Boards need to help their companies grow. As Fred Steingraber and I note in our article, What Boards Need to Do to Remain Relevant, directors need to re-examine and even revise board committees and committee work to bring the level of attention that is required to better understand the companies they serve. While oversight of executive compensation has caused the greatest shareholder concern followed by too little attention to talent and succession management, boards have not paying enough attention to productivity, quality, growth and risk management—mechanisms by which companies renew their businesses, pursue sustainable growth and mitigate risk.
Directors, please turn to the New York Times Magazine of December 16 and read about Jump, a hybrid strategy firm focused on growth. Either charter a new committee to review organic growth targets and trends or add that to another committee’s responsibilities. Innovation is what will enhance a company’s and yes, even the country’s success. Directors who understand the broader developments in products and services, markets and channels, geography and relevant resource requirements can challenge and expand management’s thinking. This committee should oversee the due diligence related to acquisitions as well as post-merger audits. They would also be responsible for understanding and overseeing the targeted and actual growth in revenues from new products in the last three to five years.
After ousting HP CEO Mark Hurd for his indiscretion with a marketing contractor, falsifying expenses to conceal his relationship, and thereby failing to live up to the HP code of conduct, the Hewlett-Packard board has a chance to demonstrate to shareholders and the public that they intend to revive and enforce “tone at the top” of the storied Silicon Valley company.
Hurd and his predecessor, Carly Fiorina, who was also fired by the board, brought new meaning to the HP Way. Certainly, it was a different company than when brilliant engineers and founders William Hewlett and David Packard were at work in the company. Their instinctive style of “managing by walking around” would be almost impossible to replicate. Fiorina, ambitious and eager to make her mark aggressively drove the Compaq merger while a subplot revealed that the HP board had its own problems as chairwoman Patricia Dunn stepped down facing felony charges. After the scandal, Hurd’s success was welcomed even if he took a cost-cutting and execution style approach to management.
With Hurd occupying both the Chairman and CEO role, Robert Ryan has served as lead director since 2008. But it has been Mark Andreessen handling the Hurd resignation. As the founder of another storied company, Andreessen has the gravitas to insist on a leader that not only performs well but behaves well.
Andreessen is given to greater transparency as well as sensitivity to culture and a larger group of stakeholders including investors, employees and the larger public given that he is an under-40 wildly successful entrepreneur now leading a company that provides a platform for social networking websites.
Andreessen is the spark that HP needs at this time, setting the tone and communicating what the board is doing on behalf of shareholders and stakeholders.
One of the findings from KPMG’s recent 28-city Audit Committee Roundtable Series is that leading boards are becoming more engaged in strategy as they pay greater attention to risk.
As boards take a hard look at their risk oversight process, they naturally turn to the risk element of the company’s strategy. The SEC’s proxy disclosure rules will require boards to take a good hard look at how they oversee risk. “If there isn’t a clear framework in place, that’s probably job number one” according to the roundtable report.
As boards engage in risk discussions, they are becoming more insistent that management provide alternatives and choices regarding the company’s strategy, as opposed to the “review and concur” approach of the past. In this way, some boards are helping to develop and determine the company’s risk appetite.
As one director said, “It takes time, effort and calories to do this right, but digging into the strategy is the only way to really understand what risks the company should or shouldn’t be taking.”
Smart CEOs look to the board in the strategy process.
In the wake of the economic collapse and the devastating impact of risky behavior by management in companies like Citigroup and Countrywide, corporate boards are paying more attention to their responsibility for oversight. While most of the problems developed in the financial sector, boards in other sectors are naturally concerned especially as they watch mounting legislation in Washington. Continue reading