Boardroom Realities E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 697

Veröffentlichungsjahr: 2009

Beschreibung

Praise for Boardroom Realities "Authored by a 'who's who' roster of governance experts, Boardroom Realities covers the latest trends in board leadership and performance as well as talent management for the board and the C-suite--all critical topics for any director serious about board service today." --Kenneth Daly, president and CEO, National Association of Corporate Directors "If leadership and effectiveness in the boardroom were important in a more benign environment, they're absolutely vital in today's tumultuous times. Boardroom Realities provides a modern and detailed road map to help steer chairmen, CEOs, and boards through these uncharted governance waters." --Peter Weinberg, partner, Perella Weinberg Partners "Jay Conger's Boardroom Realities offers a unique perspective on governance through leadership, rather than compliance, and should compel all directors to revisit the focus of board deliberations, especially at this time of unprecedented economic and financial turmoil." --Alison A. Winter, cofounder, WomenCorporateDirectors, and a corporate director for Nordstrom, Inc. "Boardroom Realities is a very comprehensive compilation of useful insights on key issues that boards must deal with every day. It's an excellent resource for board members as well as members of management who must work together to ensure good governance on behalf of shareholders." --Ronald D. Sugar, chairman of the board and CEO, Northrop Grumman Corporation "Jay Conger has collected critical insights and the latest thinking on board leadership from many of today's foremost governance thinkers. Boardroom Realities is a must for your board and for any comprehensive corporate governance library." --Ralph D. Ward, publisher, Boardroom INSIDER, and author, The New Boardroom Leaders

Leseprobe

Table of Contents

The Kravis Leadership Institute

The Kravis-de Roulet Leadership Conferences

Title Page

Copyright Page

Dedication

About the Authors

Introduction

The Organization of This Book

A Note of Appreciation

Part I - Leadership in Your Boardroom

Chapter 1 - Leadership: The Key to Effective Boards

The Importance of Board Leadership

The Nature of Boards

Leadership in Ordinary and Extraordinary Circumstances

Examples of Boardroom Leadership in Crisis

Attributes of Effective Board Leadership

Chapter 2 - Why Your Board Needs a Non-Executive Chair

The Board’s Historic Leader: The Chief Executive Officer

The Non-Executive Chair

The Lead or Presiding Director

Leadership in the Board Committees

Conclusion

Chapter 3 - The Joint CEO/Chairperson Leadership Issue in Sharp Relief

Agency Theory, Independence of the Board, and Board Duality

Why a Separate Leadership Structure Should be Embraced

Why a Separate Leadership Structure Should Be Abandoned

CEO Succession and the Dual Leadership Structure

Conclusion

Chapter 4 - First Among Equals: Leading Your Fellow Directors as a Board Chair

The Duties of the Board Chair

Understanding the Process of Leadership on the Board

Four Key Roles for the Board Chair

Managing the Status Dilemma: A Tightrope Walk

Managing Role Tension: The Cop and the Adviser

Sustaining Cohesion in the Face of Management: The United Front

Managing Role Ambiguity at the Board Level: Critical Clarity

The Sources of Authority for the Boardroom Chair

Concluding Thoughts

Part II - Talent Management Practices for Your Board

Chapter 5 - Appraising Your Board’s Performance

Why Conduct Appraisals

Conclusion

Chapter 6 - Getting the Right Directors on Your Board

“Check the Box” Governance and Corporate Performance: Is There a Relationship?

Selecting Director Competencies and Leadership Capability

Assessing Director Competencies and Leadership

Conclusion

Selected Excerpts of Effective Position Descriptions

Chapter 7 - Women Directors in the Boardroom: Adding Value, Making a Difference

Your Boardroom Needs Diversity: The Compelling Case

Women in the Boardroom Today: Progress Has Gone Flat

Finding Women Directors: Where and Who

What Your Board Can Do—Best Practices for Boards

Advice to Women—Building a Career Path to the Boardroom

Arrival in the Boardroom—Performance in the Director’s Role

Conclusion

Chapter 8 - Your Board’s Crucial Role in Aligning CEO Pay and Performance

The Board’s Vital Perspective—and Five Principles

Conclusion: The Burning Questions

Part III - CEO Succession: The Challenges and Opportunities Facing Your Board

Chapter 9 - Managing the CEO’s Succession: The Challenge Facing Your Board

The Challenges of CEO Succession

Managing the Succession Process

The Role of the Board of Directors in CEO Succession

Chapter 10 - Beyond Best Practices: Revisiting the Board’s Role in CEO Succession

Exploring the Three Dimensions of Succession

Revisiting the Best Practices

Summary

Chapter 11 - Ending the CEO Succession Crisis

Part IV - Improving Your Board’s Performance and Impact

Chapter 12 - How Your Board Can Leverage Team Practices for Better Performance

The Teamwork Context

The Teamwork Practices: From Information to Insight to Informed Action

Reflections and Conclusion

Bibliography

Chapter 13 - What Your Board Needs to Know: Early Warning Signs That Provide ...

Unnecessary Complexity

Speeding Out of Control

The Distracted CEO

Excessive Hype

A Question of Character

Chapter 14 - Globalizing the Company Board: Lessons from China’s Lenovo

Governance Decisions

Five Conceptions of Decision Making in Corporate Governance

Ownership and Governance in China

Research Method

Globalization of Lenovo’s Sales, Manufacturing, and Ownership

Globalization of Lenovo’s Board of Directors

Partnering with Management

Impersonal Market Versus the Visible Hand

Implications for Executives and Directors

Conclusion

Part V - Conclusion

Chapter 15 - Conventional Wisdom, Conventional Mythology, and the True ...

Conventional Wisdom

Board Independence

CEO and Chair Role Split, and Lead Director

Equity Involvement

CEO Pay and Dismissal for Underperformance

Multiple Board Memberships

The Presence of a Past CEO

Regular Meeting Attendance

Board Member Skills

Board Member Age

Upping the Ante for Directors

The Character of the Board

Independence in Character Over Independence in Structure

Quality Over Brand

Shareholder Interests Over Self-Interests

Norms in the Boardroom

The Need for Evaluation

Conclusion

Notes

Index

The Kravis Leadership Institute

The Kravis Leadership Institute plays an active role in the development of young leaders via educational programs, research and scholarship, and the development of technologies for enhancing leadership potential.

The Kravis-de Roulet Leadership Conferences

The Kravis-de Roulet Leadership conferences, which began in 1990, are annual leadership conferences funded jointly by an endowment from Henry R. Kravis and the de Roulet family. This perpetual funding, along with additional support from the Kravis Leadership Institute and Claremont McKenna College, enables us to attract the finest leadership scholars and practitioners as conference presenters and participants.

Copyright © 2009 by John Wiley & Sons, Inc. All rights reserved.

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Library of Congress Cataloging-in-Publication DataBoardroom realities: building leaders across your board / Jay A. Conger, editor. p. cm.—(The Jossey-Bass business & management series) Includes bibliographical references and index.

eISBN : 978-0-470-44260-9

1. Directors of corporations. 2. Chief executive officers. I. Conger, Jay Alden. HD2745.B5954 2009 658.4’22—dc22 2008051602

The Jossey-Bass Business & Management Series

To my grandfather, John Jay Hopkins

About the Authors

Jay A. Conger holds the Henry Kravis Research Chair Professorship of Leadership at Claremont McKenna College. He is one of the world’s experts on leadership. You’ll see him quoted in the Wall Street Journal analyzing people and trends in the executive suite and in the boardroom. In recognition of his extensive work with companies, BusinessWeek named him “number five” on its list of the world’s top ten management educators. The Financial Times described him as one of the “World’s Top Educators,” and BusinessWeek called him the best business school professor to teach leadership to executives.

Author of over ninety articles and book chapters and thirteen books, he researches leadership, organizational change, boards of directors, and the training and development of leaders and managers. His articles have appeared in the Harvard Business Review, Organizational Dynamics, Business & Strategy, Leadership Quarterly, The Academy of Management Review, and The Journal of Organizational Behavior. His most recent books include The Practice of Leadership (2006), Growing Your Company’s Leaders: How Organizations Use Succession Management for Competitive Advantage (2003), Shared Leadership (2002), Corporate Boards: New Strategies for Adding Value at the Top (2001), The Leader’s Change Handbook (1999), Building Leaders (1999), and Winning ’Em Over: A New Model for Management in the Age of Persuasion (1998). His book Charismatic Leadership in Organizations (1998) received the Choice book award. One of his earlier books, Learning to Lead, has been described by Fortune magazine as “the source” for understanding leadership development.

He has taught at the Harvard Business School, INSEAD (France), the London Business School, McGill University, and the University of Southern California. He received the highest teacher ratings in USC’s first-year M.B.A. program. While at the Harvard Business School, he was ranked by first-year M.B.A. students in the top 10 percent of the school’s faculty. He is also the recipient of teaching awards from the London Business School and McGill University. He has been awarded by the Center for Creative Leadership their prestigious H. Smith Richardson Fellowship for his research on leadership.

Outside of his work with universities, he consults with a worldwide list of private corporations and nonprofit organizations. His insights have been featured in BusinessWeek, The Economist, The Financial Times, Forbes, Fortune, The Los Angeles Times, The New York Times, The San Francisco Chronicle, Training, The Wall Street Journal, and Working Woman.

Joseph L. Bower, Baker Foundation Professor of Business Administration, has been a leader in general management at Harvard Business School for more than forty-five years. The faculty chair of “The Corporate Leader,” until this year he served as the founding faculty chair of “The General Manager Program,” both in Executive Education. An expert on corporate strategy, organization, and leadership, he has devoted much of his teaching and research to challenges confronting corporate leaders in today’s rapidly changing, hypercompetitive global markets. Presently he is focusing on corporate value added—the contribution that corporate groups make to their operating divisions, as well as on the management of CEO succession. Bower is the author or coauthor of more than a dozen books. The newest, The CEO Within: Why Inside-Outsiders Are the Key to Succession Planning, was published in November 2007 by Harvard Business School Press. His previous book, From Resource Allocation to Strategy (with Clark Gilbert), was published in 2005 by Oxford University Press, and won the Best Book in 2006 award from Strategy and Management. His latest article is “Solve the Succession Crisis by Growing Inside-Outside Leaders,” Harvard Business Review, November 2007. Others include “How Managers’ Everyday Decisions Create—or Destroy—Your Company’s Strategy” (with Clark Gilbert), Harvard Business Review, February 2007, “Not All M&As Are Alike—and That Matters,” “Lead from the Center: How to Manage Divisions Dynamically,” and the award-winning “Disruptive Change: When Trying Harder Is Part of the Problem,” all published in the Harvard Business Review.

Bower is a member of several corporate boards and is a life trustee of the New England Conservatory of Music.

Dr. Ram Charan has captured his business insights in numerous books and articles. In the past five years, Dr. Charan’s books have sold more than two million copies. These include the best-seller Execution: The Discipline of Getting Things Done and Confronting Reality, both coauthored with Larry Bossidy, What the CEO Wants You to Know, Boards at Work, Every Business Is a Growth Business, Profitable Growth, and Boards That Deliver. A frequent contributor to Fortune, Dr. Charan has written two cover stories, “Why CEOs Fail” and “Why Companies Fail.” His other articles have appeared in the Financial Times, Harvard Business Review, Director’s Monthly, and Strategy and Business.

Dr. Charan has served on the Blue Ribbon Commission on Corporate Governance and was elected a Distinguished Fellow of the National Academy of Human Resources. He is on the board of Austin Industries and Tyco Electronics.

He earned M.B.A. and doctorate degrees from Harvard Business School, where he graduated with high distinction and was a Baker Scholar. After receiving his doctorate degree, he served on the Harvard Business School faculty.

Catherine M. Dalton holds the David H. Jacobs Chair of Strategic Management in the Kelley School of Business, Indiana University. She also serves as editor of Business Horizons, as research director of the Institute for Corporate Governance, and as a fellow in the Randall L. Tobias Center for Leadership Excellence. She received her Ph.D. degree in Strategic Management from the Kelley School of Business, Indiana University. Professor Dalton’s research, focusing largely on corporate governance and strategic leadership, has appeared in the Academy of Management Journal, Academy of Management Review, Academy of Management Executive, Strategic Management Journal, Entrepreneurship Theory & Practice, Journal of Business Venturing, Journal of Management, and California Management Review. She is a member of the Indiana University Alliance of Distinguished and Titled Professors.

Dan R. Dalton is the founding director of the Institute for Corporate Governance, dean emeritus, and the Harold A. Poling Chair of Strategic Management in the Kelley School of Business, Indiana University. Formerly with General Telephone & Electronics (GT&E), he received his Ph.D. degree from the University of California, Irvine. A fellow of the Academy of Management, Professor Dalton is widely published, with over three hundred articles in corporate governance, business strategy, law, and ethics. In addition, his work has been frequently featured in the business and financial press, including The Wall Street Journal, BusinessWeek, Fortune, The Economist, The Financial Times, The Boston Globe, The Chicago Tribune, The Los Angeles Times, The Washington Post, and The New York Times. Recognized by BusinessWeek as a “Governance Guru,” Professor Dalton regularly addresses public, corporate, and industry groups on corporate governance issues. He is also a fellow of the Tobias Center for Leadership Excellence and a member of the Indiana University Alliance of Distinguished and Titled Professors.

Sydney Finkelstein is the Steven Roth Professor of Management at the Tuck School at Dartmouth College, where he teaches courses on leadership and strategy. He has taught executive education at the Tuck School (where he serves as faculty director of the flagship Tuck Executive Program) and has consulted to companies around the world. He holds degrees from Concordia University and the London School of Economics, as well as a Ph.D. degree from Columbia University in strategic management. He currently serves on the editorial review boards of the Administrative Science Quarterly and Strategic Organization. Professor Finkelstein has published eleven books and over sixty articles, including the number one best-seller in the United States and Japan, Why Smart Executives Fail (http:www.whysmartexecutivesfail.com). The Wall Street Journal called it “a marvel—a jargon-free business book based on serious research that offers genuine insights with clarity and sometimes even wit . . . It should be required reading not just for executives but for investors as well.” His new book, titled Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You, will be published by Harvard Business School Press in 2009.

Edward E. Lawler III is Distinguished Professor of Business and director of the Center for Effective Organizations in the Marshall School of Business at the University of Southern California. He joined USC in 1978 and, during 1979, founded and became director of the University’s Center for Effective Organizations. He has consulted with over one hundred organizations on employee involvement, organizational change, and compensation and has been honored as a top contributor to the fields of organizational development, organizational behavior, corporate governance, and human resource management. The author of over 350 articles and forty-three books, he has had articles appear in leading academic journals as well as Fortune, Harvard Business Review, and leading newspapers including USA Today and The Financial Times. His most recent books include Rewarding Excellence (2000), Corporate Boards: New Strategies for Adding Value at the Top (2001), Organizing for High Performance (2001), Treat People Right (2003), Human Resources Business Process Outsourcing (2004), Achieving Strategic Excellence: An Assessment of Human Resource Organizations (2006), Built to Change (2006), America at Work (2006), The New American Workplace (2006), and Talent: Making People Your Competitive Advantage (2008). For more information, visit http://www.edwardlawler.com.

Chosen as one of Canada’s “Top 40 Under 40,”™ Dr. Richard Leblanc is an award-winning teacher and researcher, consultant, professor, lawyer, and specialist on boards of directors.

He has conducted over two hundred director interviews and has observed and assisted dozens of boards in action. He has served as an expert witness for underperforming boards, advised government regulators, and been an external adviser to boards that have won national awards and peer endorsement from institutional shareholders for their corporate governance practices.

Professor Leblanc’s detailed advice helped shape the governance guidelines that are mandated for all Canadian companies. His empirical findings also have been of interest to boards of directors, shareholders, the media, professional advisers to boards, and industry associations. His Ph.D. degree was adjudicated as the winner of the Best Dissertation Award by the Administrative Sciences Association of Canada, and his book, coauthored with Professor James Gillies, is titled Inside the Boardroom: How Boards Really Work and the Coming Revolution in Corporate Governance, published by John Wiley & Sons.

Professor Leblanc has assessed the effectiveness of boards of directors; audit, compensation, nominating, and governance committees; chairs of boards; chairs of board committees; and CEOs; along with offering recommendations for improvement.

He may be reached by e-mail at [email protected].

Neng Liang is professor of management, associate dean, and director of the Executive M.B.A. Program at China Europe International Business School, and is a standing committee member of Shanghai Pudong Chinese People’s Political Consultative Conference. Previously he was professor of management at Loyola College of Maryland and professor of management at the China Centre for Economic Research (CCER), Beijing University. He is the author of Corporate Governance: American Experience and Chinese Practices (Beijing: People’s University Press, 2000). His articles have appeared in Academy of Management Learning and Education, Journal of International Business Studies, The European Journal of Marketing, The International Executive, The Journal of Development Studies, Chief Executive China, and elsewhere. He has served as a consultant to multinational firms including General Electric, Johnson & Johnson, and PepsiCo; as a vice president of the Chinese Economists Society (CES); and as chairman of the Baltimore-Xiamen Sister City Committee of the Municipal Government of Baltimore, United States. From 1998 to 2001, he served as the Chinese director of the Beijing International M.B.A. program at Peking University.

Jay W. Lorsch is the Louis Kirstein Professor of Human Relations at the Harvard Business School. He is an internationally recognized expert on corporate boards of directors and the author of two pathbreaking books about corporate boards: Back to the Drawing Board: Designing Boards for a Complex World (with Colin B. Carter, 2003) and Pawns or Potentates: The Reality of America’s Corporate Boards (with Elizabeth MacIver, 1989). He has also served on the boards of many public companies in both the United States and Europe. He was elected to the American Academy of Arts & Sciences on the basis of his work on corporate governance.

Mark B. Nadler is a partner at Oliver Wyman—Delta Organization & Leadership. He works with both public and private equity portfolio companies on improving leadership effectiveness at the board, CEO, and senior team levels. His clients include a broad range of Fortune 500 companies in health care, financial services, manufacturing, and consumer products, with a special emphasis on media and entertainment. Before joining Delta in 1995, Mark spent twenty-two years as a journalist and held senior management positions at newspapers including The Wall Street Journal and The Chicago Sun-Times, where he was vice president and executive editor. He has authored and contributed to numerous publications on topics involving leadership effectiveness and organization change, and was coeditor of Building Better Boards: A Blueprint for Effective Governance, published in 2006 by Jossey-Bass.

Katharina Pick is a visiting assistant professor at the Peter F. Drucker and Masatoshi Ito Graduate School of Management. Her research examines the internal group dynamics of corporate boards of directors, with a particular focus on the psychology of board membership, speaking-up behavior, and board process in decision making and conflict resolution. For her dissertation, Around the Boardroom Table: Interactional Aspects of Governance, she observed boardroom dynamics firsthand and conducted a qualitative analysis of group process. She is also the author of several case studies on boards of directors. Professor Pick’s other research interests include gender and leadership, role negotiation and social identity in high-status groups, and the diffusion of deviant organizational behavior. She received a Ph.D. degree in organizational behavior from Harvard University.

Roger W. Raber is senior adviser and former CEO and president of the National Association of Corporate Directors (NACD). Founded in 1977, NACD has ten thousand members and is the only nonprofit professional organization devoted exclusively to providing information, research, and education for corporate directors and boards. Dr. Raber has served on corporate boards and audit committees in the financial services industry. He also has served as a private college trustee and has chaired a public school district. Dr. Raber was appointed by the U.S. Secretary of Commerce to serve on the Board of Overseers of the Malcolm Baldrige Award Program. He speaks frequently to national and international groups, including the American Red Cross, Japanese Management Association, and the World Bank Group. He has been influential in shaping the founding of new governance institutes in a variety of regions, including Asia, Central Europe, and Latin America. Prior to his appointment to NACD in 1999, Dr. Raber was director of member services for America’s Community Bankers (ACB) in Washington, D.C., and president of the ACB’s Center for Financial Studies in Connecticut.

Sarah Smith Orr is the owner and principal in a management and planning consulting firm, Smith Orr & Associates, specializing in the nonprofit sector. She is also an adjunct professor at the Peter F. Drucker and Masatoshi Ito Graduate School of Management at Claremont Graduate University (CGU), teaching leadership and governance in the nonprofit sector. She is currently serving as the interim executive director of the Kravis Leadership Institute. She and colleague Ron Riggio, director of the Kravis Leadership Institute, coedited and published Improving Leadership in Nonprofit Organizations (Jossey-Bass, 2003), a text that includes chapters she authored or coauthored, one titled “Soul-Based Leadership” and the other “Transformational Leadership.” Sarah is a certified trainer and a member of the Advisory Board for the Achieving Styles Institute. Due to her deep interest in the role of leaders and a commitment to support the advancement of women, she has been involved in the founding and startup of Leadership California, a statewide educational program for women leaders in California (founding executive director), Leadership Berks County, and Leadership Pasadena. She currently serves on the board of the National Women’s Hall of Fame and as a founding member of the National Advisory Forum for The Women’s Museum, an Institute for the Future. Sarah holds an executive M.B.A. from Claremont Graduate University and is currently completing her Ph.D. in Education at the same institution. Her dissertation research topic is “Older Women Making Meaning in Their Lives.”

Jeffrey A. Sonnenfeld is the author of six leadership books, including the widely acclaimed The Hero’s Farewell, along with hundreds of scholarly articles. Frequently cited in the media, he is the senior associate dean for executive programs at Yale University’s School of Management, where he is the Lester Crown Professor of Management Practice as well as the founder and president of the Yale Chief Executive Leadership Institute. His A.B., M.B.A, and doctorate degrees are from Harvard University, where he was also a business professor for ten years. His consulting experience and public speaking are focused on CEO leadership, board governance, and leadership development. Sonnenfeld’s commentaries on corporate leadership appear regularly in the media, with frequent appearances in The New York Times, The Wall Street Journal, BusinessWeek, Forbes, Fortune, the Associated Press, and Bloomberg, and on TV programs on CNBC, FoxNews, CNN, PBS, MSNBC, NBC, CBS, and ABC.

Michael Useem is William and Jacalyn Egan Professor of Management and director of the Center for Leadership and Change Management at the Wharton School, University of Pennsylvania. He has completed studies of corporate organization, ownership, governance, restructuring, and leadership. He is the author of several books, including The Go Point: When It’s Time to Decide (Random House, 2006); The Leadership Moment: Nine True Stories of Triumph and Disaster and Their Lessons for Us All (Random House, 1998); Investor Capitalism: How Money Managers Are Changing the Face of Corporate America (HarperCollins, 1996); and Executive Defense: Shareholder Power and Corporate Reorganization (Harvard University Press, 1993). His articles have appeared in Administrative Science Quarterly, Academy of Management Learning and Education, American Sociological Review, Corporate Governance, and elsewhere. He has presented programs on leadership and governance to organizations ranging from American Express and Citigroup to Intel, Toyota, and the World Economic Forum. He has consulted on governance with Fannie Mae, HealthSouth, Tyco International, and other companies.

Elise Walton is a consultant specializing in the practice areas of corporate governance, strategic change management, organization architecture, and executive leadership. Over the past twenty years, Elise has worked with clients such as AT&T, AXA-Equitable, Fannie Mae, Ford, Hewlett Packard, Merck, Tyco, TXU, Xerox, and Unilever. Her projects have included corporate center alignment and redesign, merger and acquisition due diligence and integration process support; business-driven leadership development and talent management programs; executive team effectiveness; CEO evaluation; and board assessment.

Elise received a B.A. from Bowdoin College, an M.A. from Columbia University Teachers College, and a Ph.D. jointly from Harvard University and Harvard Business School. She has taught in the executive M.B.A. programs of Columbia University and the NYU Stern School.

Andrew Ward is a member of the management faculty of the Terry College of Business of the University of Georgia, and author of The Leadership Lifecycle: Matching Leaders to Evolving Organizations (Palgrave Macmillan, 2003). Ward received his Ph.D. from The Wharton School of the University of Pennsylvania. Ward’s research centers on leadership, corporate governance, and the role and challenges of chief executive officers. His research has appeared in numerous academic journals, as well as publications including BusinessWeek, The Financial Times, The Washington Post, Directorship, Directors & Boards, Corporate Board Member, and Investor’s Business Daily. He is frequently quoted in the media on leadership, governance, and CEO succession issues. Jeffrey Sonnenfeld and Andrew Ward are coauthors of Firing Back: How Great Leaders Rebound After Career Disasters, published by Harvard Business School Press, 2007.

Introduction

Leveraging Your Board’s Leadership Capability

Jay A. Conger

I have been actively involved for a decade in studying boardroom governance and in consulting to boards. During that time, I have witnessed several waves of reforms. Practices that were relatively rare in the early 1990s such as lead directors and board evaluations are now commonplace. These were believed to preempt boardroom failures. They did not.

As you might guess, the spread of these reforms closely followed corporate scandals, downturns in the economy, and financial markets that negatively affected company fortunes. In other words, reforms often arrived as the byproducts of CEO and company failures. Eventually, the responsibility for these failures settled on the boards themselves. Each wave of reform promoted or accelerated the spread of a handful of boardroom governance practices. These were believed to provide greater safeguards against boardroom failures. Generally, they have not.

In the past few years, we have witnessed a rise in mandated governance structures, thanks to the Sarbanes-Oxley Act (SOX) and the post-SOX revisions in the guidelines of the listing exchanges. Although these provide some safeguards, they also have side effects. What I now see is that many boards are consumed by their mandated oversight and monitoring demands. Time for other critical board responsibilities has been minimized. Many boards have also slipped into a “check the box” mentality when it comes to governance practices. They have come to believe that assigning a lead director, holding annual board evaluations, ensuring director independence, and a set of other “governance best practices” will preempt boardroom failures. In the worst case, they feel that institutional investors and monitoring agencies demand such structures, and so they implement them.

What my colleagues in this book and I have learned is that simply having the “right” governance practices on your board is only a first step—at best. We actually know from research that there is little or no relationship between the presence or absence of most board governance practices and the performance of your organization. After all, Enron won acclaim for its many “best practice” boardroom governance structures.

The aim of this book is therefore twofold. One is to help you as a director or as a CEO or as a boardroom adviser to address the governance realities facing your boardroom today. It will organize the sea of opinions and research on boardroom governance into a coherent picture so that you and your board can make better choices about governance. It will critically evaluate the many practices that have become commonplace over the decade, from lead directors to non-executive chairs to board evaluations to director criteria for “independence.”

The second aim of this book is to demonstrate that boardroom leadership and character make the primary difference in the performance of a board—not a set of governance practices. In other words, effective boards are more often the product of a leadership capacity shared across the board and a culture that encourages candid dialogue and inquiry. They are the combination of a CEO who earnestly shares his or her power with the board and directors who are able to lead in the unique setting of a boardroom. Effective boards possess a high-caliber directorate whose members are proactive, inquisitive, and highly responsible leaders. They operate as a team despite conditions that are not ideal for teamwork. The skills and backgrounds of directors complement one another powerfully and match the unique needs of the business. These are boards for which best practices are not window dressing but rather processes that enable an already empowered and informed directorship to act as both an outstanding source of counsel and a vigilant monitor. They are boards that advise their CEOs but also stretch them. They are high-performance boards.

The Organization of This Book

This book is organized into four sections covering some of the most critical topics facing your boardroom today—leadership, talent management, CEO succession, and general practices for improving the performance of your boardroom. A brief summary of each chapter follows so that you can pick and choose the topics of greatest interest to you as a reader.

Because the book is framed around the central issue of leadership in the boardroom, our first section dives deep into the challenge of effectively leading boards. As readers are well aware, boards have unique leadership challenges. In essence, boardroom leaders are leading peers rather than direct reports. Directors are accomplished individuals. Many are outstanding leaders in their own right. Leading a group of talented peers is like walking a tightwire. Authoritative styles are likely to be resisted; highly deferential and overly facilitative styles are likely to be seen as weak. There is also a serious imbalance of information on a board. The CEO is the most informed individual on the board today. As a result, many directors feel too uninformed to demonstrate strong leadership and therefore defer to the CEO’s judgment. This outcome has produced catastrophic outcomes for some companies—Enron, Tyco, and WorldCom being some of the most pronounced examples. To counterbalance this possibility, we have witnessed the rise of two boardroom leadership roles over recent decades—the lead or presiding director and the non-executive chair. Whereas the majority of publicly traded boards today have a lead director, there is more controversy over the need for a non-executive chair. That said, this latter role is appearing with greater frequency on public boards. In some countries such as the United Kingdom, boards are actually required to have a chair’s role that is not occupied by the company CEO.

In this first section, “Leadership in Your Boardroom,” four chapters will help you address the issue of how your board can build strong leadership capability and achieve a healthy balance of power. The chapters in this section share a general concern for strengthening the leadership capacity of your board, but they do take differing perspectives on the topical issue of who should be the formal leader of the board—a non-executive director or the CEO. That said, all of the contributors in this section argue that directors themselves need to be proactive and vigilant and share in the leadership demands of running a boardroom.

In Chapter One, Jay Lorsch explores the critical issue of how leadership can and should be shared across the board. He helps us understand that becoming a boardroom leader is not just a matter of being given a title, whether it is board chair, lead director, or committee chair. Rather, gaining the mantle of leadership is a complex interaction between one’s own actions and the perceptions of one’s fellow directors around the board table. He notes that the most effective boards are those in which other directors emerge as active leaders. Quite simply: the more leaders that a board has, the better.

Lorsch also identifies critical leadership attributes that directors need to possess for boardrooms to be led well. These include a common attribute—the capacity to spot irregularities, to know when something may be not quite right, and to follow up. This is accompanied by a willingness on the part of directors to commit themselves to take the initiative to solve problems. The best also possess a strong sense that their responsibility is to do the right thing as directors. Their reason for board service is not the money they may receive, nor the status or prestige, but the sense of satisfaction they get in doing the job well. A related quality these leaders share is having or being willing to acquire the knowledge to act effectively. Sometimes the director has a reservoir of knowledge related to the issue at hand. But in many instances, the most effective directors spend a great deal of time and effort to understand facets of the business or the company that are new to them. Finally, they are thoughtful about the process of leading their fellow directors. If you are going to attempt to lead, you want to be as certain as possible that others will follow you. You are undertaking leadership, among peers, who are used to being leaders themselves and thus may not be enthusiastic followers. The best directors understand this dynamic and tailor their style and timing for best effect.

In the next chapter, “Why Your Board Needs a Non-Executive Chair,” my colleague Ed Lawler and I argue that your board should seriously consider instituting a non-executive chair role. We take the point of view that there are enormous external pressures facing corporate boards to appoint a non-executive chair. We believe that these pressures are not likely to subside but rather intensify. Given this predicament, our objective is to help your board successfully meet the challenges of a dual leadership model in which authority is shared between the CEO and a non-executive chair. This is an inherently difficult position from which to lead any group, because “two heads” are more confusing than one. To succeed therefore, it is critical to define with immense clarity the chair’s roles and responsibilities and to select candidates for the chair position very carefully. We will examine how best to divide the roles and responsibilities of the CEO versus those of the non-executive chair in leading a board. In terms of selecting candidates for non-executive chair roles, we strongly argue against appointing the retiring CEO of the company your board oversees. With a few rare exceptions, this appointment can seriously compromise the oversight role of a board. Rather, we feel that retired “outsider” CEOs are ideal candidates. In addition to this background, we will describe certain personal characteristics necessary to lead as a non-executive chair. For boards disinclined to go down the path of a non-executive chair, we discuss in some detail the alternative leadership models of a lead director and of committee leadership.

In sharp contrast to our point of view, authors Dan and Catherine Dalton will argue against a non-executive chair in their chapter, “The Joint CEO/Chairperson Leadership Issue in Sharp Relief.” From their perspective, the CEO is the individual who should hold the board chair’s role. The Daltons do not find the arguments in favor of separating the roles of the CEO and the chairperson of the board terribly compelling. They feel strongly that a single voice directing the enterprise at the board level is the optimal form of leadership. Under this model of “unitary command,” there will be no parties and constituencies—internal or external—who will question who is in charge and who is accountable. In contrast, when the CEO and board chairperson roles are separated, the enterprise does not have a single presiding officer with the requisite authority to direct relevant personnel and other resources in pursuit of a unified purpose. The CEO and a non-executive chair structure simply does not provide for a single organizational voice. The Daltons argue that internal officers of the firm and a host of external constituencies such as shareholders need to know, definitively, who is in charge of the enterprise, whose voice is paramount, and most critically, who is accountable. The CEO is best positioned to be the “one in charge.” When things go wrong, there is also clarity about who is “in charge.” They do point out, however, that when the board confers substantial autonomy—as it should—on its combined CEO/board chairperson, the directors must still embrace vigilant oversight, fairly. Directors must not abdicate oversight responsibility with the CEO as their chair.

In the last chapter of Part One, “First Among Equals: Leading Your Fellow Directors as a Board Chair,” Katharina Pick illustrates the profound impact of the board chair’s leadership style. For example, she shows how chairs affect the way directors interact and work together through the manner in which they draw input from fellow board members. The chair influences how the board oversees management by shaping the relationship and communications that go on between these two groups. When chairs have the authority and legitimacy to lead, they have the ability to create a safe space for open dialogue in which management can receive both criticism and support from directors. Pick also highlights the ways in which leadership behavior by the chair can actually undermine these important aspects of board process. For example, board chairs, particularly non-executive chairs, walk a fine line between being too aggressive in their leadership and being too passive. In a group of high status and accomplished fellow directors, and with little formal authority, it is all too easy for a chair to overstep his or her position and lose the ability to lead. However, erring on the other side, a chair who is more passive can be equally ineffectual. Directors will be frustrated by a directionless discussion in which they do not have clarity regarding board tasks, or they will think the leader is weak vis-à-vis management.

Drawing upon rich case examples of both effective and ineffective leadership practices, Pick provides practical guidance for your board’s chair. She identifies four broad leadership roles for the chair and explains how to successfully lead in each role. The four roles include (1) managing the “status dilemma” of leading a group of equals, (2) managing the “tension” between the various roles the board plays with senior management, (3) sustaining the cohesion of the director group while encouraging debate, and (4) managing the ambiguous nature of the board’s role. Pick illustrates how to successfully lead fellow directors in each role.

Part Two of the book, “Talent Management Practices for Your Board,” looks at critical boardroom talent issues. For example, does your board have the right skill and experience mix among the directors? Where and how can you find a sufficient number of talented directors? Does your board leverage diversity in meaningful ways? Does your board critically assess its own performance and that of its individual directors? Does your board take a transparent and rigorous approach for assessing your CEO’s performance and pay? The four chapters in this section offer thoughtful insights to these questions along with best practice guidance. Specifically, they will examine the talent management topics of (1) how to effectively appraise your board’s performance as well as evaluate your individual directors, (2) how to determine the right mix of director skills and competencies, (3) how to identify and build a critical mass of women directors, (4) how aspiring women can become board members and effective contributors as directors, and, finally, (5) how your board should approach the issue of evaluating your CEO’s performance and in turn determining and communicating about his or her pay.

The opening chapter of this section, “Appraising Your Board’s Performance,” examines the three forms of boardroom appraisals—CEO assessments, full board assessments, and individual director assessments. As Ed Lawler and I illustrate, appraising a board’s performance has many advantages. Formal, periodic board appraisals can help ensure that all the right processes, procedures, members, and relationships are in place and functioning well. For example, effective evaluations can clarify the individual and collective responsibilities of your directors and the CEO. With better knowledge of what is expected of them, directors are in turn likely to be stronger contributors. Formal evaluations can also identify areas needing greater attention by the board. Directors have told us that after they initiated board evaluations, their meetings went more smoothly, they made better decisions, they acquired greater influence, and they paid more attention to long-term corporate strategy. Formal appraisals of the board as a whole, and also of individual board members and the CEO, can help ensure a healthy balance of power between the board and the chief executive and improve the working relationship between the two. An institutionalized review process makes it harder for a new CEO to dominate a board or avoid being held accountable for poor performance. Finally, the clearest and most consistent benefit we have observed in those companies that have adopted effective board appraisal systems is a commitment by directors and the CEO to devote more time and attention to long-term strategy.

That said, many boardroom appraisals are poorly implemented. For example, feedback rarely reveals serious shortcomings or concerns. Appraisals are often simply a perfunctory exercise. In some boardrooms, an hour might be taken to review the results of the end-of-the-year appraisal but in a “checklist fashion.” In our chapter, we will discuss how to avoid such outcomes. We will discuss why your board needs to consider both a rigorous board evaluation and individual director assessments. We will describe how best to implement each of the different evaluations providing practical guidance along the way.

In his chapter titled “Getting the Right Directors on Your Board,” Richard Leblanc strongly argues that boards need to devote far more attention to competencies and behaviors in recruiting and assessing directors. The challenge he notes is to address these factors in a manner that is rigorous but at the same time highly pragmatic. As a starting point, your board needs to have a formal director-succession planning and renewal program in place. For example, your nominating committee should have a process for identifying and recruiting new directors, including (1) taking into account their character, ability, experience, behavior and ability to devote the time required; and (2) following an appropriate interview, background, reference check, and selection process. The nominating committee’s mandate should also include recommending a director-succession planning process to the board that is objective, transparent, and rigorous. To assist in clarifying this information, the committee needs to create, maintain, and annually evaluate a director competency matrix. The matrix process should outline the competencies, skills, and experiences of the current directors and the key ones required for new directors, with an emphasis on critical gaps.

Following on Chapter Five’s examination of board appraisals, Leblanc also explores the issue of director assessments with a special emphasis on individual director evaluations. He expresses the strong opinion that boards need to undertake rigorous individual director assessments. Many boards still avoid such evaluations or else assess by “going through the motions” using self-administered, nonrobust and painless—and ultimately ineffective—evaluations. As potential models for your own board, he offers examples of how companies that have received recognition for their corporate governance practices, and in particular their director peer-evaluation processes, conduct such evaluations with greater rigor.

Continuing on the theme of director selection and development, Sarah Smith Orr in Chapter Seven, “Women Directors in the Boardroom: Adding Value, Making a Difference,” examines the issue of women in the boardroom. Despite the statistical evidence of the capabilities of women who are equipped with academic credentials and of extraordinary performance results, the representation of women on corporate boards remains surprisingly low. Yet nowhere is the influence of women as business leaders, investors, and consumers more crucial to decision making than in the corporate boardroom. Drawing on studies by the organization Catalyst, Smith Orr describes recent research showing that, with the exception of two sectors, Fortune 500 corporations that dominate in three business measures—return on equity, return on sales, and return on capital invested—were ones with boards including at least three women. Yet women hold just under 15 percent of the directorships on the boards of Fortune 500 companies. Why such a pronounced gap? Smith Orr explores the principal contributors to this dilemma, which range from the stereotyping of women’s leadership effectiveness to a scarcity of women in the most common director pipeline (CEOs of large corporations) to a lack of a critical mass of women directors on individual boards.

Her chapter then explores how your board can create a conducive boardroom environment for women directors as well as how you can best approach recruiting and developing women directors for your own board. To women seeking directorships, Smith Orr offers invaluable advice on the work experiences, networks, and career planning approaches that will take you into the boardroom. Her chapter provides guidance for women directors on how to succeed in their role.

The last chapter in this section on talent management looks at the hot topic of the board’s role in assessing CEO performance and setting and communicating CEO pay. In “Your Board’s Crucial Role in Aligning CEO Pay and Performance,” Roger Raber outlines five critical principles that must guide your boardroom actions and decisions in this regard. They are (1) independence among the directorship, (2) fair internal and external standards for pay decisions, (3) alignment to value producing performance, (4) an emphasis on achieving key metrics over the long term, and (5) clear and full disclosure of compensation arrangements. For example, the decision makers must be truly independent directors. They should have no material relationship with the company or no relationship that would interfere with independent judgment in carrying out the responsibilities of a director. The audit, compensation, and nominating committees must be composed entirely of independent directors. Fair internal standards for pay would imply that all employees of an organization should benefit when the company does well and share in sacrifices when necessary. A fair compensation policy also means that there will not be extremely wide gaps in pay at different levels (for example, between CEOs and senior managers, or executives and other employees) unless such gaps are justified and explained. Externally, executive pay should be judged according to an appropriate peer group, chosen by the compensation committee. Compensation committees must also strive to motivate not only short-term but long-term performance from CEOs and their teams. Therefore it is important to design pay packages that encourage long-term commitment to the organization’s well-being. Tying bonuses, stock grants, or other compensation to an increase in the company’s long-term value can help align a CEO’s personal financial interests with those of shareholders. Your compensation committee should embrace a philosophy of transparency—meaning full and clear disclosure. In other words, compensation committee members should not only help guide the important facts about compensation arrangements but also let shareholders know these facts in a timely manner. These are several of the critical guidelines that Raber lays out for your board’s actions regarding CEO pay.

The third part of the book, “CEO Succession: The Challenges and Opportunities Facing Your Board,” offers several perspectives on what your board can and should do with regard to CEO succession. The authors of all three chapters voice their concerns that many boards have failed to engage their CEOs in a meaningful and rigorous succession-planning process—despite this being one of the primary areas of a board’s responsibilities. Given the alarming failure rate of CEOs of publicly traded companies and the declining tenure of CEOs in general, it is clear that the process for replacing CEOs in many firms is to a large extent broken. Our contributors identify the reasons why CEO succession is often a flawed process and how your board can proactively preempt the most common breakdowns. They each paint a highly realistic picture of the challenges facing boards that wish to approach the succession challenge rigorously. They note that CEO succession is much more than finding the right replacement for a CEO. The process actually starts with the organization’s long-term investment in leadership development across and down its management ranks. Without a long horizon and developmental perspective, it is hard to produce the handful of talented candidates who can fill the shoes of an outgoing CEO. Boards need to ensure that the executive team makes such investments. A critical difference between our authors in this section is the extent to which the board can and should directly influence succession versus provide oversight of the top team’s activities.

In the opening chapter of this section, “Managing the CEO’s Succession: The Challenge Facing Your Board,” Joe Bower takes a position that may surprise you. He argues why your board’s role in succession, though very important, must be distinctly subordinate to the role played by the incumbent chief executive. As important as CEO succession should be in the work of the board, the management of the succession process is one of the core responsibilities of the executive leadership team, not the board. Bower illustrates that boards are not constituted so that they can substitute for the CEO in the critical work of developing candidates or in making the final selection of who should be CEO. After describing the limited role of the board in succession, this chapter does clarify what then are the primary areas in which your board can contribute to CEO succession. For example, Bower feels strongly that your board must enquire regularly about the succession process, assess the CEO’s and the company’s investments in development, track the progress of candidates, and meet as many candidates as possible. At the same time, it cannot get into the details of organizational arrangements that ensure that talented executives have the opportunity to experience general management responsibility early in their careers. Most important, it cannot be present during the critical times when plans and budgets are developed and outcomes reviewed that turn out to be the most critical “teaching moments” for mentors. Rather, the keys rest in management’s hands and involve the company’s early attention to recruiting and developing talent. Board members must instead note whether management documents a sufficiently large pool of potential CEO candidates and whether the company promotes development that favors inside-outsider candidates when they can be found. Does the organization and executive team select its CEO candidates for future-oriented criteria and promote a period of transition that gives the new CEO a maximum chance to succeed? Finally, is there extensive exposure to leading candidates of those on the board who will make the final choice?

In Chapter Ten, titled “Beyond Best Practices: Revisiting the Board’s Role in CEO Succession,” Mark Nadler notes that the work behind the CEO succession process is much harder than it is often portrayed by governance experts or business journalists, who are quick to excoriate any board that suddenly finds itself with an empty CEO office and no obvious candidate in sight. Seeing an even more active role for your board in CEO succession than does Joe Bower, Nadler identifies a number of specific best practices for boards to implement to ensure a rigorous succession process. Specifically, ten best practices are discussed in this chapter, drawn from the seasoned insights and experience of directors at companies that have actually done succession well. Nadler not only illustrates each practice in detail, but, as important, highlights the challenges of implementing each practice. For example, one best practice of succession planning is for your board to begin the process three to five years before a CEO transition is actually expected to occur. Such a time frame is crucial, because companies are increasingly inclined to promote internally rather than recruit externally, and grooming inside talent takes time. A long succession process ensures the opportunity to fully develop the next CEO through a combination of assignments and activities. Directors need to spend three to five years identifying and monitoring the development of serious candidates and then selecting an heir apparent who spends the remaining time making the transitions through the roles of COO, CEO-designate, CEO, and, ultimately, CEO/chair. Nadler points out, however, that in reality only a minority of boards actually get involved three to five years before the moment of CEO succession. As a result, boards end up making poor choices or giving candidates insufficient time for development.

Nadler takes these succession best practices one step further by adding additional texture to the succession picture by overlaying what he has experienced as the three ever-present dimensions of the process—analytics, politics, and emotions. The best boardroom succession processes acknowledge and integrate all three elements. A powerful example of the interplay of one element in succession decisions occurs on the emotional level. Some CEOs actively avoid working on succession because they would rather not face up to all it implies about aging and mortality. This can be an enormous emotional stumbling block for many CEOs, and a good many will put it off interminably unless pressed into action by the board. Once the succession process is finally in place, the board must keep a sharp eye out for signs that the CEO is actually sabotaging the process, finding excuses to eliminate promising candidates and thereby starting the process all over again.

In the final chapter on CEO succession, “Ending the CEO Succession Crisis,” Ram Charan argues that an outsized share of your board’s attention has been captured by its governance and fiduciary duties. In other words, too many hours are devoted to monitoring accounting, Sarbanes-Oxley, risk, and financial performance and not enough to time planning for CEO succession and managing searches. Specifically, he recommends that your board should dedicate at minimum two sessions a year to hashing over at least five CEO candidates—devoting at least 15 percent of board time to succession. Directors should also personally get to know rising stars, by inviting them to board meetings and dinners, talking with them informally, and observing them in the natural habitats of their business operations. In addition, board members need to reach a highly refined but dynamic understanding of the CEO position and their options for it long before appointing a successor to the standing CEO. Promising candidates should be as well defined as puzzle pieces; their strengths and experiences must match the shape of their organizations’ needs. Boards also need to specify, in terms as precise as possible, three or four aspects of talent, know-how, and experience that are nonnegotiable.

In agreement with Bower, Ram Charan feels strongly that the foundation for CEO succession rests on a strong internal leadership pipeline. Therefore the most important investment companies can make to improve succession is to bolster their leadership development and focus on those very rare people in their ranks who might one day become CEO. As noted by Nadler, they need to be thoughtful about assignments and experiences that cultivate an enterprise perspective and skills required by the future demands facing the company. Boards need to be proactive in encouraging such an investment by the executive team. As well, at the most senior level, functional leaders need to introduce the board to the top two or three most-promising heirs for their own positions, providing detailed analyses of those candidates’ strengths and weaknesses. Emerging leaders should routinely take part in presentations to the board and meet informally with directors over lunch. Board members need to closely track the progress not of one or two people but of the top one hundred or two hundred, frequently discussing how each individual fits into the succession puzzle and what experiences or skills might improve that fit.

In the fourth part of the book, “Improving Your Board’s Performance and Impact,” we turn to three remaining topics. The first explores how your board can leverage team practices to enhance its performance. We know a great deal about superior team performance, and many of these insights and practices can be extrapolated to boardrooms. The second chapter looks at the research on executive derailment and its profound consequences on company performance. Drawing on this knowledge, advice is provided for your board to be better positioned to spot problems in the behavior and actions of the CEO or other executives that could in turn produce dire outcomes for the organization you are overseeing. The last chapter explores the impact of globalization on boards and their governance practices. Its insights are particularly helpful for boards of companies from emerging markets with ambitions to play on the world stage.

In her chapter, titled “How Your Board Can Leverage Team Practices for Better Performance,” Elise Walton examines the unique and challenging circumstances a board faces in order to work effectively as a team. For example, its infrequent meetings and the ambiguity and complexity of the information it receives are serious barriers to teamwork. In the context of such challenges, Walton identifies what kinds of team practices can foster effective and appropriate teamwork in a boardroom. She describes the practices of developing a shared context: using tools to synthesize information, diversifying data sources, and anticipating the unexpected to ensure that the board is acting on an informed basis. Practices such as active learning, productive conflict, staying relevant, and versatility create a context in which your board, as a team, can approach issues objectively and with an open mind. Together, these practices vaccinate against unexamined CEO (or other) dependence, uninformed action, and groupthink by encouraging a thoughtful context for learning, insight, and action. Furthermore, by making use of the full capability and wisdom of the team, these practices promote team insight and action that allow the board to lead effectively. She also examines how current concepts of good governance support or undermine effective teamwork.

Chapter Thirteen, “What Your Board Needs to Know: Early Warning Signs That Provide Insights to What Is Really Going on in Companies,” describes the critical role of directors in ensuring that the company’s leaders are behaving in an ethical manner, are engaging in well-thought-out strategic initiatives, and are attuned to the changing landscape of business. Sydney Finkelstein argues there is virtually no level of acceptable risk that board directors can be willing to take on when it comes to the possibility of business breakdowns. The same challenge confronts individual directors contemplating invitations to join boards. What are the warning signs to look out for that might lead potential directors to say, “no thanks” when offered a board seat? There are some boards for which the potential for trouble will outweigh the opportunities associated with serving.