunswick review · issue 10 · spring 2016 47 women in the boardroom

“Boards in Hong Kong are coming to grips with The very idea of diversity can frighten gender, partly because of the 30% Club raising awareness of the issues,” Eldon says. He cites a 2015 some conservative boards in Asia report by Deloitte as evidence that more needs to be done. “We are still only at 11 percent women on boards, compared to 26.1 percent in the UK.” Pru Bennett, another Steering Group member, leads BlackRock’s Corporate Governance and Responsible Investment Team in Asia. Bennett is disappointed with the level of disclosure on diversity – including gender diversity – among Hong Kong companies. She encourages those who take the effort seriously to open up. “It’s an opportunity to highlight for investors and stakeholders the positive action your company is taking to build a diverse, competent and fully functioning board,” she says. competent and diverse candidates. It is essential to Eldon and Bennett both stress the nominating identify talented employees, particularly women, committee’s critical importance in determining and give them opportunities to develop. the makeup of the board and, more broadly, “The nominating committee needs to speak up if the company’s success. The best nominating a company hasn’t got the right people in the pipeline committees have a clearly defined charter that for the future executive director positions,” Eldon specifies their core responsibilities. Diversity says. “They can advocate for a program whereby policies, succession planning, identification of standout female candidates and employees are competent candidates, performance evaluation and encouraged to learn about the industry or sit on development, assessment of director independence, outside boards to build up relevant experience.” and oversight of the company’s corporate Bennett knows that non-executive directors governance practices all fall within their mandate. in Asia are often recruited through trusted “Nominating committees should be made up of relationships rather than executive search firms. independent directors who are interested to serve This can undermine efforts to diversify board and volunteer themselves for the role,” Eldon says. representation and reduce directors’ independence. “The committee’s most fundamental mandate is to While she agrees that “competence is more ensure that the board as a whole has bought into important than independence,” Bennett says the need for diversity as a way to manage risk and controlling shareholders must not sacrifice deliver value.” independence and diversity for loyalty. Directors The very idea of diversity can frighten some must be allowed to show their independence conservative boards in Asia, where large companies through their actions. “BlackRock’s starting point are often dominated by controlling shareholders is that there are no independents until proven (both family and government) and committees tend otherwise,” she says. to defer to strong chairmen. But Bennett feels Most boards have needs beyond gender and must a braver approach carries significant rewards. enlist all of their resources to fill all those gaps. “Recruiting and developing both family and “A lot of boards are short on young people, tech- independent directors who go well beyond basic savvy directors and women,” Eldon says. “We need needs is the secret to building a high-performing to bring in and then mentor newer directors to help and effective board,” Bennett says. them cope confidently with the role.” Eldon agrees that good leadership requires a variety of opinions. “An enlightened chairman will welcome this sort of advice and guidance,” he says. ginny wilmerding is a Partner in Brunswick’s Hong Kong office and serves on the 30% Club Hong Kong Nominating committees need to think Steering Group. She advises clients on corporate long term about how to ensure there is a pool of governance, reputation and shareholder value in Asia.

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n a growing number of countries, A LOOK AT women now account for more than a quarter of non-executive directors. Growing scrutiny, legislation, THE NUMBERS I recommendations in governance codes, or targets set by governments have Research by executive search firm spencer stuart contributed to this progress. finds that women are gaining seats on the board, In every country Spencer Stuart but are still under-represented at senior executive levels surveys, the percentage of women among new recruits to the boardroom is higher than the percentage already established as board directors. However, WOMEN ON BOARDS without significant acceleration, gender There is conspicuously less parity in the boardroom is still a very diversity among chairmen than among the boards they chair. long way off. 70.0% This is a major governance Demand for female directors may challenge. Among the 795 be growing, but the lack of women 60.0% companies comprising the major on executive committees and in senior indices of 13 European countries, leadership positions globally limits 50.0% only 30 women chair the board – less than 4 percent the supply of qualified candidates

40.0% for boards to choose from. Among S&P 500 boards, only 16 percent of 30.0% nominating committees were chaired by a female director, 13 percent of 20.0% audit committees, and 10 percent of compensation committees. 10.0% A number of barriers that prevent

0.0% Belgium Canada France Norway Sweden South Africa Spain Switzerland UK US women from advancing to senior positions – and thereby, the boardroom Percentage of female board directors (all) Percentage of women among new board members – revolve around lack of mentoring and poor work-life balance. In particular, women can have WOMEN ON EXECUTIVE COMMITTEES difficulty reintegrating after maternity While there are significantly leave, or face inflexible working higher numbers of women in the boardroom, the story is arrangements as they raise children. different at the senior executive Unconscious male bias, together with the 25% level. Until women achieve perception that women are reluctant to something close to parity with put themselves forward for promotion, men in senior executive roles, 20% boards will need to continue also remain significant barriers. focusing on gender diversity Quotas have had a positive impact on board diversity in some markets, but 15% far more sophisticated initiatives will be needed to achieve genuine, lasting improvements in the number of women 10% equipped to take on senior executive and board roles.

5% SPENCER STUART Spencer Stuart is a leading executive search consulting firm.

CHARTS: SPENCER STUART 0.0% Sweden Norway UK South Africa Netherlands France Switzerland See also, “Global Board Trends,” Page 8

brunswick review · issue 10 · spring 2016 49 women in the boardroom

In the UK, FTSE 100 companies have more than doubled the number of women on boards, exceeding the 25 percent target urged by the government in 2011. The 30% Club, launched in the UK in 2010 with the goal of achieving 30 percent women on FTSE 100 boards, prefers the voluntary approach. Melanie Richards, a Partner and Vice-Chairman at KPMG, and a member of the UK 30% Club’s Steering Committee, goes so far as to credit the club’s success to its opposition to mandatory quotas. “The business culture is moving in the right direction,” Richards says. “But lasting success requires businesses to feel invested in the process.” Behind Norway, the best-performing countries in terms of a gender balance on boards are Finland and France, where female board members number around 30 percent. Both of these countries also have government-mandated quotas. Studies support the positive effects of a gender-diverse board, showing that companies with more women on their egally binding quotas to raise the boards perform significantly better than QUALITY number of women on corporate their male-dominated counterparts. boards have changed the makeup However, opponents have warned that of boardrooms dramatically achieving gender diversity through quotas VERSUS L in several European countries. can actually decrease performance by But not everyone is convinced that such causing conflict and undermining trust. simple mandatory thresholds are wise. Some argue that quotas can actually work QUOTAS Many feel that the imposition of quotas against diversity by forcing companies sets back the cause of corporate gender to choose from the same limited pool of Legislation across Europe equality. Some even wonder if the debate has added women around mandatory quotas on boards to boards, but is no is a red herring, as women are still vastly under-represented in the C-suite. panacea, say Brunswick’s Since Norway instituted a 40 percent “Quotas don’t annalisa barbagallo legally binding quota for female directors achieve real progress. and mikael isaksson of listed companies in 2008, the rest of Europe has been experimenting with The pipeline different approaches. Gender quotas of women in are now in place in Germany, France, Italy, Spain, Finland, Belgium and the executive positions Netherlands, with different sanctions for is the most non-compliance. In contrast, the UK and Sweden have opted for voluntary targets for important target”

quotas, backed by the threat of legislation Melanie Richards, if not enough companies take action. Vice-Chairman, KPMG

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eligible women, sometimes known as the “golden skirts.” At one point, Norwegian businesswoman and lawyer Mimi Berdal sat on 90 different boards. More importantly, quotas alone fail to address the absence of women in senior management positions. In Europe, men still hold 89 percent of executive TECH CAN committee jobs while only 3.6 percent of Europe’s largest listed companies have female CEOs, according to a 2015 TACKLE DIVERSITY European Commission (EC) report. “Quotas don’t achieve real progress,” Richards says. “The pipeline of women HEAD-ON in executive positions is the most The talent is already there, and Silicon Valley important target. That’s a struggle, even for companies that approach the has the tools to put more women on boards, problem voluntarily.” says entrepreneur sukhinder singh cassidy Heather McGregor, Managing Director of search firm Taylor Bennett t will take US corporate boards another 40 years to reach gender and a founding member of the 30% balance, according to the US Government Accountability Office. Club’s Steering Committee, says flatly Even if every open board seat were filled by a woman, it would be that quotas don’t work, but “merely give 2024 before boards approached a 50:50 split, it estimates. Even more the appearance of doing so.” Breaking I discouraging, an estimated 75 percent of privately funded technology the glass ceiling will require more than a companies have no women on their boards of directors, according to an simple arithmetic calculation, she says. audit in July 2015 by theBoardlist, a talent marketplace I founded. “People leading companies need to The tech industry has an opportunity to close this gap. According to actively seek out female candidates,” a recent report from financial analysis firm MSCI, companies with at McGregor says. “Just looking for them least three women on the board (or a female CEO and one female board will ensure that they find them.” member) have achieved a 36 percent better return on equity since 2010 Rather than imposing quotas, laws can make it easier for women and men to reconcile family and professional goals. While the EC failed to increase mandated maternity leave from 14 to 18 weeks, it is considering other ways to improve work-life balance for both men and women. The goal is to reduce obstacles for women and increase their presence in executive positions. Ultimately, such efforts could help expand the pool of skilled women in top management posts, naturally leading to a greater presence of women in the boardroom as well.

annalisa barbagallo is a Partner in Brunswick’s Brussels office and advises clients in the digital and financial services sectors. mikael isaksson is an Executive in the Brussels office.

brunswick review · issue 10 · spring 2016 51 women in the boardroom

than companies without “strong female leadership.” companies, raising capital, investing and creating On the other hand, companies without women value for customers, employees and investors. Many on their boards have experienced 24 percent more of these same women are interested in bringing their governance-related “controversies” than the average. valuable experiences and perspectives to private or We know companies with diverse leadership public companies as independent directors. teams tend to be more innovative, better problem In the summer of 2015, I launched theBoardlist, solvers and better decision makers. We also know a private business network aimed at tackling gender that female consumers tend to be less brand diversity head-on – starting with boardrooms, loyal than males, are bigger drivers of consumer starting with the tech industry. In eight short purchasing, and demand more from brands and months, we have identified more than 1,000 highly the companies behind them. As a result, one might qualified women leaders who have been personally expect companies to leverage top female talent in nominated and endorsed for board service by over the boardroom to help drive performance and build 200 male and female peers, CEOs and investors. lifelong relationships with their customers. We believe a highly trusted and private market- Many assume that low female representation place plays a critical role in accelerating board on tech company boards is due to a lack of demand while solving the perceived “pipeline” qualified female candidates, or a “weak pipeline.” problem. Technology can allow us to accelerate the However, this is not a supply problem. Instead, this discovery and connection of great board candidates disconnect has been the result of the low demand in a safe and trusted environment, at scale. and low priority assigned to building diverse boards As an industry, we can start driving demand to drive greater performance. for diverse board candidates now. As business The tech industry, and Silicon Valley in leaders, employers, role models and mentors, we particular, has been in the spotlight for the lack can make introductions, create connections and of women on tech company boards. As pressure facilitate relationships that open doors. As board grows to address the gender imbalance, CEOs members, we can acknowledge the value of board and founders frequently describe the problem as diversification and ensure we source highly qualified unintentional, and invoke a catch-all reasoning diverse candidates for open seats, all the while that points to a scarcity of women with educations encouraging other boards to follow suit. in science, technology, engineering and math Data around the business benefits of diverse (STEM). Yet tech is an industry that prides itself on boards, including the value of women directors, innovation and disruption and has many notable is extensive and undeniable. Slow progress in leaders – male and female – who do not have STEM the boardroom only means slower progress for degrees. Taking that into consideration, it seems companies seeking a competitive advantage. more likely that our leadership is not making it a Today, there is simply no reasonable excuse for a priority to source and recruit female talent at the lack of diversity, including a lack of women, in our board level. boardrooms. Let’s accelerate the focus on building There is plenty of evidence that women leaders diverse boards by making use of technology to with the experience and expertise to serve on help connect qualified and diverse leaders with boards exist. Through my research, I know that opportunities to contribute at the highest levels women in my industry, technology, are starting of our companies. Each one of us has a role to play. Let’s get started.

sukhinder singh cassidy is Founder and Chairman of Joyus, an online, video-based shopping network, and theBoardlist, a curated talent marketplace to help “Today, there is simply no place qualified women leaders on the boards of tech companies. She was CEO and Chair of social commerce reasonable excuse for a lack site Polyvore before founding Joyus in 2011. Until 2009, of diversity, including a lack she was a senior executive at Google. Sukhinder Singh Cassidy spoke with katie ioanilli, of women, in our boardrooms” a Partner in Brunswick’s London office.

brunswick review · issue 10 · spring 2016

TILTING THE GENDER SCALES The United Arab Emirates has taken a strong lead in Middle East efforts to put women in leadership roles, say Brunswick’s heather salmond and jeehan balfaqaih

Emirati women have always been the backbone of family life and social structure, a role that derives from traditional Islamic and Bedouin culture. As society has evolved, so has the role of women, with education and leadership training opening up new opportunities – including on corporate boards. Businessman and entrepreneur Badr Jafar, the CEO of UAE conglomerate Crescent Enterprises, has been a leading voice on gender equality. He insists that gender imbalance in the boardroom cannot be corrected without addressing it at the executive level first. “The good news is that the UAE continues to have more women than men enrolled in higher education, making it more likely they will enter the workplace,” he says. “We need to focus our efforts ender balance in the corporate boardroom to ensure that a maturing corporate culture bumps is not a goal commonly associated with the outdated attitudes.” Middle East, a region whose reputation Jafar, along with a number of other leaders, is usually determined by the policies of a both men and women, last year launched the Gulf G small group of countries. While women Cooperation Council Chapter of the 30% Club. play a critical role in Middle Eastern society, they are He sees increasing female representation in the not widely recognized as full partners with men. boardroom not as a women’s issue but as a business But a recent push for reforms by the United issue. “The evidence is overwhelming that both Arab Emirates and the founding of a Gulf region businesses and economies need more female leaders branch of the 30% Club – the global initiative to strengthen decision making and create more aimed at advancing female participation on boards lasting value,” he says. – highlight how seriously leaders are taking the issue That objective faces a number of hurdles, of gender equality in both business and politics. In both corporate and in society, including the 2015, Sheikh Mohammed bin Rashid Al Maktoum, limitations that Middle Eastern women place on Vice-President of the United Arab Emirates and themselves, says Rana Ghandour Salhab, a Talent Ruler of Dubai, founded the UAE Gender Balance and Communications Partner at Deloitte, focused Council, a government body dedicated to achieving on the Middle East. “Arab women need to believe the goal of women’s equality. that it is possible for them to have careers and “Emirati women have proved their competence build families,” she says. However, she points to the in all fields and we are proud of every achievement 30% Club’s efforts to build equality worldwide as they made, and thus, we are committed to support evidence that such challenges are not isolated to the them until they achieve the highest degrees of Middle East. excellence,” Sheikh Mohammed said at the UAE “Obstacles to advancement for women transcend Gender Balance Council’s first meeting last year. culture and tradition,” she says. The UAE is a young nation, only 44 years old, heather salmond and jeehan balfaqaih are and its leaders see gender equality as a signature Partners in Brunswick’s Dubai office and members of the of its innovative approach to social reforms. Steering Committee of the GCC Chapter of the 30% Club.

brunswick review · issue 10 · spring 2016 53 women in the boardroom

“Studies have shown that three women ONE SEAT OFFERS A VIEW directors – or a third of the group – count for much more in terms of effectiveness than just one or two,” he says. OF INDIA’S FUTURE In 2014, in an attempt to deepen the pool of boardroom talent, Bansal Regulatory efforts have made a controversial start founded a program to mentor women for to reforming the gender balance on boards, independent directorship positions. The says Brunswick’s azhar khan program aims to give participants a greater level of familiarity with crucial boardroom matters, says Bansal. At least 30 women veryone agrees: India needs more Asking companies to prove the fitness who have completed the program, all women like Renu Sud Karnad, of candidates will merely slow down the experienced professionals and none from a banker who sits on the boards process further. “The more conditions you the family of a lead shareholder, have since of several Indian companies. Yet impose, the less likely it is that you will find become independent directors. E she is a rarity, reflecting India’s suitably qualified women,” she says. The scarcity of women in the workplace modest efforts to place more women on Bansal is one of a small number of is worsened by expectations that women boardroom seats. women who are well-established business will not return to work after having India’s Companies Act, enacted in 2013, leaders in India. An engineer turned children. A recent study by Catalyst, a requires at least one woman on the board McKinsey consultant, she set up the India nonprofit promoting the inclusion of of all listed companies, a move inspired offices of executive search firm Spencer women in the workplace, found that by the ambitious quotas put in place by Stuart prior to her current role at TPG. nearly half of Indian women drop out some European countries. But while a of mid- or senior-level careers to raise strict regulatory requirement in Norway, RENU SUD KARNAD spearheads lending a family, compared to 29 percent for instance, has achieved 40 percent operations at HDFC, one of India’s largest across Asia. representation by women, the much mortgage houses, and is a member of the Karnad, who sits on audit committees weaker “one woman” rule in India is board. Once opposed to the notion of of electronics company Bosch and facing resistance. quotas, she now insists the law should be automation group ABB, is among those Only 12.1 percent of board seats at strengthened, acknowledging that “some professional Indian women who was able the Bombay Stock Exchange’s top 200 sort of reservation is necessary to focus on to return to her career after starting a companies are occupied by women, the issue – perhaps for a generation.” family. She cites the important supporting according to a 2015 UK government N. Balasubramanian, a governance roles played by her employer, HDFC, and report by former trade minister Mervyn expert and professor at the Indian Institute her own family in her professional success. Davies. In 2015, the Securities and of Management in Ahmedabad, sees the Balasubramanian says that despite Exchange Board of India fined 530 “one-woman” requirement as a step in resistance, businesses ultimately will be companies for missing multiple deadlines the right direction, but agrees that much unable to resist the financial rewards to meet the quota. For listed companies, more needs to be done before any positive that have been shown to accompany the fine is 142,000 rupees ($2,240) plus change in board culture can be expected. more women on boards. Research by 5,000 rupees ($78) a day. Such penalties accountancy firm Grant Thornton may not be enough. Among companies estimates Indian companies could that have complied, many have simply improve their returns by $14 billion appointed a female relative of an existing annually by including at least one woman. manager or shareholder as a proxy. That advantage isn’t widely understood. Anjali Bansal, a Partner and Managing “If that improves, then I can see boards Director at global investment firm TPG voluntarily seeking out more women for Growth and an independent director on their boards,” he says. “Otherwise, it is just the India board of UK pharmaceuticals a case of them ticking a checklist.” group GlaxoSmithKline, argues that even this is an important start because “at azhar khan is a Director in Brunswick’s least it gives women a seat at the table.” Mumbai office.

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A JOURNAL OF COMMUNICATIONS AND CORPORATE RELATIONS ISSUE 10 SPRING 2016

THE BOARDROOM ISSUE View from t he top table

Confessions of a serial director

chair at two tables Sony & Chugai’s

ceos change rank – power sharing in brazil

Ford Foundation’s drives the agenda against inequality

quite contrary Save a seat for dissent

open for business The diversity debate

good samaritan To the rescue of a Portuguese institution

Plus the language of business dress how unicorns risk extinction

ANSWERING TO A HIGHER AUTHORITY Islamic finance has grown into a $1 trillion practice with its own compliance sector. Brunswick’s hassan fattah and tasha young examine how Shariah has taken a seat at the board table

asser dahlawi’s epiphany came in the early 2000s. At its core, Shariah (sometimes Shariyah or Sharia) finance After more than a decade spent working in the eschews usury, or riba – the collection of interest. Based on the growing area of Islamic finance, he had begun to Quran, the sayings of the Prophet Muhammad and religious realize that efficient controls were lacking to ensure case law, the code requires that money be used only to represent Y compliance with Islamic codes, or Shariah. the value of a commodity or product, not something of value “We kept seeing gaps between what was being proposed in itself. Investment returns should serve a common good and to the Shariah boards at these institutions and the encourage partnership between lender and borrower, with the implementation of the product,” Dahlawi says. “There was risks and rewards shared by both sides. no audit, no quality check. But people were calling it Shariah Shariah compliance requires some interpretation to adapt compliant, and that was a major problem.” to the modern age. Profits from pork, gambling, alcohol and What this rapidly growing industry needed, he realized, tobacco are clearly forbidden, but so are financial derivatives. was a new level of professionalism – external advisory And gray areas exist, such as whether a company can lend specialists who understood all the concerns in such transactions. itself money as an accounting method, with no asset attached. In 2004, he helped found the Shariyah Review Bureau, a Historically, companies would retain three to six scholars business he now runs as CEO. It is part of a growing industry and experts as an independent Shariah review board that would of Shariah advisers that help structure financing transactions make recommendations to the corporate board regarding and certify that financial products conform to Islamic law. compliance. However that practice created wide variation among These advisers are increasingly important to company boards rulings between companies. To encourage greater reliability and as more businesses embrace the Muslim world as a source of consistency, many companies in recent years have chosen to capital and inspiration. outsource the process of Shariah review. brunswick review · issue 10 · spring 2016 57 The Shariyah Review Bureau is an organization that offers this service. SRB’s scholars use their experience as authorities and their expertise in BANKING IN GOOD FAITH finance to find precedents for a financial process, product or institution. If they find a non- hariah, or Islamic religious law, offers a Sukuk Also called compliant feature, they will offer alternatives. guide to moral business conduct. Profits “Islamic bonds,” these Cases involve everything from the simple (how a S from pork, alcohol and gambling, for are one of the most bank account can be set up) to the complex (the instance, are forbidden. Investors also cannot popular forms of Islamic leasing structures of private equity deals). When be guaranteed returns on investment and must finance. Where normal they are stumped, the researchers appeal to the share in losses as well as gains. bonds represent debt and wider network of Islamic scholarship. The Quran has several verses that scholars pay an investor interest, The Shariah compliance sector carries believe condemn riba, generally understood sukuk represent the value of an underlying an exciting air of innovation. SRB’s own office as the charging of interest. Other religious authorities echo that interpretation, and it sits asset. An investor buys is reminiscent of both a dotcom and a library as the bedrock of most Shariah-compliant a piece of a company, for or financial research facility, with a ping-pong financial products. Many forms of loans, bonds instance, and is entitled table, mini golfing range, multiple screens on and other transactions need to be redesigned to a share of the profits each desk and a large supply of pantry perks. before they can be considered acceptable for associated with that Sheikh Muhammad Ahmad, one of SRB’s religiously minded investors. asset. The payment is a scholars, wears an Apple Watch, but represents To allow for profits while not charging substitute for the interest an ancient tradition of Islamic scholarship and interest, money must represent the value that a bond investor of a specific commodity. Several Shariah would collect in a non- authority. He is also a Shariah finance expert, concepts that build on this idea (see right) Shariah transaction. having structured more than 400 transactions have spread internationally throughout The issuance of sukuk over 11 years. Islamic countries and are increasingly can raise money for SRB is not alone in the space. Others include popular in Europe and the US. infrastructure projects Amanie Advisors, based in Kuala Lumpur, or business expansions. and Dar al Sharia, a subsidiary of Dubai Islamic Bank, one of the first Islamic banks – both offer Shariah services around the world. Headquartered in San Francisco, IdealRatings NCTM hoped to provide an alternative offers Shariah compliance checks tailored more investment and tax-advantaged returns for toward Western markets. clients in Europe. SRB thought a single-bond structure for INTEREST IN SHARIAH compliance NCTM might not meet the range of needs services has spread globally. US agriculture required and it suggested a suite of products technology company Fresh Box Farms, based in instead: one arranges profit sharing; another Massachusetts, specializes in hydroponic farming permits the purchase of equipment in a of produce in specially designed units. The Shariah-compliant “leaseback” arrangement; and a third allows company approached SRB to help it reach out financing for companies seeking to acquire to Islamic investors. risk tends to be another business. “The main activity of the company is lower, due to the Occasionally, it’s just not possible to create a Shariah compliant – producing vegetables,” bridge between the moral strictures of Shariah says Mansoor Munir Ahmed, SRB’s Assistant asset-backed and modern financial practices. “Clients come General Manager. “But the minute you tap nature of the debt to us for various options and scenarios,” says into the financial world, new questions are Sheikh Muhammad Ahmad. “But sometimes, no raised from a Shariah perspective.” matter how you tune it, you simply can’t make In Fresh Box Farms’ case, SRB found Shariah it compliant. So my job becomes finding an compliant funds could buy stock in the company, alternative product.” in return for a proportional piece of the profits. The first Islamic banks appeared as a In another example, Italian law firm niche offer in the 1970s. In the early 2000s, NCTM wanted to build a Shariah-compliant a new generation of bankers and investors bond that small- and medium-sized enterprises, sought to widen the appeal of Islamic finance or SMEs, could offer to investors. In addition by applying modern banking concepts to helping SMEs gain access to Islamic finance, and systems.

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BANKING INGOODFAITH

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59 with these challenges. Two questions come up repeatedly. First, how do we manage in a world of unparalleled uncertainty and geopolitical risk? Second, how do we know which risks could really hurt us and where best to put our time? Too often, board members approach risk as something we can eliminate entirely as long as we have the right processes in place. The truth is, risk is a constant and necessary companion. Day to day, it can be mastered and restrained, but a thriving business will always feel its presence. The logic of hindsight tells us the present is confusing and the past was ordered. For every generation, the future is full of peril and the NO RISK, potential for disaster can seem overwhelming. But risk also creates possibility. In 1975, the world seemed a dangerous place: the Middle NO REWARD East was in turmoil, the Cold War showed few As the pace of change increases, says signs of thawing and a global oil crisis was looming. Most of today’s attractive markets Control Risks CEO richard fenning, were either insignificant or off limits. The first so does the need to manage our fear digital tools were emerging that would eventually revolutionize almost every sector and unravel entire industries. Four decades later, the world is wealthier, healthier and in many ways safer than it was back the world is a more complicated place than it then. Different risks have emerged, but they too has ever been, and risk has taken on an evangelical will give way to a reshaped future with its own set mania, dominating boardroom discussions. of opportunities. Across any range of indicators, risk seems to be On the other hand, the pace of change is rising. In the geopolitical landscape, the long reach increasing faster today than ever. That is a defining of a new breed of terrorist unsettles us. The Middle feature of our age and impossible to ignore. East is seemingly consumed by intractable bitter conflict. Afghanistan and Libya are spiraling into a self-destructive vortex. Europe and the eurozone are fractured by a rise in nationalism and stresses from the seismic movements of refugees. Across the Channel, the future of the United Kingdom is under scrutiny. A brittle global economy adds to the uncertainties. Emerging markets are under pressure and the Chinese economic model – the miracle of modern times – appears to be creaking. At the same time, threats to the security of corporate data are growing and dramatic changes have pushed the energy sector into upheaval. Even where these threats seem containable, there is a gnawing awareness that public perceptions of a particular risk could suddenly snowball and transform your business landscape in the process. I spend a lot of my time with directors and executives, sorting out the realities associated

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Disruptive forces challenge both business and “Risk is a A proper strategy involves not one decision, but politics. They appear rapidly, upset the status quo an ongoing commitment to a dynamic network of and wrong-foot the established order. You can constant decisions, each of which must be prioritized. This think of this increased speed of change as a mass and necessary applies to cybersecurity but also to risk in general. insurgency, rushing through companies, government Identifying the risks that matter most to your institutions and indeed, our everyday lives. companion. business and how to address them can be time- In the same way young companies such Day to day, consuming and intense. But done rigorously and as Uber and Airbnb are shaking up stodgy regularly, it is also the best thing you can do. business sectors, so new political organizations it can be Certainly ignoring the problems is not an option. are makeshift and audacious, seeking out mastered Not all risks will materialize into crises, but some unconventional funding and roughly jostling the will. A tense political conflict that turns violent can established order. They are present in Middle East and restrained, threaten your overseas operations and employees. conflicts, US politics, the European migration but a thriving Somewhere, right now, a company is discovering crisis, Russian policy toward the West and in a hacker at large in its corporate network. India’s political landscape. business will When emergencies such as these happen to Such risk is a fact of life, but it affects everyone, always feel your business, it will be little comfort to know that not just your company. That means the challenge is companies throughout history have faced their own to adapt more quickly, to be better at handling risk its presence” set of risks. What will be a comfort is the knowledge than your competitors. Disruption and instability that you have anticipated such a scenario and are force good companies to think faster, to change prepared to deal with it. more radically, and to better understand the societies and customers they serve. RICHARD FENNING Take cybersecurity as an example. Threats to corporate data are now a critical business concern Joining Control Risks in 1993, Richard Fenning has for nearly every company; hackers, whether served in Japan, the US and London. He was appointed malevolent teenagers or malicious states, are the CEO in 2005. leading disrupters of our age. CONTROL RISKS No simple, single fix can protect your particular Control Risks is a global risk consultancy engaged company against the fallout from a cyberattack. in helping organizations assess, plan and manage their Instead the risk must be managed. Technology can operations in some of the most complex and volatile help, but we must also shift how we think about regions of the world. digital security and have nimble leadership when Richard Fenning spoke with richard meredith, a Partner,

ILLUSTRATION: OTTOILLUSTRATION: STEININGER the near-inevitable breach occurs. and aideen lee, a Director, in Brunswick’s London office.

BE PREPARED

Do not confuse risk Listen in stereo Age and experience Crises can arise where Bad things happen with fear Advice is shaped matter – usually you least expect them to good companies Risks that sound the by where it comes Leaders with a few gray It is easy to focus on You can’t anticipate most dramatic are not from. People close to hairs are invaluable geopolitical hotspots. all obstacles. Despite necessarily the most the action may have in a crisis. But they But if you talk candidly all your efforts, things damaging. Remember, extraordinary insights could be at a cultural to senior European can go badly wrong. fear is a visceral, but lack the objectivity disadvantage when a banking executives, for An acceptance of that emotional instinct; of those further away. young hacker is found instance, they will tell reality can help you determining risk is a For example, Russia- in your key database. you that the political risk be more emotionally factual, cerebral process. related sanctions seem Allow younger people they fear most comes prepared – and more Better to be rational than very different in Moscow to brief the board and from the US, given effective when to succumb to anxiety. than in London or listen to what they say. the zeal with which the crisis comes. New York. Listen to regulators there have both sides. targeted international financial institutions. ILLUSTRATION: OTTOILLUSTRATION: STEININGER

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Companies in China root in the popular consciousness. The social responsibility strategies as pillars are racing to shape public response to the Sichuan earthquake for business, establishing trustworthy and the volunteer spirit created by the relationships with Chinese stakeholders.” strategy around social Beijing Olympics gave civic engagement Increasingly, both Chinese companies needs, say Brunswick’s and philanthropy momentum. Social and foreign businesses operating in lu jianzhong media has broadened the conversation, China are being held to higher standards. and tong zhao leading to more scrutiny of the contract Recent laws, such as the Environmental between business and society. Protection Law, have brought corporate n the face of an economic slowdown However, recent events have intensified responsibility to the regulatory forefront. and increased pressure on profits, doubts about whether government and Market-based mechanisms are also it would be easy to assume China’s business are doing enough. In December strengthening. For example, the Hong business leaders are putting 2015, Beijing issued the first red alert for Kong Stock Exchange has increased I environmental sustainability and air pollution, resulting in school closures expectations for environmental, social responsibility initiatives on the and restrictions on traffic and outdoor social and governance reporting from back burner. Far from it. work. This led many to wonder if the “recommended” to “comply or explain.” For China’s local companies, state- country’s attempts to balance economic This move is widely seen as a step toward owned enterprises and multinational growth and environmental concerns go a compulsory reporting requirement. corporations (MNCs), such efforts far enough, and if companies are doing As a result, sustainability is moving are accelerating. Many companies are their part to solve quality-of-life issues. higher on the agenda in boardrooms and moving from ad hoc social responsibility In fact, the “new normal” – the theme companies are looking for ways to link programs to more integrated approaches, of Xi Jinping’s policies during his first corporate social responsibility (CSR) keeping up with regulations and rapidly three years in office – emphasizes that strategies to business objectives. changing public expectations. the economic pressures facing the Historically, MNCs have led the way Since 2008, the vocabulary of social country require a deepening focus on on the implementation of integrated responsibility and sustainability has taken sustainable development. Guo Peiyuan, approaches to sustainability in China. General Manager of SynTao, a Chinese Now, as the economic boom stabilizes sustainability consultant and research and profits fall, there is added pressure on group, says the government’s current them to show how they are “giving back.” Five-Year Plan “puts a strong focus on In MNC boardrooms, the question is innovation and the green economy. not, “Should we show our commitment?” As such, MNCs need to embrace the but rather, “How well are we showing ‘new normal’ by adjusting their China that our commitment aligns with strategies. At their core, these strategies government priorities and social needs?” should aim to become more involved in This conversation is growing, but there is Chinese society using environmental and still room to improve. While more MNCs

AND CORPORATE CITIZENSHIP: THE VIEW FROM THE CHINESE BOARDROOM

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are publishing China-focused corporate China is on the path to a more To address this, Twinings focused citizenship reports, less than 8 percent are on poverty alleviation efforts all along translated into Chinese. sustainable future as its supply chain. A key step has been In Chinese companies, CSR programs social responsibility becomes training and education to highlight still tend to be seen as an add-on, rather the relationship between nature, tea than central to value creation. But that a pillar for the economy production, economic benefits and a is changing quickly. According to the and the country as a whole more harmonious society. The move China WTO Tribune, the number of CSR encourages more young people to reports published in China rose from one become farmers and helps reduce the to 898 in just 10 years (2001 to 2011). use of fertilizers and pesticides. And as “Good reputation and a strong brand to share information and best practices the tea quality improves, profits rise. are just as important as solid financial – have also put corporate responsibility China is on the path to a more performance,” says Zheng Dongshan, high on their agenda, in response to sustainable future as social responsibility Senior Vice-President of China General members’ needs. becomes a pillar for the economy and the Nuclear Power. “After the Fukushima In all this increased awareness, the key country as a whole. The government’s accident in Japan, the public’s suspicion components of an integrated business 13th Five Year Plan outlines strategic and resistance toward nuclear power program are beginning to emerge, linking priorities, including Made in China 2025, plants was unparalleled. It was vital core values, operations and a management entrepreneurialism and the continued to improve the openness, fairness and system that addresses social needs. anti-corruption campaign. These are frequency of our disclosure mechanism.” Leaders in this space in China include designed as a sophisticated and home- In response, Zheng’s company was companies such as Intel, General Electric, grown path toward sustainable growth. among the first in China to establish a PricewaterhouseCoopers, KPMG, HSBC, Boards that can help China on nuclear and radiation disclosure platform, China Mobile and Chinese appliance that road, by demonstrating a real to ensure the public received accurate and maker, Gree Electric. Many MNCs are understanding of responsibility concerns timely information. That also reduced the now beginning to localize their CSR and working with the government to risk that inaccurate public information programs to align with China-specific implement localized programs, stand to could harm the company’s reputation. issues and needs. succeed in the “new normal.” A barrage of networks and forums, UK tea marketer Twinings is a good sponsored by advisory organizations example. Young workers moving to Brunswick Partner lu jianzhong heads such as Golden Bee and Collective cities created a labor shortage among the Shanghai office and leads the Business Responsibility, have emerged to further China’s rural tea farmers. Meanwhile, & Society practice in Asia. He advises on increase awareness of environmental the remaining older farmers overused sustainable business strategy and corporate and CSR issues. Chambers of Commerce fertilizers and pesticides, resulting social responsibility. tong zhao is a Partner in Hong Kong and advises on corporate – important platforms for both in environmental problems, soil reputation, capital markets, M&A and

ILLUSTRATION: SASHA PROOD SASHA ILLUSTRATION: multinational and Chinese companies degradation and reductions in quality. crisis communications.

AND CORPORATE CITIZENSHIP: THE VIEW FROM THE CHINESE BOARDROOM

brunswick review · issue 10 · spring 2016 63

FOUNDATION OF EQUALITY

Ford Foundation President healing the world’s ills requires a broad commitment to diversity and a pledge to bring the entire resources of individuals darren walker and corporations to bear on specific problems. That is the message is throwing down Darren Walker would like to send to both the corporate world and the the gauntlet to business philanthropic community. to join organizations Now in his third year as President of the Ford Foundation, one like his and tackle of the world’s leading private charitable organizations, Walker is credited with refocusing the organization on a commitment to combat the really big issues social inequality. In that battle, intolerance is the principal enemy. “Combating narratives of intolerance requires powerful counternarratives that embrace – and truly celebrate – diversity and Interview by Brunswick’s inclusion,” he wrote in a 2015 op-ed on CNN’s website. He notes that discrimination against women and minority communities of all types david sutphen and is symptomatic of a larger problem. “We cannot focus solely on the maria figueroa küpçü economic piece of the puzzle, or look at racial or educational inequality in isolation. Doing so treats symptoms while ignoring the disease.” Walker knows how big the challenges are. He was instrumental in organizing 10 foundations that together raised nearly $370 million to help the city of Detroit emerge from bankruptcy, an allegiance referred to as the “Grand Bargain.” To succeed in such challenges, philanthropy needs the full support of the business community. Walker personally has been a beneficiary of Ford Foundation support: he was among the first young children enrolled in the US national early education program, Head Start; he received public grants to go to college; and he worked as COO at a Harlem nonprofit. All of those opportunities were sponsored by the foundation.

The Ford Foundation’s mission is to tackle inequality. It explains its work on issues that include (from top left) civic engagement and government, “Inequality inhibits people’s voices and makes government less effective”; creativity and free expression, “Cultural change often precedes transformations in other spheres, heralding new social, political and economic thinking”; and internet freedom, “The digital world is not neutral, and its benefits are not equally shared”

65 He also spent nearly a decade on Wall Street, overwhelming, depending on the industry. The skill working as a lawyer and bond salesman, and has set includes both high cognitive intelligence and a keenly developed understanding and respect for high emotional intelligence. A CEO needs an ability corporate leadership. to speak in the boardroom and on the shop floor, to Today, the foundation runs a $12 billion travel in really diverse circles and to be comfortable endowment; its grant-giving budget in 2015 was in all kinds of diversity. That is a huge remit and around $500 million to support its work globally. not something that CEOs had to do in the past. We spoke to Walker in the foundation’s New For boards, having to focus on profitability and York City offices, where he discussed ways boards stock price as the sole metric of success places and corporate executive suites can be more effective them in a very difficult situation. A company partners to philanthropy and to society. today should be focused on shareholders, but also customers and employees and the communities What do you think is the biggest misconception where they do business. And it’s really hard to serve that corporates have about philanthropic players all four of those stakeholders. Just focusing on stock such as the Ford Foundation? price distorts things and makes boards behave in They often don’t believe we are having a big impact ways that they probably would not, if left to their or making a big difference in the world. Partly that’s own druthers. because we do a poor job of telling our story. Philanthropy has suffered from the Let’s say a group of Fortune 500 CEOs asked misconception that if you do good, charitable you, “From your perspective, what should we mission work, everything else will be just fine. But focus on?” we’ve got to do a better job of communicating the Corporations today can play a critical role in importance of the work we do and how relevant solving big problems in society, and definitely it is for solving big issues like climate change or one of the things they should focus on is how to inequality or gender violence or many of the ills leverage their resources and assets to solve them. that face our world. Philanthropy is critical to A company doesn’t have the same perspective solving those problems. as a nonprofit mission or organization. A CEO People who work in the private sector are wakes up every day and says, “How do I make the FORD FOUNDATION: inclined to think philanthropy and nonprofits are best widget, at the best price, treat my employees THE FIRST 80 YEARS “soft” jobs. Well, I worked at a big global law firm, well and return value to shareholders?” That’s as it Cleary Gottlieb Steen & Hamilton, and at UBS, should be. But the CEO also needs to think about, and I have never worked harder than in this sector. “How do I make the widget in a way that does the People pick this career path because stock options least harm to the earth, and that returns a value aren’t as much of a priority. For them, what’s really that’s not just financial?” And that’s really hard. important is making a difference in the world. So much of what is termed “corporate social Edsel Ford (left), responsibility” is really superficial and low son of Ford Motor What would you like to see on the corporate impact. Really robust CSR programs can be Company founder board agenda? transformational, but we need more of them. Henry (right), The demands on a CEO today, particularly at a A lot of CEOs would like to spend more time establishes the

Ford Foundation in publicly traded company, are enormous and almost building better CSR programs, but they just don’t MAUTNER RINCÓN PATRICIA / REUTERS MACGREGOR, LUKE / OLDFIELD MATTHEW PHOTOGRAPHS: 1936 with an initial donation of $25,000. The funds are to 1954 be used “all for the EQUALITY IN public welfare.” SOUTH AFRICA 1969 After their deaths The foundation SESAME STREET establishes fellowships The Children’s Television in the mid-1940s, for scholars, funding Workshop receives large bequests from research that grants from the both Fords transform documents and exposes foundation to educate the foundation into the devastating impact preschoolers, including the world’s largest of South Africa’s a new series called philanthropic apartheid policies “Sesame Street” organization at that time.

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get prioritized enough, or the board just doesn’t group, will add up to something really great and necessarily appreciate the value they create. So I dynamic. That means making sure each board would like more attention paid to, “How do we member feels they are adding value, that they have more effective, high-impact CSR programs?” are having an impact and that their time is well spent. These are high-value individuals. They are Can you give an example? not interested in being on boards where they are I have found that the best CSR programs are the simply “potted plants” or tokens. You need to know ones where the company truly wants to utilize all them individually and to make sure that they are of its assets, not just a sliver of one department and motivated and inspired, that they feel that they are one person’s time. both learning and giving. For example, we partnered with Citibank in a conditional cash transfer program, where support “It can’t be just, Some companies may be on the threshold, is linked to the recipient’s actions. We used this recognizing the need for that kind of thinking anti-poverty program to help promote financial ‘We’ve got about diversity but not sure where to begin. literacy among people who really need it, to help 10 directors and What do you say to them? them build their household income and economic Well, it’s a positive sign to admit you don’t know security. I think we need more programs like that. we have to something and then to acknowledge that you need have a black help. That’s the first step. You’ve got to find the So you want companies to bring all their assets, people who can bring you the best intelligence, not just write a check? seat and a seat information, networks and resources to fill any gap Right. Bring your marketing, bring your R&D, for a woman.’ you might have. And then go beyond that. I think bring your HR, bring your IT. Bring your whole a lot of CEOs articulate a desire for diversity and self as a company, all of the assets that you have That’s not good inclusion, but they don’t internalize it into their to deploy to help solve a big problem. governance. practice. They don’t place it within the incentive We need the corporate sector to help solve structure of the organization. problems today. There is no way that government That’s tokenism. and philanthropy can do the work that has to be You need to move Have there been examples in your life where done without the corporate sector. you’ve had to help build that bridge? beyond that” It has happened that I’m the only African American What makes a good board? or the only openly gay person on a board and we’re Today, for a board to be effective and have impact, thinking about how do we diversify and everyone different perspectives have to be present. It’s not turns to me and says, “So, how do we do this?” That just about race and gender – those are critical, but can feel like a burden, but my experience has been, it’s also about the diversity of lived experiences, boy, I pull out my contact list and get to work, just of backgrounds and geography. It’s political and helping them fill those gaps. representational perspectives. But what I’m really interested in is how to help When putting a board together, you have to CEOs move from seeing this merely as compliance, think almost as a curator. You want to make sure to seeing it as something that adds value to you as you populate that table with people who will a CEO and to the governance of your enterprise. It

POPPERFOTO ROBERT NBC/ NICKELSBERG,/ GETTY T_KIMURA RIVER/ NORTH / PHOTOGRAPHY, ISTOCKPHOTO do their best work individually and who, as a can’t be just, “We’ve got 10 directors and we have

1976 PIONEERING 2006 MICROFINANCE COMBATING THE 2014 The Grameen Bank 1979 STIGMA OF AIDS “GRAND BARGAIN” launches with support MONITORING The foundation The foundation helps from the foundation, HUMAN RIGHTS launches a orchestrate a giving landless people, The foundation supports $50 million global $366 million program mostly women, access several international initiative to address to assist the bankrupt to credit. Grameen human rights groups, one discrimination that city of Detroit, and later wins the Nobel of which later becomes often accompanies an makes the largest Peace Prize in 2006 Human Rights Watch HIV/AIDS diagnosis individual contribution

brunswick review · issue 10 · spring 2016 67 to have a black seat and a seat for a woman.” That’s environmental, social and governance outcomes. not good governance. That’s tokenism. You need We want to have more social impact through to move beyond that, to really internalize it and to our investments. provide space for the kind of discourse you want Foundations sit on billions of dollars of assets in at the board table and also informally, among the our investment portfolios. But most of us never ask board members. the question of how we might get the most out of that balance sheet. So, I worry that we leave a lot on So part of that is promoting healthy the table that could be deployed to exponentially conversations between board meetings? grow our impact. Yes, absolutely. The quality of fellowship among the directors is one of the things I think a lot about with the Ford trustees. Boards are often presented with difficult decisions. A board where people know and trust each other, and aren’t just quasi-strangers who meet once a quarter, is likely to be a more effective board. When “Philanthropy they’re comfortable with one another, I will have has suffered their candid, honest engagement. And that’s what I need. from the We visit places around the world where the misconception foundation is active, and I always encourage trustees to bring their spouses. Because it allows DARREN WALKER that if you do them to bring their whole selves. You get to really Darren Walker is President of the Ford Foundation. good, charitable see the full picture of someone when they’re with For more than two decades he has been a leader in the their family. And that brings you closer. It gives you nonprofit and philanthropic sector, working on social mission work, a deeper sense of the person and what drives and justice issues, including education, human rights, urban motivates them. It builds fellowship and trust. development and free expression. Before joining Ford, everything else he was Vice-President at the Rockefeller Foundation, and had a decade-long career in international law and finance will be just fine” What’s your biggest fear about the philanthropic at Cleary Gottlieb Steen & Hamilton and UBS. He also led space right now? the creation of affordable housing as COO of Harlem’s I mentioned earlier that I wanted corporations Abyssinian Development Corporation. and board members to bring their “whole selves” david sutphen is a Partner and Head of Brunswick’s to help tackle big issues and make a difference. Washington, DC office. He advises on strategic When I turn that same challenge back to us communications, reputation and public affairs, with a – are we bringing our whole selves? – I’m not focus on media, technology and diversity. sure. I’m afraid we maybe underplay our assets maria figueroa küpçü is a Partner and Head of Brunswick’s New York office. She advises on social for social impact. We have to look at how we use purpose, campaigning and stakeholder engagement our investment assets, our endowment, for and leads the US Business & Society practice.

BUILT BY FORD: THE MODERN MBA

he first Master in Business Administration program make the MBA the equal of other graduate programs. Their was offered by Harvard Business School in 1908. recommendations included a stronger emphasis on the social T After World War II, when the GI Bill allowed thousands responsibilities of American enterprise, an effort that was picked of returning veterans to get a college education, the MBA degree up by other philanthropic and educational institutions. became a popular choice in the US and began appearing Today, the foundation continues that work by supporting as an option at schools in Canada, Asia and Europe. organizations such as The Aspen Institute’s Business and Noting that rising popularity, an influential Ford Foundation Society Program, which trains executives and educators in report from 1959, “Higher Education for Business,” helped sustainability and values-based leadership.

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SECOND SECTION

P.72 Art works for the city

P.80 Musical tropes: George Crumb takes note P.70 Fixing pharma’s reputation

P.79 Unicorns: time P.82 they got realistic A bespoke view of business dress BATTLE FOR A HEALTHY REPUTATION Public distrust of the drug industry requires a new approach to communications, say Brunswick’s charis gresser and gabrielle silver

n January, more than 80 companies advances in genomics and molecular in our understanding of diseases and how across pharmaceuticals, biotech medicine. The US Food and Drug we treat them: when I was training, all and diagnostics came together in an Administration approved 45 new drugs we could give for multiple sclerosis was I unprecedented declaration to tackle last year, the highest annual figure in more steroids. Now there are five new drugs.” antimicrobial resistance. It was, one than a decade. More innovation is expected to follow, journalist said, an example of pharma Many of the newer medicines as discoveries spill out of established doing some good at a time when a lot have chemical structures and ways pharma labs, biotech startups, research of people are throwing “bad, bad words” of working in the body that are so foundations and academia. Everyone at the industry. novel that they provide fresh lines of is hungry to push the scientific That observation throws into sharp attack against cancers and diseases frontiers, whether in gene editing, the relief the critical gap between how the ranging from diabetes to auto-immune re-engineering of immune cells or industry sees itself and how it is perceived conditions. The world also now has understanding the impact that variations by others; between the solutions that an effective cure for hepatitis C – a in DNA sequence can produce. biopharma creates and the problems others potentially life-threatening disease for But along with the renewed buzz, say it causes; between innovation, and a millions of people. there are also brickbats raining down reputation that seems to have run aground. Sir John Bell, Regius Professor of on the industry. In the US, a complex, We are on the verge of an extraordinary Medicine at Oxford University, says, emotionally charged debate about drug era in pharma, thanks in part to the huge “We’ve witnessed dramatic improvements prices rocketed up the political agenda last

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year. The fuse was lit by a row over Turing message here should be simple: successful patient network with more than 400,000 Pharmaceuticals’ price hike, from $13.50 pharma uses its science and scale to solve members who can use the platform to to $750 a pill for one of its drugs, sparking the world’s most difficult health problems. track and share their experiences, and a controversy that spilled over to drug The challenge is how to present that so contribute data for research. pricing in general. it’s seen as the rule and not the exception The result is a wealth of patient- A tweet from Hillary Clinton – normal practice rather than just an reported data that could provide new underscored the potency of the issue: isolated example. insights into the nature of diseases, “Price gouging like this in the specialty Debate over pharma’s reputation will the patient experience and the effects drug market is outrageous. Tomorrow continue and no single action by the of drugs beyond the lab or trials. I’ll lay out a plan to take it on.” Following industry will resolve it. However two Interest in this data has fueled her post, $15 billion was wiped off the trends are worth highlighting because collaborations between PatientsLikeMe market value of US biotech stocks in just they together create the possibility of and academics, industry, regulators and one day. better communication between pharma nonprofits that span a wide range of In another sign that the actions of and its stakeholders. research areas. one company can become a headache The first is collaboration with an Likewise, pharma and its customers for all, a poll conducted by medical news ever-widening group of organizations. are looking at ways to harness the power publication STAT and Harvard T.H. Chan Increasingly, pharma is joining forces of large data sets and patient registries to School of Public Health shortly after the with charities, research groups and understand how effective drugs are once Turing episode found that “about three- even competitors to crack seemingly they have been approved and are being fourths (76 percent) of the public believes intractable problems. These present used to treat patients. that brand-name prescription drug prices opportunities for pharma to explain the None of this is easy and all of it requires are unreasonably high today.” wider benefit of its drugs, not just to coordination between pharma and its Industry commentator Matthew individual patients but also to the broader counterparts in health systems. They Herper, in a column for Forbes, said the health economy – by relieving pressure need to agree on the type of data that is reputation problem was “born of two on cash-strapped hospitals, improving relevant, and how it is to be collected, decades of missteps as one of the most- employee productivity or contributing analyzed and interpreted. respected industries in the country fell to scientific understanding. Telling that data story is not to be viewed along with tobacco and To make that story compelling and straightforward, but when it is done well, oil companies … The big challenge for credible, the industry needs evidence. it can enable pharma to be relevant to an pharmaceutical companies is how to This is where the second trend may be ever-wider range of audiences that are widen the discussion.” invaluable: the explosive growth of new only going to get more interested in what Self-inflicted wounds aside, this is types of widely shared data. pharma has to say. an industry that is always likely to find That data might be individual health Data by itself can’t bridge the gap itself in the crosshairs of public opinion. stories. PatientsLikeMe, for example, is a between pharma’s reputation and It is a simple fact that pharma produces exciting innovation. But used effectively, drugs that sick people need. It is hard it can help different stakeholders to think of a more fraught topic: this communicate with each other more industry often stands at the door between clearly, and help clarify what are often life and death. complex messages. But even in such a highly charged These two threads – collaboration context, there are many examples of and the power of new types of data – pharma responding to public health can be braided into a more effective emergencies, for instance, through efforts communications strategy. Using that, coordinated in record time to work on the industry can more consistently show an Ebola vaccine. Another example is the how it supports the public’s health across industry’s licensing agreements for HIV It is hard to think of a more the board, not just one treatment or one drugs with the United Nations-backed disease at a time. Medicines Patent Pool for use by generic fraught topic: this industry manufacturers in low-income countries. often stands at the charis gresser is a Partner in Brunswick’s On a number of issues from access to London office. Previously, she was a scientific writer for Public Health England. medicines to transparency, the industry door between life and death gabrielle silver is a Partner in London. has moved toward society’s expectations She is a qualified doctor and previously worked

ILLUSTRATIONS: BJÖRN ÖBERG BJÖRN ILLUSTRATIONS: for responsible corporate behavior. The with GE Healthcare.

brunswick review · issue 10 · spring 2016 71 This is, of course, to misunderstand, is relevant and meaningful for the – often with a daft, sniffy hauteur – communities for whom these projects CULTURE how those cities took their shape and are the centerpiece. character, which was through forceful The second challenge is that the top-down planning. Haussmann, big difference between successful and CLUB Nash and Schinkel were planners and less successful cultural districts lies in architects of ruthless self-confidence and whether thought has been given to the For a cultural center to with an almost totalitarian mandate, animation of the surrounding public work it’s not just the expunging the past and the present with spaces and provision for outdoor buildings that matter, says barely a thought. In contrast, cultural performances, smaller-scale galleries, live ADRIAN ELLIS, it’s everything districts are now usually planned, even in music in cafés and bars, craft studios and in between that really counts the least consultative of political cultures, maker spaces, informal gathering spaces with agonized attention (rhetorical or and educational facilities. The small stuff real) to community input and vigorous that feels like background is as important genuflections to history. in making a compelling destination as the ultural districts – quarters But for all the deliberations, the more grandiose cultural temples in the with a high density of art cultural district boom still seems to have foreground. The “software” and the infill galleries, museums, theaters and two blind spots. First, this is happening are as important for success as the iconic C concert halls – have become as high culture sometimes struggles for and photogenic hardware that grabs the the anchors of a formidable swathe of audiences as well as financial support headlines. And it takes careful planning urban development projects around the from the box office, philanthropy and supportive economics – well beyond world from Rio to Montreal, Helsinki to and public sector. Audiences for high the architects’ paygrade – to attract artists Melbourne, Hong Kong to Abu Dhabi. arts are under threat, the reasons well and makers, collocating production and Many more are in the pipeline. understood, and the business model for consumption, and to ensure that street- These “top down” exercises often get arts organizations challenged as a result. level animation is viable. bad press in the mistaken belief that the Whatever the sizzle, when the steak is not Cities are striving to become less great cities they seek to emulate such as as appetizing as it has been, is building interchangeable, less commodified, Paris, Amsterdam, Berlin, New York and steak houses the best strategic bet for more distinctive. Expressive and iconic London were organic, slo-mo, naturally urban regeneration? Not unless serious architecture and bespoke must-see occurring phenomena that cannot and effort is given to working out how spectacles are handy weapons in that should not be manufactured. How the buildings’ occupants can develop battle. The arts community has stepped nouveau riche to try… audiences and programs in a way that up to the challenge with enthusiasm and

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The Bode Museum in Berlin (far left) was closed for eight years while it was renovated at a cost of more than $200 million. The Bode is one of five museums located on the fittingly named Museum Island, a UNESCO World Heritage Site, in the heart of the city

West Kowloon’s cultural district is under construction, with the first major venue set to open in 2018. Meanwhile, “bamboo theaters,” (left) traditional temporary structures which stage Cantonese opera performances, have made appearances on the site, attracting crowds and interest in the district

intelligence, and sometimes more than a little expediency. There is barely a forum you can think of – urban regeneration, health, tourism, economic development, TALE OF TWO CITIES inward investment – in which the arts community is not an active, articulate Berlin is an example of a classical European cultural hub, while West Kowloon and canny participant. in Hong Kong is a modern story of artistic commitment and urban planning. Here, we speak to cultural ambassadors from both The committed capital expenditure in the pipeline for investment in cultural infrastructure over the next 10 to 20 years Following are excerpts of interviews that duncan pescod, CEO of the West is staggering. Planners should not fixate were conducted separately. Kowloon Cultural District Authority: on buildings themselves, but make sure What is unique is the fact that we are they are designed for truly compelling What is unique about your building the district from scratch on a programs and that between the buildings cultural center? magnificent site in the heart of Hong are vibrant, attractive public spaces for michael eissenhauer, Director Kong. This is an opportunity not only the communities they aspire to serve. General of the Staatliche Museen to realize the government’s ambition to zu Berlin: Berlin itself. It has a history of build world-class facilities for the people ruptures, going back to the 19th century. of Hong Kong, but also to shape the After the Wall fell, not only did Berlin future of arts and culture in the region. have to bring the city together, it also The close relations we are building with had to reinvent itself and catch up. And China and the West mean we really can quickly. As a result of all that change, bridge East and West – there’s a dynamic Berlin has more options than other major relationship between Asian traditions cities – it’s more flexible. This openness is and Western culture. ADRIAN ELLIS one of the essential differences for me. The diversity of our National How do state-led approaches coexist Adrian Ellis is the Director of the Global Cultural Districts Network Museums – more than 5 million with more entrepreneurial initiatives? and founder of AEA Consulting, objects in 19 buildings – presents a ME: In Berlin, there is real cooperation – an international practice that communications challenge, compared they cross-fertilize. Many locations means specializes in arts management. to the single brand of the Louvre or Met. we can put on many different events. From 2007 to 2012 he was Executive Director of Jazz at “The National Museums in Berlin” means We host contemporary artists, theatrical

PHOTOGRAPHS: BERND WEINGART, STAATLICHE MUSEEN ZU BERLIN / WEST KOWLOON CULTURAL DISTRICT AUTHORITY DISTRICT CULTURAL KOWLOON WEST / BERLIN ZU MUSEEN STAATLICHE WEINGART, BERND PHOTOGRAPHS: Lincoln Center in New York. something different to each person. performances, musical performances –

brunswick review · issue 10 · spring 2016 73 these external initiatives come into many if they do not define themselves solely international artists and offer new of the museums and enormously enrich in terms of tourism. They must look environments for experimentation. the cultural spectrum. For example, we beyond money-making, otherwise they had eight Kraftwerk concerts in the Neue don’t work. What was the thinking behind your Nationalgalerie in 2015. DP: Absolutely. Artists have an important master plan? DP: The West Kowloon Cultural District role in society and art is a necessary ME: Ours took shape after the fall of Authority has the full support of the ingredient to make cities liveable – good the Berlin Wall. After 30 to 40 years of government, while being required to places to live, work and play. Art at its separate development, museums in the operate in a prudent commercial manner. best holds a mirror up to society and east and west of the country were to be This allows for the best of both worlds. challenges norms. This was clearly brought together again. While Museum On the one hand, we listen to the broad evident in art that emerged out of the Island is a UNESCO World Heritage arts community in Hong Kong who Occupy Central movement in Hong Kong. Site, it also has to build for the future, are not only part of our future audience optimizing access to the buildings group, but are also potential collaborators. How can your city project itself as and modernizing safety and efficiency. Meanwhile, Hong Kong’s commercial art both a cultural attraction and a site for Bridges connecting the buildings were scene has had great success. creativity and experiment? all destroyed during World War II and ME: The two aspects complement each recreating them was impractical. Instead, Is culture an important component in a other. Contemporary culture reflects underground walkways are being built, wider political and economic strategy? our heritage, informing our views on the “Archaeological Promenade.” ME: The culture of Berlin has roots museum treasures and, in turn, gaining DP: We are building far more than in the whole community. During the substance through its relationship with cultural facilities. Starting from scratch, 20th century, the Nazis, the dictatorship the past. I think there is a lot of potential on land newly reclaimed from the sea, of East Germany and the Wall all for a reinvention of Berlin in this duality. we are building a town within the city, threatened to destroy that, but enough DP: Hong Kong is well known for the with cultural, artistic, educational, retail, vigor remained for the organic unity importance we place on the freedom to dining, hotel, residential, office and other to re-emerge. This is why Berlin is able express, to publish and to debate. As a spaces together with the infrastructure to reinvent itself. Cultural districts symbol, the extraordinary architecture to support that community. We hope can thrive only if they are set up with of the West Kowloon district is already to promote an understanding of Hong sustainable funding, if they have emerging. Our programming will Kong’s identity and traditions and create functions beyond a single area, and feature the best of local, regional and a place where people can come together.

The Neues Museum in Berlin is home to the iconic bust of Nefertiti, thought to have been made more than 3,300 years ago. The original was excavated in Egypt by a German archaeologist in 1912. The museum has several copies (left) including an idealized version from 1921 which features the eye that is missing from the original. The bust has recently been in the news since two artists claimed to have secretly scanned it and made the files available for anyone to download and make a copy with a 3-D printer. Modern scanning technology has led to many arts institutions

facing similar dilemmas AUTHORITY DISTRICT CULTURAL KOWLOON WEST / HUANG ZHANG / BERLIN ZU MUSEEN STAATLICHE KLEUKER, ACHIM PHOTOGRAPHS:

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What are the main cultural projects be the first major venue to open, in 2018. currently under way in your city? Xiqu is a performing art that has existed ME: We have almost 20 independent in China for more than 2,000 years and building projects running at the moment. integrates literature, music, arts, dance, It is an incredible period of change. martial arts and juggling. The best- The most prominent project is the known genres include Kunqu, Cantonese MICHAEL EISSENHAUER Humboldt Forum, the reconstruction opera and Beijing opera. of the former Berlin City Palace where M+ is Hong Kong’s new museum Michael Eissenhauer is the our non-European collections will be for 20th and 21st century art, design, Director General of the Staatliche Museen zu Berlin, the largest housed under one roof and highlight the architecture and the moving image, network of museums in Germany, connections between Europe and the rest with work from Asia and beyond. The comprising 15 collections and of the world. Lyric Theatre will act as a platform for four institutes. Previously, he was On Museum Island, British architect Hong Kong’s leading performing arts Director of the Museumslandschaft Hessen Kassel, where he oversaw David Chipperfield is designing a new organizations and a venue for programs the museum’s restructuring entrance building that will link all the from Hong Kong and worldwide. One and renovation. Museum Island buildings with one of the most important spaces will be the another. The Pergamon Museum project park, a public space and green lung at is just as big – almost half a billion euros the heart of the city. There will be a black will go to its restoration. The Neue box theater for 450 people and outdoor Nationalgalerie at the Kulturforum will performance space for up to 10,000. be refurbished over the next few years and Longer term, we will have more extended – everyone is watching what theater and music venues, gallery spaces we are doing to it. We are also building and education facilities. DUNCAN PESCOD a central repository, a city in itself, for Duncan Pescod is CEO of the historic objects. Plus innumerable smaller Interviews conducted by Maria Marques and West Kowloon Cultural District projects. A long answer, but… David Lasserson of brunswick arts, an Authority. He previously served for DP: This cultural development in international communications consultancy more than 32 years across various bureaus and departments in the West Kowloon is one of the largest dedicated to promoting and managing the reputation and interests of arts, cultural and Hong Kong government, including in the world, with many venues and charitable organizations around the world. transport, housing, tourism, urban performance spaces. The Xiqu Centre will www.brunswickarts.com services and trade.

Detail from artist Zhang Huan’s “Family Tree” series (left). This, together with work from many other Chinese and Hong Kong artists, will be housed in West Kowloon when construction on the M+ Museum is finished. The name reflects the concept of “museum and more”

The site upon which the West Kowloon Cultural District is being built (right) was under water 30 years ago. The government began to reclaim land from Victoria Harbour in the 1990s; new ground for a groundbreaking cultural center

brunswick review · issue 10 · spring 2016 75 When Banco Espírito Santo was split up and its toxic assets jettisoned, eduardo stock da cunha was parachuted G00D in to rescue the “good” bank. Then things got complicated… SAMARITAN Interview by Brunswick’s alexandra abreu loureiro

hen Eduardo Stock da Cunha Fund, became the sole shareholder. The In the meantime, a socialist-leaning came to the aid of a teetering “bad bank,” containing the company’s government came to power in Portugal institution in his native most toxic assets, was left to existing and another domestic bank collapsed, W Portugal, he didn’t bank on shareholders and junior bondholders. throwing more shadows on to Novo that good deed turning into an intense If BES had been allowed to fail and Banco’s future. long-term commitment. go into liquidation, it could have had As interim CEO, Stock da Cunha needs In September of 2014, at the invitation a “devastating systemic effect” on the to provide stability and grow the business’s of Portugal’s central bank, Stock da Cunha whole banking sector, José Berberan value despite these stormy conditions, took temporary leave from his position Ramalho, a Deputy Governor of the fighting each day to deliver for both at Lloyds Banking Group to be interim Bank of Portugal, told a parliamentary customers and regulators. Chairman and CEO of the fledgling Novo hearing late in 2014. “It’s a 26-hour-a-day job, I can tell you,” Banco, formed out of the collapse of one he says. Here, he discusses leading a bank of Portugal’s largest lenders, the family-led BES’S FIRST MANAGEMENT team under siege, the pressure of serving many Banco Espírito Santo, or BES. post-bailout resigned after only two stakeholders, and the personal sense of In July the same year, under a cloud months, citing a shifting mandate. Stock duty that drives him. of suspicious accounting practices, da Cunha was tapped to lead the good the bank had reported a 2014 first-half bank, named Novo Banco, until it could Why did you take the job at Novo loss of $4.8 billion. BES, a linchpin of the be sold. Banco? You must have known you were nation’s economy, seemed about to go A year later, the expected sale fell stepping into a hornets’ nest. belly up. through and the search for a buyer I’m attracted to challenges and this is the The central bank stepped in and ground to a halt. Stock da Cunha was kind that happens once in a lifetime. And organized a bailout to salvage the left in a kind of limbo, steering the huge it was a mission, something I could do for retail operation – the so-called “good retail bank toward an uncertain goal, my country. bank.” The family leadership was forced unsure if, or for how long, his term would Basically, I was asked to rescue a out and a separate entity, the Resolution be extended. bank that was tremendously important

MILESTONES ON THE ROAD TO RUIN – AND RECOVERY

Banco Espírito MAY 2014 JUNE Family members, Santo is founded An independent including the CEO of BES, in 1920 and audit finds serious Ricardo Espírito Santo Salgado has roots in the DECEMBER 2013 problems at Espírito (right), give up leadership roles mid-19th century A Wall Street Journal Santo International, businesses of article questions “financial a BES sister unit. JULY Shares continue to fall. patriarch José gymnastics” within the Finances of the BES reports record loss of Maria de Espírito family-led Espírito Santo whole group are €3.6 billion ($4.8 billion) for the Santo Silva group of companies thrown into doubt first half of 2014. Respected economist Vitor Bento named CEO and Chairman

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to the Portuguese financial system of the bank. It seemed best to separate and still on the brink of collapse. It is those roles. one of the most prominent banks for retail and commercial customers Your position was supposed to last only in Portugal. a few months. Are you still determined Before moving to Lloyds in London in to see it through? 2014, I spent 20 years at Santander Group, The sale did not succeed initially, and we the final five as COO and member of the all have had to accept that. As long as I board at Sovereign Bank, Santander’s can, I will continue to have this active retail unit in the northeast of the US, role in helping the bank continue on based in Boston. I took on that role the right track. To the very last minute, when the bank was also in a very difficult my focus will be on creating value for situation. We had to radically change the this bank. bank by cutting costs and headcount by more than 30 percent. Novo Banco is now undergoing a restructuring and a recapitalization EDUARDO STOCK DA CUNHA What attracted you to Lloyds? plan. What will the new bank look like? Lloyds is an amazing institution – a The way I think it should have looked Eduardo Stock da Cunha is retail bank in one of the largest financial a long time ago. This bank can only interim CEO and Chairman of Novo Banco in Lisbon, Portugal. markets in the world, with more than survive – and it will survive – if we He is on leave from his position 20 percent market share in personal keep our competitive advantages or as a Director at Lloyds Banking current accounts and almost 20 percent make them stronger. That means we Group in London. Previously share in small companies and business need to take care of families’ savings he was with financial group banking. When the opportunity arose at and lend money when they need it; Santander in Portugal and Lloyds, I jumped at it. we need to help Portuguese companies its US unit, Sovereign Bank. build exports and reach the appropriate NOVO BANCO What is your role now, at Novo Banco? international markets. Novo Banco was created in My job is to manage the bank and to We are a Portuguese bank, based in 2014 as part of the Portuguese preserve or to increase the value of Portugal, mainly working for Portuguese government-led effort to resolve the franchise. Given the failed sale and companies and households. That is where the collapse of former Banco other public challenges, it is not easy. our competitive strength lies, not in other Espírito Santo. Novo Banco But we are sure that the bank is on markets, where local competition may is the country’s third-largest the right track and will continue to have the advantage. Our strength is in bank by net assets and has regain value. community banking, US-style. almost 2 million clients. Its domestic network has some When I took the job, I had a 580 retail branches and around discussion with the folks at the Resolution But you have had some foreign bidders 6,000 employees. The group Fund – the sole shareholder of the for the company? serves households, Portuguese bank. We agreed that I was in charge, Ownership should and must be exporting companies and the

PHOTOGRAPHS: ZEFERINO SILVA / MARTIN SHIELDS, ALAMY STOCK PHOTO / MARIO PROENCA, BLOOMBERG, GETTY / NOVO BANCO GETTY NOVO BLOOMBERG, / PROENCA, MARIO / PHOTO ALAMY STOCK SHIELDS, MARTIN / SILVA ZEFERINO PHOTOGRAPHS: but that they would handle the sale independent. This is a local bank, in emigrant community.

MILESTONES ON THE ROAD TO RUIN – AND RECOVERY

AUGUST SEPTEMBER MAY 2015 Bank of Portugal Vitor Bento and Bank of Portugal discloses that more his team resign. starts proceedings losses at BES were Eduardo Stock against former BES hidden in deals with da Cunha is named executives, including Swiss group Eurofin interim CEO and Salgado, suspected Holdings. A $6.6 billion Chairman of Novo of “malicious bailout is unveiled Banco by Bank acts” and “ruinous and “good bank” of Portugal management” Novo Banco is born

brunswick review · issue 10 · spring 2016 77 this space and with these types of customers. may have influenced the bidders, two of whom As long as the new owners understand that were Chinese. and support our mission, it doesn’t matter as long as they comply with the criteria defined What are some of the other hurdles? by the authorities. The European Central Bank stress test was an important one, determining how much additional You have said before that the CEO and chairman capital was required for the bank. Bidders knew the roles should be separate, but you hold both at stress test results would be disclosed in November Novo Banco. Does this bother you? 2015, so it seemed best to wait for those results This is a “bridge bank” arrangement, designed to before continuing with the auction of the bank. The end with the sale of the business, so I’m not that “To the very restructuring plan demanded by EU authorities is concerned. A bridge bank is temporary by law, last minute, another factor. But those uncertainties have been even though it would be preferable to separate clarified now. the CEO and chairman roles. my focus will be on creating value How will you measure success at Novo Banco? The government’s handling of the collapse The first measure of success is that the bank of BES set a precedent in the European for this bank” survives and the second is that it remains a valuable banking system. Are there lessons to franchise. I really think we’ve achieved both of be learned? those. That’s not my victory, but a victory for It’s too soon to tell. It would be wise to wait until Portugal and its financial system, for the bank’s the situation with Novo Banco is resolved and then employees and its customers. calmly, after a lot of discussion, change whatever Third is profitability, which is taking longer needs to be changed. than expected. Success here depends on how we Probably one area that needs to be analyzed very implement the restructuring and the capital plan. carefully is whether there is any conflict of interest Over the long term, we need all three: survival between the central bank, acting as a regulator of the bank, protection of the franchise to ensure and supervisor, and the Resolution Fund, acting as its value, and implementing the restructuring and the lead shareholder, especially if you have people capital plan to make the business profitable. working at both the Bank of Portugal and at the Resolution Fund. You are at Novo Banco on professional leave But again, I think it is very early to judge how from Lloyds. Will it feel dull going back? things were handled. I would wait for this to be No. The important things you bring to resolved and then look at it again. work – seriousness about what you’re doing, acting responsibly with your colleagues, your The recent Portuguese elections have opened shareholders, your customers – those things are a new wave of criticism about the bank bailout. common to everything you do. Could that impact Novo Banco’s future? It has been said that investment banking is about Simply put, we don’t know. We Portuguese tend a few people. It’s like a military strike force: the level to punish ourselves by being very self-critical of organization is relatively small, but there is a lot and slow to acknowledge our achievements. of creativity and ingenuity. BES was one of the largest institutions in the By contrast, retail banking requires an army, with system, representing between 16 and 20 percent all the corresponding institutional standards, rules of retail and commercial banking in Portugal. and discipline. Yes, you also need creativity, but It collapsed. Imploded. Yet the banking system you need to apply it in a rigorous way that rewards continued to work normally. I wonder what would all your customers and, by consequence, your have happened in other countries in a similar employees and shareholders. situation? In this case, because of the authorities, That is just as true at Lloyds’ banking operations the employees, the customers, nothing calamitous as it is at Novo Banco. happened; no branches were closed. So we should really celebrate that. alexandra abreu loureiro is a Senior Adviser for Brunswick in the Portuguese-speaking world. It’s true, some events combined to make 2015 She previously served as spokesperson and media more difficult. The bank had more problems than adviser to the Portuguese government on defense initially thought. The Chinese stock market crisis and foreign affairs.

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BELIEVE IN UNICORNS, NOT THE HYPE The lure of a $1 billion-plus valuation can entice startups to overpromise – with disastrous consequences, say Brunswick’s amanda duckworth and eric savitz

in silicon valley, corporate capital poured in and estimates valued Stick to reality Trouble often begins communications has become an the company at $9 billion, largely on the with exaggerated narratives that have inadvertent accomplice in the maniacal promise of a revolutionary blood test that only a loose affiliation with the facts. Stay push to create unicorns. Not the single- only needed tiny amounts of blood. In optimistic, but keep stories anchored horned mythical beasts, but the northern October however, The Wall Street Journal in reality. Present a balanced picture of California variety: venture capital-financed published an article saying the company’s opportunity and risk, accompanied by startups with private market valuations of proprietary testing techniques were usable real-world examples of product or service over $1 billion. According to The Economist, in far fewer cases than its publicity implied. impact. If you face regulators, anticipate there are more than 140 such companies. US Food and Drug Administration their concerns and pre-empt them. They A backlash has emerged, dominated approval for some of the company’s can bring you to your knees if snubbed. by the widespread conviction that many practices was denied, further damaging Play fair Winning doesn’t mean everyone of them are wildly overvalued. Some its reputation and jeopardizing critical else has to lose. Smear campaigns can have overstated their products’ potential. partnerships with Walgreens and Safeway. damage a young company’s long-term Others have understated the risks they In December, Fortune’s Alan Murray wrote, reputation and make the battle for face, underestimated the competition, or “If Theranos is ever going to make it out of hearts and minds much harder to win. underprepared for regulatory oversight. the Unicorn forest, it needs to hold itself to Communications can be determined and All of these mistakes carry consequences. a different standard.” effective without stooping to mudslinging. Those unicorns able to complete IPOs Spectacular setbacks often involve Less is more The CEO doesn’t need to be have done so at levels well below their pre- questionable communications practices: everywhere. Show up at events with a listing valuation. And there are indications hyperbolic press releases; a carelessness specific purpose, not just to hobnob with that in their lust for a 10-digit valuation, with the facts; the desire to create rock the glitterati – or technorati. Companies startups are accepting investment terms stars out of young CEOs; scorched should show off a deep bench of executives favorable to venture capitalists at the earth take-downs of competitors; and and avoid positioning the CEO as an expense of employees and early investors. disregard or even disdain for regulators. irreplaceable superhero. Many startups have gone down this road While it makes sense to inspire key Relationships matter No one needs to with the right goals in mind, including audiences about innovation, too easily read piles of press releases – and no one the recruitment of critical talent and hope translates into hype. Here’s how toottosteininge will. Instead, connect with key reporters driving growth to build market share and stop that from happening: and analysts, answer tough questions create formidable barriers to entry. New and build trust. Not every article will be companies have to be decisive and show favorable, but you will get better coverage confidence in their products and future, in the long run. or no one will be interested. But when you Aspiring unicorns should resist overpromise and underdeliver, the result the fantasy world of hype and come r can be lost jobs, damaged careers, financial .com down to earth. Management wins pain and failed businesses. when it underpromises and overdelivers, The recent controversy around Theranos, and investors reward companies that a healthcare technology company, shows exceed expectations. just how much is at risk. Early in 2015, amanda duckworth is a Partner and Head investors were drooling at the prospect of of Brunswick’s San Francisco office where

ILLUSTRATION: OTTOILLUSTRATION: STEININGER an IPO by the California startup. Venture eric savitz is also a Partner.

brunswick review · issue 10 · spring 2016 79 OPUS FOCUS Composer george crumb’s scores suggest the mysteries within music, says Brunswick’s carlton wilkinson

the spell cast by George Crumb’s music often takes “I don’t have any artistic skills outside of musical hold long before the actual sound. It happens in the pages calligraphy,” says the 86-year-old Pulitzer Prize-winning of his scores themselves. Each is meticulously hand-drawn composer in a phone conversation from his home in by the composer, and sometimes he twists traditional Media, Pennsylvania. “I just think the music should look notation into a dance of symbols and shapes that help the way it sounds.” the performer interpret the piece. Like ancient runes or Western musical notation dates back more than 1,000 hieroglyphs, these expand the medium of music notation, years and is the basis of the classical tradition. It emerged animating the page and adding layers of meaning. as an aide-mémoire for singers in European monasteries

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“I don’t have any artistic skills they hear something in my music that is prehistoric,” he says, “evocative of nature outside of musical calligraphy. and of old-world things that don’t exist I just think the music should any more.” Crumb is known as much for his look the way it sounds” experimental sounds as his graphic scores. Footnotes explain the sometimes dizzying array of effects, such as singing into a cardboard tube, walking slowly offstage and, over the centuries, has been while performing, or playing glasses tuned GEORGE CRUMB constantly reinvented. Pitch, loudness, with water. These create a sense of ritual rhythm and articulation symbols are and theater. Born in 1929, George Crumb is a Grammy and Pulitzer Prize- relatively simple, yet communicate His audience includes many admirers winning composer. A native of complex musical ideas. Crumb’s graphic in and out of classical music circles. The West Virginia, he retired from scores add an emblematic dimension. late David Bowie wrote in 2003 that the University of Pennsylvania Professor Emeritus at the University of Crumb’s string quartet “Black Angels,” in 1997 after more than 30 years Pennsylvania, Crumb says that while most written in response to the Vietnam War, of teaching. composers now use computers to notate “scared the bejabbers out of me” when music, “I prefer to do it the slow, old- he first heard it in the mid-’70s. “It’s still piece, of all my graphic notation. It was so fashioned way. You have to be like a monk hard for me to hear this piece without a much work.” in a cell. You forget time exists.” sense of foreboding,” Bowie said. “Truly, at There is more to come. He is working Similarly, the sound of Crumb’s music times, it sounds like the devil’s own work.” on a “large-scale piano piece,” and while he seems to exist outside of time, drawing Crumb’s scores, drawn on oversized won’t share the details, it is bound to push in passages from historic scores. He sheets, can take weeks to complete. beyond the limits of both sound and page. finds inspiration in subjects that allude The resulting work speaks volumes. to memory and to experiences of time “Spiral Galaxy” (shown left) remains one carlton wilkinson is Deputy Editor of the on vast scales. “People have said that of his favorites. “I’m most proud of that Brunswick Review, based in New York.

Crumb’s scores are not just instructions to the performer. He says, “the music should look the way it sounds.” The musical elements fragment, alternate and repeat in the swirl of “Spiral Galaxy,” (left), from his book of piano solos, “Makrokosmos I” (1972)

In an instrumental interlude from “The River of Life: American Songbook I” (2003, right), percussionists play the center circle music as a loop, while other instruments play each “ray,”

SCORES COURTESY GEORGE CRUMB, C.F. PETERS C.F. CRUMB, GEORGE COURTESY SCORES separated by pauses

brunswick review · issue 10 · spring 2016 81 “I’m very proud to have trained on Savile Row. CUTTING ACROSS But the businesses there have changed over the years. Many are now THE SEXES more global luxury brands than traditional tailors, kathryn sargent, the first female Head Cutter whereas I’m just interested on Savile Row, interprets the language of business in the craft behind the trade. dress for Brunswick’s patrick handley I am a tailoring geek” “I was always drawn to men in suits”

“There’s a lot a suit can do for a person. A bespoke suit should be an extension of your personality” KATHRYN SARGENT

Kathryn Sargent’s career in bespoke “When you see tailoring began with an apprenticeship at Gieves & Hawkes on Savile Row in somebody who looks London. For centuries, men have been the confident, comfortable craftsmen making suits – for their male clients – and not many women have felt in their clothing, cut out to be tailors. But within 13 years, Sargent was promoted to be Gieves’ Head that reflects in the way Cutter, the first woman to hold that position they behave as well” in the country. In 2012 she left Savile Row to open her own atelier (above) in Brook Street, and now makes suits for both men “I don’t think people and women just a short walk from the realize just how much famous street where she learned her trade. what they wear patrick handley is a Partner in Brunswick’s London office and co-heads the firm’s Energy communicates about and Resources practice. Kathryn Sargent is his tailor. Her confidential notes on him them. Especially if they’re read, “Prot. S/blades, VBL”; tailor-speak for in the public eye” “protruding shoulder blades, very bow-legged.”

“Bespoke is not one suit fits all, it’s not one method fits all. It’s problem solving. Bespoke is a blank canvas. You’re not working with anything that pre-exists – it’s handmade completely from scratch. So you can do anything. It really is limitless”

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SAVILE ROW in central London was built in the 1730s, on land that had belonged to the 3rd Earl of Burlington. It was named in honor of the Earl’s wife, Lady Dorothy Savile. Tailors arrived on Savile Row in the early 19th century and theirs has remained the street’s defining trade ever since. Savile Row is world renowned for its bespoke tailoring. Bespoke garments are made on the premises from scratch and by hand. It takes approximately 50 hours to make one suit. Despite their name, “made- to-measure” suits are produced in a factory, and then altered in-store to fit the customer. Savile Row’s clientele has included many powerful and famous figures, from Lord Nelson to Ian Fleming, J.P. Morgan to Elton John and John F. Kennedy to Gregory Peck. The Beatles gave their final live performance on the rooftop of 3 Savile Row, above the offices of Apple, their record label. In their famous Abbey Road album cover, three of the four Beatles crossing the road are wearing Savile Row suits.

BRITISH BILL-DODGE Winston Churchill is pictured below inspecting English coastal defenses during World War II. The July 1940 morale-boosting trip to Hartlepool in north-east England came less than two months after his famous, “We shall fight on the beaches” speech. He is posing with a Thompson submachine gun and wearing a Savile Row suit made by Henry Poole & Co. The company recently discovered that Churchill had once refused to pay a bill of £197, equivalent to £12,000 ($17,000) today. They have not held a grudge; the “Winston Churchill grey chalk stripe” is still sold today.

Right: Winston Churchill in a Savile Row suit brunswick review · issue 10 · spring 2016 83 “There is a formula, for cutting a trouser, the waist-measure, seat-measure, outside leg, inside leg. You make a grid with a pencil and set square – it’s fractions, and you work on a scale. The scale of a trouser is half the seat, the scale of a jacket is half the chest, and you draft the pattern proportionately. Then you take into consideration the client’s shape: bow-legged, knob-kneed, high right hip, sloping shoulders…”

“I used to find really amazing tailored pieces in secondhand shops when I was a student. I would take them apart to see how they were made, then put them back together again. My tutors thought that was a bit mad. But how do you design something if you don’t know how it’s made?”

“I started as a trimmer at “There are rules for men: two-button, Gieves & Hawkes, the person who three-button, double-breasted, four-button puts in all the buttons, linings and cuff. You do this, you do that. You’ve canvases when the cutter has cut the job. got your trousers, you’ve got your buttons, When the suit comes to you, there you are. You’ve got a framework. you put in all of that, bundle it up Men have been wearing suits for hundreds and give it to the tailors. And of years and it has evolved. And suits you keep stock – it’s stock control” for women have evolved from menswear”

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“Traditionally, you were brought in by your father – he told you what tailor to go to. Now everybody searches the internet before they meet you. My youngest client is 18 and I have many in their 20s”

“Some men come in “A client tells me she gets and say, ‘I want to look like Bespoke career respect from male colleagues when she wears a bespoke suit. the king of the world. “Even though I didn’t really want to do womenswear, ‘Is that gray herringbone? Give me a suit that makes I started making things Where is your tailor? for myself. And I got a me look powerful. lot of pleasure from wearing Oh, London! Savile Row!’ What’s the boldest check garments that were It gets you automatic handmade. Clients would ask acceptance. She calls it you’ve got?’” me, ‘Where did you get your suit?’ And then, ‘There’s a her armor. She feels comfortable woman I work with because it fits her “A client said, ‘I don’t want who’s always trying to and it’s very sharp to look like I’m too much find something’ or, ‘Can I send my girlfriend?’ and it’s going to last her” in command. I want to be And I said, ‘Absolutely.’ approachable.’ I said, ‘Don’t do It started like that” stripes – and you need to be “Gieves & Hawkes more open, less buttoned-up. Think about having your suit has a masculine history, a bit looser rather than but I trained there. overly fitted, so you look more relaxed. And try pleating I have that experience your trouser – that way the cloth’s of tradition. I wanted to going to flow when you move. That will work’” put my stamp on that and for my atelier to be a very open and welcoming place” WHAT’S IN A NAME? ”When people talk about going to see their tailor, they’re not. They’re actually going to see their cutter. I am a cutter. I measure the client, advise them on style, cut the pattern and cut the “How much material. Then I send it to the trimmer and then it goes to my does all this cost? tailor. The tailor actually does the sewing. When the garments are basted together, I do the fittings and alterations. I’ll rip down My prices start at £4,220 the suit completely flat, remark it, and then it will go back to ($6,000) for a two-piece the tailor. When you walk down Savile Row, and look down into bespoke suit, and the basements, the people you see there are tailors. The cutter is client-facing. But when people ask me what I do, I say, £2,970 ($4,250) for a sports ‘I’m a tailor.’ Because if I say a cutter they don’t understand” coat or blazer ”

PHOTOGRAPHS: LUKE CARBY/ MJ KIM/ IWM, GETTY Left: “Derek,” Kathryn Sargent’s mascot

brunswick review · issue 10 · spring 2016 85 CRITICAL MOMENT snapshot of a communications turning point

december 17 1903 If it had been 57 minutes, then it might Wilbur Wright watches as his brother Orville have been a news item.” The Wrights becomes the first person to fly a self-powered aircraft in this photograph, taken on the beach 0n a brisk, windy morning, with his discovered what many have since learned: at Kitty Hawk, North Carolina brother Wilbur running alongside, Orville delivering a great scoop doesn’t always Wright took off in a homemade aircraft lead to a great story – or any story, for us to consider what matters more: an and flew for 12 seconds. Later that day, that matter. achievement, or whether it is noticed? Wilbur himself remained airborne for Other papers showed similar The temptation is to conclude that the nearly a minute. Men had flown before, indifference, or in some cases, outright newspapers simply missed a gift-wrapped but never in a plane that powered itself skepticism. Scientific American would story. More than a century later, the press’s and could be controlled mid-air. publish an article titled “The Wright negligence remains cringeworthy. But For such a transformational moment, Aeroplane and Its Fabled Performances.” the Wrights certainly could have helped it was all remarkably casual. The Wrights For more than four years after their themselves by making a little more effort had decided who would fly first with the first flight, the Wrights remained largely to engage with journalists. flip of a coin. Only five men were there to unknown. This was partly by choice. There is no doubting the Wrights’ see it. One of them, who had never even Both Orville and Wilbur enjoyed working genius – Orville once built a printing seen a camera before, took the photo. on the aircraft more than promoting it. press using a tombstone and buggy parts. Orville sent a telegram to their father, It was not until 1908, after agreeing to a But they failed to understand that even announcing their success and adding, series of public demonstrations, that their the most blatantly important stories are almost as an afterthought, “inform Press.” achievements were finally acknowledged incapable of telling themselves. The editor of the Dayton Daily Journal, and celebrated worldwide. with whom the news was first shared, That the Wrights could go edward stephens is Associate Editor CONGRESS OF LIBRARY DANIELS, T. JOHN PHOTOGRAPH: responded: “Fifty-seven seconds, hey? unrecognized for so many years forces of the Brunswick Review, based in New York.

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