9. Larry Stybel on the importance of an informed and effective board
Episode Description Larry Stybel talks what a board need to do to really do its job properly and the critical role of the Nomination/Governance Committee in that process. Do we have the right talent on this board? Are the board members sufficiently educated to handle their fiduciary responsibilities? And does the board understand that it has primary responsibility for defining the corporate culture? Thanks for listening! We love our listeners! Drop us a line or give us guest suggestions here. Links https://www.boardoptions.com/ https://www.stybelpeabody.com/ https://www.issgovernance.com/ Quotes “If you really don't understand the industry that you're in, who is your chief learning officer for the board of directors, and in many cases, by default, the chief learning officer of the board of directors is the CEO and if the board also has the responsibility of evaluating the CEO's performance, is there something wrong with this picture? Board evaluation is that time when the board shines a spotlight on itself and says, “what are we doing positive and negative to advance shareholder value?" “Every company that I have ever worked with says we are innovative, and the question is: who's the role model for innovation? If it’s not the board, then where?” “I think the board has primary responsibility for defining the corporate culture, and then the CEO has the responsibility for executing the corporate culture.” “The board is usually putting the spotlight on the CEO and senior management. So, in that way, I can understand why putting the spotlight on themselves is not something they actually want to do. Right it goes like this: “I think performance evaluation is great for you, Joe, but not for me.” “There is a song by Leonard Cohen, and I think you know it, Raza, “Everybody Knows.” And that song applies to boards. Everybody knows who's making a major contribution and everybody knows who isn't. They just don't want to talk about it.” “There's a kind of cliché that I that I see among young, inexperienced founders it’s called "the problem solved problem." And that is: we had a problem, you know, 70% of our revenue is coming from one company and that one company is threatening to go to a competitor. I flew to California and I talked with the CEO and I got him not only to stay with us, but to increase our business. And I go back to my friends and family board and I say, we had a problem, its solved - and they say, great, what's for dinner?” “I think podcasts like these are, are an excellent way for board people to learn while they're driving or learning while they're exercising.” (Thanks Larry!) Ideas/Comments If a board wants to keep what is often a superficial sense of collegiality, they don't want to do board of directors self-evaluation because you're going to get to issues that one or more board members are going to be uncomfortable with. When board self-evaluation is defined as an event, it usually is a onetime event. If a board is really serious, they're going to do board of directors self-evaluation. People think of diversity in many ways. Gender diversity is one of them, racial and ethics diversity are others but the way, somebody does problem solving is another important dimension to add to the matrix of what you need on a board to make it truly diverse. I have encouraged CEOs to do on boards is to send something to the board even once a month or a one pager. It could be a snapshot of financials. It could be three or four sentences about what's going a brief, but helpful, update so that when you're walking into the board room, or even when you're getting the materials for the next board meeting, you have been updated all along. No surprises. The board should not be surprised. You should not walk into the board room and find out something's been going on, What happened with Equifax (theft of the credit records of 143 million people) should be part of every board education course., First, they did not immediately inform people that their data had been stolen. They delayed it for six weeks, which gave the hackers a chance to really use the information they had stolen. And the second thing, maybe even more egregious, members of the senior management team actually sold shares of stock during the time before the public knew that the breach had occurred so they would not take a hit on their stock shares. And this gets back to corporate culture. So, what was going on at Equifax that made senior executives think that what they did was okay to do?