Our March 15 program featured a lively and interactive presentation by Professor Michael Useem, the William and Jacalyn Egan Professor of Management and the Director of the Center for Leadership and Change Management at the Wharton School of the University of Pennsylvania.
Soundbites from the evening:
Professor Useem distinguished the Board’s fiduciary role from the act of leadership, explaining that Boards should behave as leaders in three ways: take charge, partner or stay out of the way. He walked through the scenario in which, via an act of leadership by the Apple Board—the rehiring of Steve Jobs in 1996—that company was resuscitated from certain failure to stunning success.
Professor Useem observed that Boards have improved in presiding over fiduciary duties and delivering total shareholder return (TSR), and that, increasingly, Boards have become leaders and partners over the last 15 years. He explained that Boards should “take charge” on matters such as CEO selection, the Board’s own composition and method of operating, and ethics & integrity; should “partner” in areas such as strategy, financial goals and risk appetite; and should “stay out of the way” when it comes to execution, operations and non-strategic decision-making.
What are the traits that make a director a leader? Professor Useem outlined—and with audience suggestions expanded—the Leader’s Checklist of the mission critical capacities to be looked for in the boardroom and predicted that more Boards will move to individual Director evaluations over the next ten years as they seek members who act as leaders.
Professor Useem also touched on the power of institutional investors, highlighting the shift from largely fixed to more than 80% variable compensation for executives over the past thirty years, to achieve greater correlation with TSR. He also pointed out that, contrary to the claims of critics such as ISS, companies with staggered boards actually perform better than boards elected annually.
Among the many actionable ideas that were developed in the course of the program were:
• strategies for becoming a Board leader, how the Board can function as a team of leaders;
• the optimum range for the size of a Board;
• how the interview process can be used to discern whether a candidate would bring leadership and team capacities into the boardroom.
Attendees received personally autographed copies of Boards That Lead - When to Take Charge, When to Partner, and When to Stay Out of the Way, authored by Professor Useem, Ram Charan and Dennis Carey, generously donated by our sponsor, KPMG.