Editor: Welcome back, Steve. Please start our discussion with a description of your role as it relates to NACD’s educational mission.
Walker: It’s important to know that NACD’s 15,000 members include directors from nearly every type of business entity ranging from startups to the top of the Fortune 500. Most of my time is spent counseling board and C-Suite leaders on issues ranging from board dynamics to board composition and succession planning. I then work to develop solutions for their leadership that are primarily aimed at creating a “Strategic Asset Board.” My substantive participation stems from this work as well as from my experience working with boards since 1994. I also speak at events nationwide on the subject of emerging issues and challenges facing today’s boards, both now and in the future.
Editor: How do NACD’s initiatives tie into the goals of your members?
Walker: It’s both good news and a self-fulfilling prophesy that by virtue of joining NCAD our members have demonstrated a desire to be thought leaders and exemplary directors in the area of proactive and strategic governance. NACD prepares members and their boards to be strategic assets to all stakeholders.
First and foremost, exemplary directorship requires a fundamental change in the traditional process of board selection. The essential question no longer is “who do you know,” which means that today’s boards should never be composed simply of friends of existing directors or senior management. Rather, in our ever-changing world of technological innovation, and competitive disruption that can render a company obsolete virtually overnight, the better question is “what skills do we need to remain competitive and relevant.”
Board members occupy precious real estate in the business world; therefore, effective board composition must seek a unique, collective skill set that adds value in providing feedback, oversight, guidance and mentoring. This means, for example, that great directors can offer a fresh perspective and operational experience, or perhaps complementary insights around areas like IT and risk, which can add to the dialog and the business experience of the management team. Companies with an international footprint may look for directors who have lived in key countries and, therefore, have practical, boots-on-the-ground experience with the culture, politics, geopolitical issues and regulatory framework.
Editor: It sounds like NACD is educating members to think more creatively about board composition.
Walker: Well, that’s exactly the point. Creating a strategic asset board requires that the components fit strategically into place. On the practical side, our advisory service assists boards in developing a skill-set matrix, which is defined by board leaders and senior management. Essentially a spreadsheet, the matrix provides an integrated picture of desired skills, such as expertise in M&A integration, finance or cyber risk, or perhaps leadership experience as a former CEO. Then each director’s level of expertise is ranked on a scale of zero to ten, through either a self-assessment or a confidential peer evaluation. The idea is to challenge members to consider not only what they have, but also what will provide real value in both the short and long term.
We’ve seen management teams give wonderful feedback to boards while also reporting a need for change based on updated business plans and a new reality that, for instance, may require cutting-edge digital or ecommerce experience. We have found that giving management teams a voice in board evaluation will lead to very productive discussions as to their needs and strategy.
Another example of creative thinking involves recognizing the need to transition away from legacy boards. One NACD member – a one-hundred-year-old business – had executed on a strategy of acquisition rather than growing the core business organically. Over time, they had acquired a number of complementary yet very different businesses. Composed mostly of local community members, the legacy board was no longer aligned to provide strategic guidance and leadership to the more dynamic enterprise. So we are helping this client deal constructively with expanded operations and the resulting need to transition from their legacy board to a more strategic asset board.
Editor: How does Directorship 2020 support NACD’s educational mission?
Walker: In recognizing that boards often lack the internal resources required to optimize board composition, NACD offers custom consultative and educational services that integrate our Directorship 2020 initiatives into the programming. The goal is not to make directors substantive experts on emerging issues like cybersecurity and IT risk, but rather to equip them to ask the right questions and offer constructive tension and pushback to the management team. We want to empower boards and management teams to understand what should be their separate roles and responsibilities, and then make great choices that help them succeed in a highly competitive world.
We work with board members to maximize their participation on committees so that full board meetings can be dedicated to strategic issues, including the complete and efficient use of each director’s unique skills.
NACD offers a large number of public and custom in boardroom programs all year. Our Director Professionalism® program is designed for newer and aspiring directors who need basic training about roles and the responsibilities and, really, how to operate effectively in the boardroom. We have observed that the vast majority of directors, even those at the highest levels, have never received basic training on how to perform effectively as a director.
I’m not talking about an orientation to the company or skills derived from prior senior management experience, but about specific training on the role of a director, including the extent to which you should ask questions and how to become engaged and provide value. Do you have to be quiet for six months? No you don’t.
Even for highly functioning directors, this program offers a welcome tune-up and a great reality check, for instance, about effective teamwork or ensuring best performance in nuanced areas, such as fiduciary duties, strategy and risk oversight.
Our Master Class® program is geared toward seasoned, public company directors who want to engage in forward-thinking discussions with their peers and hear from global experts on cutting-edge governance issues. Strategy is different today than it was ten years ago, and directors need the resources to stay nimble, avoid obsolescence and remain competitive. In fact, in addition to coverage in our Master Class program, NACD’s new Blue Ribbon Commission report, being finalized as we speak, covers this topic.
Editor: Let’s talk about the custom programs available in the Directorship 2020 initiative.
Walker: Our custom programs are developed through research into the company’s unique structure and dynamics as well as the relevant industry and competitive landscape. We may be looking at a legacy board trying to renew itself or a relatively new public company board that’s really trying to understand how it can be a strategic asset. We assemble a team of seasoned faculty members who are familiar with the industry and can speak from a “been there done that” perspective. This is peer mentoring at its best.
As just one example, I recently spoke with a company that created a strategic alliance with another organization. They have asked NACD to help them integrate the two boards and create economies of scale so that they can become more competitive.
Editor: Is the faculty comprised of NACD members? How does this create value?
Walker: Yes. NACD has over 40 faculty members and subject-matter experts who have a passion for excellence in governance. They are accomplished business people and serving board members. I take great joy in matching these resources with our custom programming to provide expertise that many companies otherwise could not afford. NACD’s members believe in our 501(c)(3) mission to create exemplary boards, which enables us to leverage high-quality talent at a nonprofit rate.
Editor: What’s on deck for the Directorship 2020 program?
Walker: Our educational curriculum is based on guidance from our renowned research team, Blue Ribbon Commissions, advisory councils, Directorship 2020 roundtables and over 15,000 members with whom we meet regularly to discuss emerging issues. Currently, we are looking at seven key disruptive forces, meaning those that transform how people live, how companies do business, how countries govern and ultimately how boards must lead. The first is geopolitics, then competition, technology, environment, economic, innovation, and demographics.
Speaking of demographics, one of our major themes, and the subject of a recent Blue Ribbon Commission report, is board diversity. We know that U.S. demographics are not reflected in our boards. While most agree that tokenism is not the answer, NACD encourages boards to search for candidates with the right skill sets and, from that qualified pool, select diverse candidates who provide valuable and unique perspectives. We’ve seen improvement but remain focused on getting those assets into the boardroom and placed at the highest levels.
More generally, our programs will address issues pertaining to all the disrupters I mentioned. We covered competition, diversity and technology to some degree in this discussion, and NACD will bring in additional experts to discuss global economic factors and market forces, risk assessments as growth opportunities shift to emerging economies and areas plagued by instability, to name just a few.
Editor: What programs should corporate counsel know about?
Walker: From counsel’s perspective, I recommend a new program entitled “An Insiders Guide to The Boardroom,” which is designed for lawyers interested to understand the psyche of board members, particularly as it relates to roles and responsibilities, plus the key issues that keep board members up at night. We just held a full-day program in Chicago, attended by thirty-two general counsel from around the country, to discuss these issues and much more.
Our current agendas focus more on strategic discussion than operational overview. Specifically, how can general counsel become a stronger asset to the board, and how can they seek and obtain outside expertise that will enable their boards to ask critical questions and avoid asymmetric information risk?
Asymmetric information exists when the board is over-reliant on the CEO and the senior management team as its primary source of information. We encourage directors to mitigate that risk through routine access, often through committee work, to other senior executives from key departments, certainly legal but also IT, finance, compliance and internal audit. Access to broader information from outside the company, and this consistent interface, will help in avoiding those big issues we read about in the newspaper.
Editor: Let’s close with a message to readers who may not be members of NACD.
Walker: Our membership has grown dramatically since 1977, which reflects the ever-increasing spotlight on the boardroom as a result of major developments, such as Enron, Sarbanes-Oxley, Dodd-Frank and the economic recession. Put simply, regulators, stakeholders and shareholders are paying more attention.
Our members hold themselves to a higher standard and embrace the goal of addressing today’s challenges and becoming strategic assets. NACD membership provides the benefit of daily, real-time information on leading-edge issues that affect the boardroom, as well as educational resources and proprietary research that leverages the knowledge and experience of over 15,000 directors from every industry and organization type. This collaboration with our membership keeps us constantly focused on what’s ahead and how to stay competitive. Everything we do is by directors and for directors, and we encourage MCC’s readers to be a part of our mission to be the voice of directors.
Published September 22, 2014.
