My Day at Director School
from
Summer 2001
by Ann Reilly Dowd
Outside it’s one of those early spring days in the nation’s capital that make you feel like kicking your shoes off. The sun sparkles on the Potomac, and the air is fragrant with the light scent of cherry blossoms in full bloom. But I’m inside a small windowless conference room at the National Association of Corporate Directors (NACD), rubbing shoulders with a dozen CEOs and senior corporate execs who’ve gathered behind closed doors to learn the ways of a very different ecosystem. Welcome to rookie director school—a corporate board version of Survivor.
My fellow students have come from companies up and down the East Coast, some private, most public, ranging in size from EDGE Software Services, a Virginia-based company with $14 million in sales, to Hartford’s Fleet National Bank, a subsidiary of FleetBoston Financial, which has assets of $179 billion. What they share is a desire to survive and prosper in an unfamiliar and rarefied environment. “When you go on a board, there are no clear job descriptions,” says Daniel Gerrity, the former CEO and a director of Coinstar, a 10-year-old company that owns and operates coin-counting machines. “There are just a bunch of very successful guys—at least in our case they are all guys—often without a clue as to what a board should do.”
Today is all about getting a clue. The large mahogany table around which we’ve gathered is stacked with thick green briefing books, stuffed with useful information on the roles, responsibilities, and liabilities of directors. “Good cheat sheets,” quips my classmate, Fleet vice president Frank Maguda. We also get nifty NACD studies on such arcane but potentially career-threatening issues as audit committees and executive compensation. Warns NACD executive director Roger Raber: “Board members are a group with significant liability but very little information or education. The rules are changing all the time, and you have to keep up.” Groans another director: “That’s what my lawyers tell me.” Heads shake knowingly in agreement.
Liability is one reason that everyone at this table is riveted to the silver-haired Raber, a veteran director and corporate governance expert who, armed with his PowerPoint presentation, outlines the roles and responsibilities of board members. Numbers one, two, and three: Enhance shareholder value. But that’s not all, he instructs us. Boards must also “select and evaluate top management, ensure management succession, and engage constructively in setting corporate strategy.” Then Raber reminds the class what boards should never do: Micromanage. Says the professor emphatically: “Remember NIFO: Noses In, Fingers Out.”
Suddenly, the day has whizzed by, with only a 10-minute break for sandwiches on paper plates tucked between stacks of papers and coffee cups on the boardroom table. We’ve discussed audit committees (no place for a financial neophyte); executive compensation (get paid in stock to share investors’ pain and gain); nominating committees (the next big corporate governance focus); poison pills (avoid “dead-hand” ones); options repricing (put it to a shareholder vote); corporate governance committees (if you don’t have one, you should); mergers (why directors have less responsibility in stock deals than in cash deals); how to evaluate CEO and board performance without causing a mutiny (wrap it up in a strategic policy review); and more.
“It was great,” raves Barbara Buice-Watson, vice chairman of the board of Alabama-based Three Springs Inc., a company that helps troubled teens. “I learned a lot about best practices. And tomorrow I’m going to follow up with our corporate counsel on the limitations on our stock-option plans.” Echoes Fleet’s Maguda, who as a portfolio manager in the bank’s trust department sits on the boards of many small companies: “I learned a lot about my biggest concern: individual and corporate liability.”
But what did I learn in director school? This board business is a lot more complex than you might think. It takes more than a platinum résumé. It takes integrity, hard work, and cash. NACD members pay $795 a session; nonmembers, $1,395. A day like this also calls for Olympian endurance. Some of the meetings are brain-numbing.
Now my classmates are rushing off to catch trains and planes to make more such meetings tomorrow and the next day. Not me. I’m headed down to the river to catch some rays and get a whiff of the cherry blossoms.
