How Oracle's Board Stays On Top Of IT
from
May/June 2006
by Charles Burck
Aboard’s
biggest challenge in signing off on a good IT system is getting the
information it needs to make the right decisions, says Jeff Henley, 60,
chairman of Oracle Corp. The software company’s former CFO, he moved to
his new job in 2004 at the behest of company co-founder Larry Ellison,
61, who remains CEO. Henley spoke with
Corporate Board Member
’s Charles Burck. Excerpts:
Should a board have a tech committee?
I don’t know if it’s necessary. We don’t have one. The audit committee
provides regular monitoring. I’m not strongly against an IT committee
if it makes the board feel more comfortable. But IT people, accounting
and finance staff, and auditors all have their own points of view. If
you’re getting all three points of view, you don’t have to be an expert
in IT systems to get a good sense of where things stand and what may
need to be improved.
Is it important for a company like
Oracle to have strong technological representation on the board?
With the exception of Hector Garcia-Molina, who’s a professor of
computer science and electrical engineering at Stanford, none of our
directors are technical people. I think the board is comfortable that
management has the technical capability to make the right decisions.
Many of our board members have been with Oracle a long time, and even
though they’re not technical, they’ve learned an awful lot about the
company, its products, and our competitors. Certainly they don’t
develop the strategy, but they’re very good at critiquing it and asking
pointed questions. There’s always a strategy-review component at
meetings, and we do an offsite once a year for a couple of days where
we explain where we’re going and what the strategy is. We’ve become a
lot more acquisitive in the last couple of years, and several directors
have played a very active role in the whole acquisition process—for
example, spending a lot of time with our bankers looking at valuations.
So I’d say our board does a good job with acquisitions and the strategy.
How can board members use technology to increase their productivity and acumen as directors?
All my board members have laptops, and many go out on the Web and
Google or Yahoo, and do a lot of other things. We make available to
them a tremendous amount of what we have inside the company. They have
access to all the financial data that management gets, and all our
marketing research studies.
I don’t say that directors
have
to use their computers to get information; some of ours still prefer to
read financial reports in hard copy. But you can get more
leverage—you’ll know a lot more—if you take advantage of the technology.
What should board members know about their company’s IT capabilities and needs?
IT systems are a fundamental part of your infrastructure, and directors
should be concerned about how robust and solid the systems are. Do they
really allow the company to be efficient? Are they unified, with
standard sets of processes for all divisions and countries? The more
robust and unified your IT systems are, the more efficient you’ll be
and the better information and controls you’ll have.
How can boards stay up to speed on all this?
In our own case, we have a presentation at least once a year from our
IT management, where we cover basic systems and changes that are
planned. We spend a lot of time on security and controls. But it’s the
audit committee that typically gets more deeply into the systems and
talks face-to-face with the IT people. We give the committee members
detailed presentations, and they inform the board in their reports. Our
auditors also evaluate what’s going on with IT systems and include
their findings in their regular reports and presentations. We’ve had
the auditors do several special studies too. Like everyone, we’ve spent
a lot of meeting time on Sarbanes-Oxley, with presentations from
accounting and from a lot of the IT people, because they had a whole
series of documentations they had to do, and out of that arose a lot of
issues we really hadn’t thought through.
You say it’s important to unify your IT system, but many companies haven’t done that. What’s holding them back?
Until the mid-’90s, there were a lot of technical and cost challenges.
At Oracle we didn’t start consolidating until the late ’90s, when
databases started to get more scalable and phone costs in Europe and
Asia became more reasonable. Also, we were very entrepreneurial, and
there were cultural barriers to consolidating. The technical and cost
issues have gone away, but the big issue today is cultural. A lot of
companies have allowed decentralization; they want their divisions or
countries to be autonomous. When you do that, there’s not a lot of
cooperation—the different factions of the company don’t really care
about having a single system.
Why wouldn’t the autonomous units still want to be able to share information and, so to speak, a common language?
You’d be surprised. To use a single system, you have to set up the data
the same, you have to have a common process, and everybody has to
accept a lot of changes. But everybody says, “We’re different.” It
takes very forceful top management to say, “That’s ridiculous. We’re
going to make this work.” You can’t underestimate the power of cultural
pushback. This is an area where boards can push a bit too, and insist
on a single global system.
In your experience, are board members reasonably IT-literate these days?
It’s hard to say. Most, obviously, do a lot electronically that they
didn’t used to, but in terms of enterprise systems and accounting
systems, I don’t know if directors are that much more literate than
they used to be, unless they’ve had jobs in corporations where they’ve
used these systems. The main thing is that they need to intellectually
understand that these things are valuable and ask questions about them.
Did Sarbanes-Oxley force more IT consciousness and proficiency on boards?
Absolutely. We were always pretty good at talking about it, but there’s
no question that we get down to a lower level of detail because of
Sarbanes-Oxley.
