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Harvey Golub
Nonexecutive Chairman
AIG Inc.

Harvey Golub’s Advice for a CEO
Don’t try to be the board members’ best friend ... and other key principles of CEO-board relations.

By Harvey Golub

Ed. Note: Harvey Golub was named in May 2009 to be one of six new members nominated to the board of AIG Inc. On Aug. 6 he was elected nonexecutive chairman of the board. "Harvey Golub is one of the most experienced and respected executives in the financial services industry today, known for his leadership, integrity, and business acumen," said outgoing AIG Chairman Edward Liddy of his successor. In 2004 Mr. Golub authored a cover story for Directors & Boards titled “A CEO Looks at the Director’s Role.” The following is an excerpt from that article.

Different CEOs have different ways of working with their board, and I would not try to prescribe one set of rules to apply to all companies. But I believe that a few principles are of value:

The Elements of a Board’s Schedule Should Be Set Well in Advance

At American Express, I set the key elements a year ahead of time, including where and when the off-site meetings would be held, and what strategic issues would command significant blocks of time and when.

For example, in November I would give an assessment of how the company did over the year and review overall performance. In January, we would conduct an extensive review of strategy. Obviously, some issues had to be dealt with as they emerged. But the goal was structure, planning, and consistency.

These characteristics tend to provide discipline and focus. They also are essential to attracting good directors and getting the most out of them, given that the best board members tend to be busy people who need to be able to plan ahead of time. Directors were interested in individual topics. I would take their concerns into account and always schedule discussions of those topics.

It Is Helpful for a Board to Meet from Time to Time Without the CEO Present

In fact, it may be a good idea for a company to make it an internal rule requiring the board to do that. That would serve as a device to force the board to think about major issues as a group and provide an opportunity for board members to discuss issues privately without the risk of offending the CEO or creating bad relations. In my view, a CEO should prefer board members to meet by themselves from time to time. By encouraging directors to discuss issues that are gnawing at the back of their minds, it could head off issues before they reach a critical point.

Of course, board members don’t always want to meet without the CEO. Early in my tenure, I arranged for the board to get together for a dinner meeting without me. Two weeks before the dinner was scheduled to be held, several directors called me and asked me to be there. They felt that the meeting would be more productive with the CEO present. But it makes sense to at least set up the opportunity.

I should note that in today’s environment, I would have encouraged the board to meet without me and would continue to do so on a regular basis, although I did not do so then. (Ed. Note: In subsequent years this principle has been embraced and even codified as a best-practices provision.)

The CEO Should Not Try to Be the Board Members’ Best Friend

Some believe that by keeping up an extensive schedule of private dinners and special events with directors, a CEO can build an atmosphere of rapport and friendship that will carry over into the boardroom.

But the board is not the CEO’s friend — it is the CEO’s boss. The board of directors is not just a collection of individuals — it is an institution with a responsibility for representing the interests of shareholders. Friendship should never allow a CEO to get concurrence when it otherwise wouldn’t be coming.

I would occasionally seek advice on specific situations from some of the members of my board. Other than that, I would not communicate with them a great deal between board meetings unless there was a critical, unexpected matter to review. Once a year or so, I would get together with each of them or get in touch to ask if there were any specific concerns they would like to raise or anything they felt they needed to be better informed about regarding the company.

Don’t Be Wasteful!

The last piece of advice I would give a CEO is to be completely open and honest. Be careful to discuss the failures as well as the successes. Never surprise the board. Never ask it to vote on a complicated issue without explaining its nuances and risks.

The important challenge for the CEO is to keep the board on track. It is essential that directors be able to focus on the overall strategic issues and understand the company’s strategic goals and how the business processes help advance them. On a good board, there is too much experience and judgment sitting around the table to waste it on anything of secondary importance.

Harvey Golub retired from American Express Co. in 2001 after serving as chairman and CEO since 1993. During his tenure, the company reached record earnings and the price of its shares increased sixfold. Prior to joining the company in 1984 he was a senior partner with McKinsey & Co.

Mr. Golub is the nonexecutive chairman of Ripplewood Holdings, a private equity firm based in New York. He is a member of the board of Campbell Soup Co. and formerly its nonexecutive chairman. He serves as nonexecutive chairman of the board of Reader’s Digest Association and is also a director of RHJ International, a public investment company based in Belgium.

He has served on the boards of Dow Jones & Co. and Warnaco Inc., and as chairman of the board of AirClic, ClientLogic, and TH Lee Putnam Ventures.

His article in Directors & Boards was originally drawn from the book “How to Run a Company” by Dennis C. Carey and Marie-Caroline Von Weichs (Crown Business, 2003).