Friends of Bill Make It to the Boardroom
from
March/April 2002
by Shawn Zeller
Veterans of the Clinton administration are finding new berths as company directors. That has pushed the number of former Washington heavy hitters on Fortune 1000 boards to more than 600, a 50% increase in just 10 years.
Let us count the ways corporate America loves this crowd. They’re used to big, controversial issues; their pockets bulge with any number of unredeemed political IOUs; their PDAs are crammed with the names and home phone numbers of those who control the purse strings on Capitol Hill and in Tokyo, Westminster, Bonn . . .
Each administration seems to turn out potential directors who are ready to barter all this for the fat compensation packages offered by the private sector. Clinton’s people are seen as particularly blessed with foreign experience, which tops the list of boardroom skills that many companies are after, says John Nash, founder of the National Association of Corporate Directors in Washington, D.C. “These folks can open a lot of doors on the international scene,” he explains. “In a lot of foreign countries, knowing the government is the only way to get business. The governments run the businesses.”
The Friend of Bill who’s done the best for himself as a director is William S. Cohen, the former Republican senator from Maine who served as Clinton’s defense secretary. According to William M. Mercer Inc., a New York City consulting firm, he makes more than $800,000 a year from four directorships.
Although Cohen says he’s turned down invitations to join twice as many boards, the four directorships he holds may be pushing it. A rule of thumb is that three boards are all most people can handle. “Directors with a government background may have real expertise,” says James Heard, head of shareholder watchdog Proxy Monitor Inc., “but it doesn’t serve shareholder interests if they’re on five or six boards.”
The folks who signed Cohen clearly think that they’ll get enough attention. Vincent A. Wasik, chairman of United Shipping &Technology Inc., which named Cohen to its board in November, says the attraction was his “knowledge, experience, and network.” Henry Silverman, CEO of Cendant Corp., where Cohen became a director in January 2001, expects him to help the travel and real estate services company expand internationally.
Other CEOs also have high hopes for their new hires. Bill Greehey, chairman and chief executive of Valero Energy Corp., a Texas oil-refining outfit, says that former energy secretary and ambassador to the UN Bill Richardson was elected to Valero’s board “because we conduct business internationally and are impacted by world market conditions. Richardson’s global experience will be particularly beneficial.” Greehey adds that the company’s relationship with its new director began in the early 1980s, when, as a congressman from New Mexico, Richardson was a member of the House Energy and Commerce subcommittee that oversaw the fossil-fuel industry. He too sits on four boards.
Greehey will get no argument from former ambassador Charlene Barshefsky, Clinton’s trade representative and a director at three companies. “I’m someone with experience with governments around theworld,” she says. “And companies with a large multinational presence are advantaged by board members with knowledge of the commercial and political environments abroad.”
Still, Barshefsky says she expects it could take Washington alums several months to get up to speed on what exactly boards do. “This is all new to me,” she says, raising the inevitable question of whether former federal officials pull their weight in comparison with their more experienced corporate colleagues.
Eric Vautour, a Washington-based partner at the executive search firm Russell Reynolds Associates, says that companies understand this learning curve and allow for it. “We do at least 50 to 60 of these searches a year, and the companies are very specific,” he says. “They want a former high-level public official with experience in defense or health care or trade or some other specific area.” That experience, he adds, can often outweigh any deficiency in corporate-management skills that a new director might have.
What government insiders already know is immensely valuable, says MaryAnn Gilleece, a Washington lawyer who serves on the board of Firearm Training Systems in Swanee, Georgia. “You’re always going to have the federal government affect you,” she says. “It could be corporate taxes, or federal employment law, or products that you make vis-à-vis safetyrequirements. If you have a board with only corporate people, they can’t help you. Washington is a foreign world for them.”
Something Charlene Barshefsky didn’t mention is that Washington veterans like her also help corporate America increase gender diversity at the board level (for more on women directors, see below). Barshefsky’s directorships, along with the three held by Clinton’shealth and human services secretary Donna E. Shalala, are good examples of the “premium placed these days on adding diversity to corporate boards,” says Patrick McGurn, vice president of the Maryland proxy advisory firm Institutional Shareholder Services. Other cases in point: Clinton labor secretary Lynn Martin has five directorships, which ties her with Laura D’Andrea Tyson, who headed Clinton’s White House Council of Economic Advisers. The champ may be Ann McLaughlin, a labor secretary in the Reagan administration. She sits on nine boards, including those of Microsoft and American Airlines’ parent, AMR Corp.
Not everyone has found a board to join. Clinton’s secretary of state Madeleine Albright was without a directorship in December, although McGurn, among others, thinks she’ll soon acquire one. Other boardless veterans include former interior secretary Bruce Babbitt, who may be perceived as too friendly to environmentalists. Former treasury secretary Lawrence Summers is now president of Harvard University, and may not have time. Housing and urban development secretary Andrew Cuomois still wondering whether to run for governor of New York. Former attorney general Janet Reno has announced her statehouse candidacy—inFlorida, which may put her up against first brother Jeb Bush.
Clinton himself remains boardless. Does he have anything in the offing? Requests to his office for information went unanswered.
Who Went Where–And For How Much
| Director | Number Of Boards |
Companies
|
Total Compensation |
|
William S. Cohen, 61
Secretary of Defense, 1997-2001 |
4
|
Cendant
Global Crossing IDT United Shipping & Technology |
$134,833
$538,956 $194,490 $17,842 |
|
|
|||
|
Bill Richardson, 54
Secretary of Energy, 1998-2001 |
4
|
City National Corp.
Diamond Offshore Drilling Peregrine Systems Valero Energy |
$103,077
$50,400 $247,128 $103,762 |
|
|
|||
|
Charlene Barshefsky, 51
United States Trade Representative, 1996-2001 |
3
|
American Express
Estée Lauder Starwood Hotels & Resorts Worldwide |
$184,280
$123,011 $131,304 |
|
|
|||
|
Donna E. Shalala, 61
Secretary of Health and Human Services, 1993-2001 |
3
|
Gannett
Lennar UnitedHealth Group |
$70,000
$47,142 $398,744 |
|
|
|||
|
Alexis M. Herman, 54
Secretary of Labor, 1997-2001 |
2
|
Cummins Engine
Presidential Life |
$89,000
$27,000 |
|
|
|||
|
Rodney E. Slater, 47
Secretary of Transportation, 1997-2001 |
1
|
Kansas City Southern Industries
|
$74,007
|
|
|
|||
|
Richard C. Holbrooke, 60
U.S. Ambassador to the United Nations, 1998-2001 |
1
|
Human Genome Sciences
|
$485,363
|
|
|
|||
|
William M. Daley, 53
Secretary of Commerce, 1997-2000 |
1
|
Electronic Data Systems
|
$236,114
|
|
|
|||
|
Richard W. Riley, 69
Secretary of Education, 1993-2001 |
1
|
Sylvan Learning Systems
|
$58,065
|
