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Yet, one simple "rule of business" remains constant. Your organization's ability to execute is the ultimate determinant of your success. And, when it comes to effective execution your potential roadblocks are many.
At Ford Business Consulting, our specialty is helping organizations overcome obstacles to superior execution by tuning the human system to support the business strategy.read more...
At Ford Business Consulting, our specialty is helping organizations overcome obstacles to superior execution by tuning the human system to support the business strategy.read more...
CEO Pay and Other Board issues – What was Verizon’s mistake?
Which of the following statements do you believe?
1. My company's Board should be a strategic asset to the company.
2. Diversity of thought and background helps a Board approach problems more creatively.
3. The reason my Board looks pretty homogeneous (in terms of professional background, ethnicity, gender, age, etc) is that those are the folks who have the qualifications we need.
If you believe statements 1 and 2, you may have created a logic conundrum for yourself with regard it statement 3. Take a look at the article in the Wall Street Journal (“Verizon Tries to Mute Criticism of CEO Pay,” May 3, 2006). The article points out that, for a variety of reasons, “board members sympathize with management” even though they are supposed to look after shareholder interests.
Key reasons for the sympathy are cited as
- They are former CEO’s or senior executives
- They have served with the CEO on other boards
- They have worked at companies that had a business relationship with the company
These “chummy connections” (as WSJ refers to them) are often the very qualifications CEO’s cite when recruiting new directors. I’m not saying that the CEO wants to “stack the board” with his buddies, simply that he feels these connections can be assets to the company. However, the same CEO will then bemoan the lack of diversity in thought and experience on his board (if he’s paying attention).
Here’s what I think has happened. We’ve left these “chummy connections” as an unquestioned qualification for board membership, not realizing the ways in which they may make the board too homogeneous to be optimally effective. In spite of independent director requirements, boards are still full of “middle aged white guys” (as one CEO regretfully described his board).
What does this mean in the real world?
Let’s say you are the CEO of a semiconductor company. What if your board included someone with no connections to that industry and no CEO experience? Maybe at her first board meeting, she barely understood the barrage of acronyms that filled your presentation. Could she ask some unique questions, throw the discussion “off course” just enough to stimulate some creative thought? Maybe even raise issues about shareholder reactions to a CEO pay raise that the rest of the guys wouldn’t think about till it hit the papers? Or possibly see a market trend coming before all the “middle aged white guys” saw it because she looks at the world in a different way?
Don’t get me wrong – this is not a pitch for diversity for its own sake. It’s a warning that when boards are blind-sided, it may be because the board members are all part of the “same club”. Boards who truly want to connect to shareholders (and other stakeholders) need to reconsider the implications of their implicit recruiting criteria through this lens.
1. My company's Board should be a strategic asset to the company.
2. Diversity of thought and background helps a Board approach problems more creatively.
3. The reason my Board looks pretty homogeneous (in terms of professional background, ethnicity, gender, age, etc) is that those are the folks who have the qualifications we need.
If you believe statements 1 and 2, you may have created a logic conundrum for yourself with regard it statement 3. Take a look at the article in the Wall Street Journal (“Verizon Tries to Mute Criticism of CEO Pay,” May 3, 2006). The article points out that, for a variety of reasons, “board members sympathize with management” even though they are supposed to look after shareholder interests.
Key reasons for the sympathy are cited as
- They are former CEO’s or senior executives
- They have served with the CEO on other boards
- They have worked at companies that had a business relationship with the company
These “chummy connections” (as WSJ refers to them) are often the very qualifications CEO’s cite when recruiting new directors. I’m not saying that the CEO wants to “stack the board” with his buddies, simply that he feels these connections can be assets to the company. However, the same CEO will then bemoan the lack of diversity in thought and experience on his board (if he’s paying attention).
Here’s what I think has happened. We’ve left these “chummy connections” as an unquestioned qualification for board membership, not realizing the ways in which they may make the board too homogeneous to be optimally effective. In spite of independent director requirements, boards are still full of “middle aged white guys” (as one CEO regretfully described his board).
What does this mean in the real world?
Let’s say you are the CEO of a semiconductor company. What if your board included someone with no connections to that industry and no CEO experience? Maybe at her first board meeting, she barely understood the barrage of acronyms that filled your presentation. Could she ask some unique questions, throw the discussion “off course” just enough to stimulate some creative thought? Maybe even raise issues about shareholder reactions to a CEO pay raise that the rest of the guys wouldn’t think about till it hit the papers? Or possibly see a market trend coming before all the “middle aged white guys” saw it because she looks at the world in a different way?
Don’t get me wrong – this is not a pitch for diversity for its own sake. It’s a warning that when boards are blind-sided, it may be because the board members are all part of the “same club”. Boards who truly want to connect to shareholders (and other stakeholders) need to reconsider the implications of their implicit recruiting criteria through this lens.
Labels: inclusion, leadership, stakeholders