A View from Two Worlds
Antonio Carrillo, CEO of Arcosa Inc., newly elected Director of NRG Energy and former Director at Trinity Industries and Dr. Pepper-Snapple Group.
In your experience, what are the main factors for a CEO, like you, to have a 100% effective Board of Directors?
I think the most important condition for having an effective board is to have alignment between management and the board on the strategy of the company. If that alignment exists, the board will be able to evaluate how decisions made by management align with the strategy and measure progress. Another important factor is that the board needs to have a respectful environment where every Director can speak their mind openly and at the same time listen to the other Directors' opinions.
What is the benefit of having more diverse and inclusive Boards?
Diverse boards should bring different points of view on every topic. So, discussions become richer in terms of content and ways to approach different problems. Part of the Board's responsibilities is to oversee risk management in a company. A diverse board will be able to approach risk factors from different points of view and, therefore, be able to evaluate risk better.
In your experience, what elements are necessary to have the perfect marriage of a Board and the CEO?
Transparency and trust are the key factors in a relationship between management and the board. Another important factor is that there should be clarity of the responsibility of management and the board. Finally, communication plays a key factor, making sure the board is informed of important topics and there are no surprises.
What is the most effective way to create a healthy interdependence?
I believe the separation of Chairman and CEO to be a best practice. If there is no separation then the figure of a Lead Director becomes very important. The Chairman or the Lead Director play a crucial role in coordinating the relationship between management and the Board.
What needs to be done to make Boards more effective for the CEO’s, but also for Customers and Employees of the Corporation?
There is a trend that has gained momentum in which large investors are pushing for ESG to be a key part of a company’s strategy. The milestone of an ESG strategy is to do a Materiality Study that looks at the impact the company has on the different stakeholders (customers, employees, communities, etc.) and the impact those environmental factors have on the company. With that Materiality Study, Management should integrate what is material for the company into the strategy. By using this approach, Boards make sure they are taking a broader view of the impact of the company. I tend to agree that a strong investor focus complemented with ESG should be part of the strategy of the company, but there are other views out there and companies and Boards approach the subject differently.
What would be a “Dream Board” for you as CEO? What capacities, what kind of support, what kind of relationships?
The Board should reflect on the capabilities needed to support the strategic direction of the company. It should have a diverse group of individuals with strong reputations and proven capabilities to support the strategy and serve on the different committees. At the same time companies go through difficult times and the Board should have individuals who can deal with those situations. On the relationship side, Board members should feel comfortable giving their thoughts and listening to others always in a very respectful environment.