As I navigate my life post-Rohm and Haas, I have come to see the role and responsibilities of board membership in new and expanding ways. One of my mentors and now good friend, Jack Krol, has played a big role in that process. Jack recruited me to the Tyco International Ltd. board. He has taught me a great deal about boards, and I value his insights. Those insights, I believe, would be useful and insightful to anyone who has interest in corporate governance as well as best governance practices.
Jack is the former chairman and CEO of DuPont Co., and he served with me on Tyco's board from 2002, when Jack was lead director, until 2008. He also served as chairman on Delphi Automotive's board from 2009-2014. Jack made history with Ed Breen, who took over Tyco International in 2002, when former CEO Dennis Kozlowski and his CFO resigned after being indicted and later convicted of fraud and embezzlement. Ed and Jack basically threw out the old board at Tyco and installed a new board in order to save the tarnished and hugely indebted company whose former executives' lavish lifestyles and criminal behavior all but sank the conglomerate.
I was one of those new board members recruited by Jack and Ed. (Ed is currently chairman of DuPont and Jack is a former director of Tyco.) Jack joined Delphi Automotive as board chairman in 2009, the company having just emerged from a messy spin-off from General Motors and four years in bankruptcy. There he built an entirely new board to include a seasoned blend of executives from the electronics, IT, finance, specialty chemicals, auto manufacturing, and related industries. I was part of that new board as well. Following are excerpts from Jack's thoughts and observations, including what criteria he looks for in recruiting a board member, a board's obligations to the company and its shareholders, and his assessments of me as a board colleague.
Jack Krol: How board members (like Raj) add value
I first met Raj when I recruited him for Tyco's board of directors. He came highly recommended as someone with impeccable character and credentials. Everyone who knew him gave him very high marks, including the companies that recruited him to serve on their boards. That's basically why I recruited him for Tyco's board. He did an outstanding job there. Over time, it became more and more apparent to me how strong and consistent his leadership skills were, and we have grown to be close friends in the period since.
What do you look for when you look for someone who can run a board? The first question I always ask is: What's the track record or success of this person? What does he or she bring with their experience that this board can use? These are important questions to discuss with a wide range of sources. An hour with the candidate is not sufficient. That's only a snapshot. His or her track record over the past 10 or 15 years is the backdrop to the interview that is most important.
How does the assessment process start? First, review business experience and results. How broad was the experience? Does it fit the board's needs? Every board should have an up-to-date list of backgrounds needed on the board. For example, at Tyco, which was a conglomerate, we recruited several CEOs from different business backgrounds. At Delphi, we recruited several CEOs and others with automotive backgrounds.
In all cases, people with financial backgrounds are necessary, preferably CFOs. The rest depends on other specific backgrounds needed.
A very important criterion is a record of high integrity, ethics, and trust. An issue in this area would be reason for rejection.
A best fit
You also need to focus on the candidates who will best fit with the board — someone who will have the respect and confidence of board colleagues. Is he or she a team player or likely to be divisive and controversial? There's a balance here that's important. You want someone who has the conviction of their opinions, but is collaborative with the other directors. The candidates should have consistent temperament and style and be comfortable with their place in life. We're not looking for the next President of the United States or someone focusing on becoming chairman of the board. We're looking for an individual who can listen as well as offer judgments and is able to come to a consensus. Raj fits the above and brings both leadership and social competencies in his management style.
In addition to a core set of competencies, the ideal board candidate has to have the energy and drive to put the time into really understanding the company's business model so that he or she can contribute on both the strategic and operational side. As part of this two-sided perspective of the company, it's important that the candidate listens well and can draw out the board's thinking and ideas. This entails asking probing questions, what-ifs, turning the logic around and coming at it from different angles, all to bring out the best thinking of the board and get them all involved and engaged in the questions and issues to extract the best conclusion.
The issues that get to the board's attention are the tough ones, so they are important as well as sometimes very thorny. What makes Raj particularly suited to serve and lead a board is that he brings these skills to a discussion in a very quiet, almost invisible manner, and is persistent in getting consensus. These are highly desirable skills, very important to board membership, and absolutely essential for board leadership.
Sometimes — not always, but sometimes — particularly in reaching tough decisions, there is the need for a board member to be a little louder than softer and more forthcoming about his views. Raj has the kind of temperament that boards need. He's smart, strategic, and even-tempered, not to mention gracious and generous. His ego is very much in check. He is a modest man by all measures and that is an important competency for a board member, much less a CEO. In his way, Raj generally gets consensus on thorny issues.
The above are the qualities that prompted me to have him join the Delphi board in 2009. Of course, I had the opportunity to observe Raj on Tyco's board where he served on the compensation and HR committee, took a very complex situation surrounding compensation to the board, and got the board in line. It was not easy at Tyco, because in those days following the scandal, there were people on the board who didn't see the company as objectively, I think, as Raj did. We basically needed to overhaul the company, including the compensation program. We made Raj chairman of the compensation committee where he did an outstanding job developing a leading compensation program.
Raj was a member of that new crop of board members in 2009 whom I recruited to Delphi. As we did our board evaluations, I called each individual sitting board member and asked two questions: First, who is making good contributions to the board and who might make more? And second, I asked each to name one or two board members who would be a good candidate for chairman. Raj generally came up at the top of the list. So, from my standpoint and eventually the consensus of the board, Raj was the right person. Raj was named chairman effective March 1, 2015.
The capacity for overdrive
So, what makes Raj tick? My observation is that he's a person who is very quiet and modest and when you're around him, you wouldn't think that this guy has got overdrive in him. It's the first thing you notice when you get to know him, though. He just has it. And it's bone-deep. It's part of his fabric, his character. He's willing to work very, very hard at whatever he does in order to make you a success. He puts in whatever time it takes, whatever meetings he has to go to, whatever he has to do in order to try and make the project or venture a success. I think this was in his DNA or from his early upbringing in India and his time in the U.S.
I'm not sure what was in his mind when he first came to this country or when he started his career in finance. I don't think he ever had a vision that he would become CEO of Rohm and Haas someday. I think he saw his career in stages, wanting to take every opportunity that came to him and make the best of it he could. His focus was on whatever assignment he was given, and he does that to this day. That's what got him to be a successful CEO and board member.
When I was at DuPont, I counseled people who were always looking at the next job by saying, “Don't look up the line. Do your current job as well as you can and get results. You'll be recognized, I assure you. That's the best chance of getting whatever you want to be — a general manager, CEO, or whatever you're best fitted for.” As I was coming up through the ranks, I saw people who were concentrating on who they knew, what were the right parties to go to, and what DuPont family members to get to know. I told them they were focusing on the wrong things. And you know what? Most of these people left the company. They never made it. They probably felt they weren't moving fast enough or had hit the ceiling. They thought they should have been CEO after a few years with the company. I never saw Raj that way. With Raj, it's about getting the job done that he's working on and trying to settle issues collaboratively. That's how he managed his career, I'm sure, and that's how he tackles tough assignments now.
The last thing I'll mention is that board members have to understand the business to add value for the shareholders. I served on an insurance company board and realized that to add any value I had to understand the business model and how the company made money. It was very different from the chemical business. And it took some time.
Learn the business
The lesson here for any board member is to learn the business, the way it makes money, the culture, the values, its unique language, and the leverage that a company has in the marketplace in order to constantly focus on the areas that will result in growing the value of the business. It's as simple and as hard as that.
Much of being a good CEO and a good board member is discipline — self-discipline and cost discipline while growing the portfolio and taking advantage of new products and new markets. But there's more, and that's where company leadership and board leadership come together. The same criteria that drive successful company management drives board membership: integrity and trust, excellence, teamwork, and accountability. We look to choose the CEO according to those same criteria that I look for to recruit board members.
That's what we did at DuPont, what Raj did at Rohm and Haas, and what we are doing at Tyco and Delphi Automotive and the other boards I serve on. We look for board members who know the business or invest the time to learn the business, and can bring value to board decisions. That's where a board can help management the most — giving good advice.
I've served on 11 corporate boards, each one teaching me something about managing companies, or industries. I've learned a lot. What's next I don't know, but having worked with Raj is one of the highlights of my career. He's a remarkable man. I'm proud to know him and call him friend.