The Three Most Critical Issues for Board Directors
Story By: Christina Catalano
Leaders Featured in this Article
Being a board director can be one of the most gratifying and satisfying roles within a corporate. The opportunity to work with a robust group of people, to create new ideas, and direct a company into prosperity is priceless.
CURRENTLY IN 2018, Latino participation has progressed and has become mandatory. The influence of Latinos in economy and market is obvious, and that means Boards should reflect what is apparent. Representation, in all spectrums, is vital to keeping a company constantly innovating. Company identity and culture is also at the forefront. Principals, values, characteristics, or what we like to call the DNA, is integral.
According to John Miller, the CEO of Denny’s, that is exactly what they do at Denny’s, “We start every single meeting, we end every meeting, we end every conference with strong principles – we literally open and close every meeting with one of our guiding principles as an organization.”
When it comes to tackling challenges, keeping a stable culture with transparent principles and a full and clear identity may be the make-or-break factor.
CEO SUCCESSION
MANY TIMES, companies look to the CEO, but ensuring that there is a CEO succession strategy in place is a problem for many companies. Considered one of the most important decisions for a Board, CEO succession is a highly-critical process with three levels: CEO Selection, CEO Succession, and CEO Retention.
In Jamie Montemayor’s view, it is important to have a strategy in place. “Having a solid strategy for the future is extremely important because if that is clear, it is much easier to identify the right set of candidates to consider for that job, down the road.” As a group, board directors work to establish the direction a corporation should take. The DNA of a company comes into
play heavily when it comes time to initiate the search for the next CEO.
To Grace Lieblein, the proper system in place for a successful CEO succession is a top priority of the company because it sets the tone for the future. “One of the first steps for the Board is to define what are the most critical characteristics for the future CEO. It’s important to note that the Board should be looking at the direction that the company is going in the future, vs. where they are today, and what characteristics will be important ahead. One other step is to regularly discuss CEO succession. If a Board waits too long to prepare, it may be too late to do an
effective job.”
Antonio Garza agrees that preparation is key and also believes that having the CEO be a part of the process is a key part of effective board succession. “Ideally, the CEO should be part of this effort and committed to identifying and supporting a successor. Of course, boards also need
to recognize that there may be times when identifying and moving on a successor will be dictated by unanticipated events and will need to be done quickly.”
Not having a succession plan could be a devastating mistake. CEO succession needs to be a priority for Directors. From selection to retention, analyzing this process and the strategy, should constantly be on a Directors’ agenda.
RISK MANAGEMENT
Risk Management is another challenge Boards face today, and while accountability starts in the C-suite, boards definitely have oversight of this function. If Directors do not ask insightful question, they may be setting the company up for failure. According to Marcela Donadio, “it is our responsibility to make sure that the appropriate questions are asked, and that those
are focused on the unanticipated—the things that catch people and companies off guard. And yet, these are not the same for all companies—it is not a one size fits all. You have to understand the company and the environment in which it operates.” Once the board has a foundation on which to build, the accountability structure expands through the company. Further, accountability is essential when setting up for success. “This is an area where ‘Tone at the Top’ and corporate culture are critical. Risk management has got to be a company-wide effort which allows for the efficient flow of information from various parts of the company to senior management, relevant internal committees and full board.” Antonio Garza states.
However, even when the issue of risk management seems to be solved, a board must be careful not to over-manage. Tom Falk, the CEO of Kimberly-Clark, believes that there has to be risk management combined with balance and constructive feedback. “Every board member knows that there’s a line between oversight and management. I’ve always had a board that knew where that line was; they were always excellent, constructive, and always try to help me instead of just telling me what to do.”
The combination of risk management along with communication is a fundamental element of successful boards.
BOARD EFFECTIVENESS
Measuring how efficient is a board can be calculated in multiple ways. Solely making profit is a thing of the past, and people, community, and culture are the future.
According to Gerry Lopez, there has to be more to a company than simply profit, “boards need to be much more attentive and sensitive; we include the employees, the customers, depending on your industry, it may or may not include the government- in order to deliver value to the shareholders, you have to deliver value to the customers and stakeholders.”
To Grace Lieblien, board member of American Tower, the way to be most effective for all stakeholders is to have an open board. Listening is an essential characteristic that Boards should adopt; listening to other Directors, listening to the CEO, listening to employees, listening to customers, and so forth.
“I think another best practice is keeping Board presentations succinct so there is ample time for questions and discussions. How a Board uses the Committee structure is also important to ensure topics are covered in appropriate detail.”
Moreover, with an open board, there must also be a clearly-defined strategy. Ralph De La Vega says, “I think boards in general have become much more involved in strategy. That’s been a top issue for board members over the years. Helping the management team and providing the oversight and overview has never been more important due to the accelerated rate of technological change, marketplace changes, customer behavior and preferences, and disrupted business models coming into play.”
Another matter that comes into play when it comes to developing an effective Board is the diversity of talent. U.S. Senator Robert Menendez says, “Culturally competent boards will ultimately be positioned to tap into the marketplace of the future. The biggest challenge I see to make the leap into the corporate board of the future is the current pipeline. The fact that women and people of color are under-represented on boards and executive teams today, tells me that the bench is spread thin for the future.” When the diversity of the board is not there or essentially non-existent, so is the ability for a company to be working at its highest potential.
This need for diversity does not only stop at the boardroom itself, but to a company’s customers. Sol Trujillo understands the importance of a board looking at its market because “you have to know your customers; you have to relate to your customers. Now if you look at most companies that are domesticcentric, the single largest group of sales growth is being driven by the US Latino cohort.”
THE FUTURE OF THE C-SUITE
ALL OF THESE leaders bring important points to the table about the current state of boards, but they also bring in solutions that have been applied to Boards they currently serve. Directors are the chief conductors of companies. If Boards want to create an effective ecosystem that serves beneficial for the leadership, employees and customers, it must all begin in the boardroom.
Leaders and Directors, in this case, come from all different backgrounds and industry, they all share a very important characteristic – the ambition and courage to bring change and drive companies onto a new degree of progress and innovation.