The Search for a Go-to Guy
from
November/December 2002
by Lisa Ferri
As the SEC investigated Computer Associates International’s accounting practices earlier this year, the company made moves to improve corporate governance. It appointed one of America’s finest business minds, Harvard professor Jay W. Lorsch, as a director, then turned to him for advice. Just what, exactly, did the company need to do to reinvigorate its board?
Lorsch’s solution was simple. What the company had to find, he said, “was a go-to guy.”
That is, said Lorsch, it needed a lead director.
Lewis Ranieri, former vice chairman of Salomon Brothers, now fills that role at Computer Associates. And his board is hardly alone in acknowledging the importance of bringing in a go-to guy. The number of boards that employ outside lead directors when the chairman is also the CEO has risen to 32% from the 27% reported by Korn/Ferry International in 1996.Among them: Campbell Soup, Delphi, E*Trade, Home Depot, Raytheon, and Safeco.
Typically, a lead director presides over meetings of the independent directors and speaks informally with them between sessions, ensuring open communication within this group. Frequent contact with outside directors puts the lead director in a good position to make sure that the chairman’s agenda includes all the issues on directors’ minds. Serving as sounding boards and intermediaries, these go-to guys have proved valuable at many companies, including General Motors, where the trend started in 1992.
That year, during a corporate crisis, GM director John Smale, the retired CEO of Procter & Gamble, led a boardroom rebellion against General Motors’ CEO and chairman, Robert Stempel. The board ousted Stempel and put in a governance guideline that called for the hiring of a lead director whenever insiders held both the CEO and chairman posts. Smalebecame GM’s first lead director and helped the company regain its footing.
Yet some troubled businesses, like Tyco International, have brought in lead directors with fanfare but remained in free fall. “Not all lead directors are created equal,” says John Anzur, a partner at the San Francisco office of the law firm Gray Cary Ware & Freidenrich.“ Just because you bestow a title on one of the directors doesn’t mean that you’ve fixed the problem.”
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A related worry is that lead directors may suddenly be hired as a knee-jerk reaction to recent corporate scandals. “One of the problems we’re facing in the wake of Enron is that everyone’s looking for a panacea,” says Gayle Mattson, managing director at Korn/Ferry International. Though most lead directors take on key administrative chores, including oversight of board self-evaluations and recruitment of new directors, ensuring independence on the board is not simple.“ Accountability and personal responsibility in the boardroom is anattitude, not a set of tasks to be checked off,” says Rick Bennett, chief activism officer at Lens Investment Management, a Washington,D.C.-based shareholder watchdog group.
At Delphi Automotive Systems, John Opie, retired vice chairman of GE, is the new lead director, replacing Thomas Wyman, who had held the jobsince 1988. Gayle Mattson cites Opie and Wyman as excellent examples of people with the “right personality” for a lead-directorship. She applauds their ability to elicit boardroom debate, read body language,and keep their own roles in perspective. “They check their egos at the boardroom door,” she says, “and then listen—truly listen—to what is being said and, perhaps more importantly, to what is not being said.” Mattson believes that the right disposition in a lead director trumps even institutional knowledge of the company. Company details can be learned; demeanor cannot. “The lead director has to understand that he is not the boss of the board,” says Lorsch.
Anzur warns that individuals who are willing to do the heavy lifting in the boardroom without demanding all the glory may not be easy to find, but adds that they are what boards need. “The lead director has to let the CEO and management team take credit,” he says. “Because ultimately they’re the ones driving the bus.”
