Board Structure: One Size Does Not Fit All

Corporate Board Member just finished hosting its Director Peer Exchange in Washington, D.C., and we came back with some great experiences. After five years of holding peer exchanges in NYC just for committee chairs, this was the first time we held a peer exchange open to all board members who sit on committees, and it proved to be just as beneficial to the committee members as it has been to the chairs. In addition, a new feature at this event was a session for chief executives to discuss CEO/board relations. I facilitated that discussion, and can assure you we had plenty to talk about, starting with everyone’s feelings about the various legislative proposals to mandate the splitting of the CEO and chairman roles. (See my two earlier blogs on this issue: Will Mandating an Outside Chairman Solve Anything? and Mandating Split CEO/Chairman Roles – Part II) 

Actually, most of our time was spent discussing the CEO’s relationship with the chairman or lead director, and during the discussion summary period, probably the most telling thing was that everyone in the room agreed that this relationship was unique to each company, and therefore, didn’t fit into any “cookie-cutter” solution or best practice mandate.

For example, we discussed founders who initially served as CEO/chairs who later moved to just chair but still remained very active. There were other situations where the existing CEO requested that the previous CEO sit on the board even though he or she had retired. We also discussed family situations, where the family members still owned a majority of the stock and one or several members still served on the board. We even heard about an entrepreneur who, after holding the various executive chairs, finally had to move his office out of the headquarters to emphatically demonstrate that he had officially handed the reins over to the CEO. We heard about difficult cases where retired CEOs were disruptive to the board governance process when they still occupied a board seat after officially leaving the company, as well as positive stories where those subsequent relationships were very productive.

I went into the peer discussions with the strong feeling that some legislation will be enacted regarding the CEO/chairman roles and contemplating how really onerous it would be if the role split was actually mandated. During the course of the morning, I must say that my eyes were opened wider.

The more I take the time to step back and really look at the ramifications of the proposed bills by Congressmen Schumer, Frank, and Dodd, the more frustrated I become that the governance and boardroom changes that are being proposed are not strategic, but are, unfortunately, simply political. What is particularly sad about that is we have seen signs of a much different and improved governance tone in the boardroom today. A majority of corporate directors are engaged and we have some previous regulatory and legislative changes to thank for that. The fear is that some of the proposed legislative changes will swing the pendulum too far. I understand that this is on the heels of a terrible financial debacle that happened right under the noses of some of our most visible companies and their boards, but it won’t help the country to recover if we create a corporate board system where the best candidates won’t want to serve and tomorrow’s new public companies won’t want to list in the U.S.

Memo to Schumer, Frank, Dodd and Schapiro: A one-size-fits-all governance solution may create more problems than it solves. We all believe some change is in order...so let’s make sure it addresses the true problems with our system and isn’t just a way to appease the angry mob for the moment.