Come On, Let's Cut to the Chase
from November/December 2006
What information do you need to do your job as a director? How do you make sure you're getting it?
Is the strategic plan working? How about financial performance? Give us a detailed- but not too detailed- report. Minutiae make the eyes glaze over.
I think the most important information for directors to have is a solid understanding of the industry in which the company operates and the company’s place in the industry. So if I had to boil it down to one key piece of information, it’s a lot of benchmarking data on relative performance, which you then have to examine carefully. While it’s natural to look at areas where the company is underperforming its peers, it’s equally important to understand where it is outperforming and why it is outperforming, and whether it’s because the company is doing something unsustainable or inappropriate. If you look at some of the corporate scandals or meltdowns, that was the case—the company was outperforming its peers dramatically because it was doing something unsustainable.
Trevor Fetter, 46
President, CEO, and Director, Tenet Healthcare Corp., Dallas
Timely, reliable financial reporting, internally as well as externally. That’s the information all directors need in order to make decisions. They say accounting is the language of business, so you have to speak it.
Richard Rampell, 54
CEO, Rampell & Rampell PA, Palm Beach, Florida
RailAmerica Inc.
I need financial information, economic information, real estate information. I also like to look at the personal capital—the people—and that takes time, in terms of not just dealing with the CEO and CFO. We as a board made a decision a year and a half ago to get unfiltered feedback from people beyond the top two or three. What is the leasing manager experiencing? What’s happening in a particular region? We want their unfiltered reactions. So we have one-on-ones with them to try to get a flavor of what they’re about and what’s happening.
James S. Cassell, 50
President, Capitalink LC, Miami
Equity One
What’s needed is measurement against plan. The board needs to know whether or not the strategic plan is being accomplished, and to the extent it’s not, they need to examine why not. And if it means you’ve got to do some adjusting to your strategic plan, fine, you can do that. If it means you’ve got to get busy at different efforts to try to accomplish the plan, so be it. But you’ve got to know whether or not you’re succeeding.
Gerald W. Hepp, 69
President, Gnosis Praxis Ltd., Novi, Michigan
MIVA Inc.
Short term, a director needs an accurate, timely, and detailed—not too detailed—financial description of the company’s performance. Long term, a statement of the business strategy, including marketing timing, technology development, financial management, operational processes, and approach to its international business.
Robert J. Potter, 73
CEO, R.J. Potter Co., Irving, Texas
Cree Inc., Molex Inc., Zebra Technologies
I need to know what’s going on inside the company. I go to various management meetings so that I know what people are thinking. We also have a hotline that lets employees call in to the board so we have an idea of what’s going on. You can get more info from that than you get out of a whole day of board meetings.
John W. Higbee, 63
Consultant, Charlotte, North Carolina
Rent-Way
What information are you getting that's useless?
Please, spare us the avalanche of irrelevant details.
Minutes and housekeeping matters take up too much time.
Gerard E. Puorro, 59
President and CEO, Candela Corp., Wayland, Massachusetts
Sontra Medical
Overly detailed PowerPoint presentations that are really for management and not the board. There’s a level of detail that’s actually disruptive for the board to get involved with. I like things short. If you can’t tell me about it in one page, you probably don’t know enough about it.
James T. Brady, 66
Managing Director, Ballantrae International, Franklin, New Hampshire
Aether Holdings, Constellation Energy Group, McCormick & Co., T. Rowe Price Group
The most useless information is information that is too tactical. The board is more interested in strategic issues than in specific tactics, and sometimes you can get too deep into that level of minutiae. You can see it on people’s faces. They’re thinking, “Why are we spending an hour on this topic?” When that happens, we say, “This is something we could spend, say, 10 minutes on, rather than an hour, if we want to spend any time on it at all. And maybe it could just be given to us as a written document.” However, our tendency is not to embarrass people, and a lot of times the people being brought in to make these presentations are led to believe we want to hear this, and I just think it would be rude to, without some prior guidance, say this is something we’re not interested in. So the first time we usually say, “Thank you very much, it was a very interesting presentation,” and then when we have our independent directors’ meeting we’ll discuss whether we want to hear more of this or see it in a different form.
Harold S. Haller, 68
President, Harold S. Haller & Co., Cleveland
U-Store-It Trust
Useless information is generally measured in pounds and reams of paper. I have often seen management provide boards with simply too much information that is not filtered down to key metrics with insightful analysis. I generally ignore data without insights on which decisions can be made and which actions taken.
Harry J. Harczak Jr., 50
Executive Vice President, CDW Corp., Vernon Hills, Illinois
US Cellular
I don’t know that it’s completely useless, but it’s one of the problems we see with setting compensation. That is, the foundation for evaluating compensation for executives is to do a survey of competitive firms’ proxy statements and see what people are paid. A fellow director said this best, calling it the socialization of executive compensation. What we should be focused on instead is value creation. Few of the compensation studies and research you see talk about the true value over the long term that someone is creating.
John M. Sabin, 51
CFO, Phoenix Health Systems, Montgomery Village, Maryland
Competitive Technologies Inc., Hersha Hospitality Trust,
North American Scientific,
Prime Group Realty Trust
