SHEILA BAIR, DIRECTOR:
Thomson Reuters, Host Hotels, and the Industrial and Commercial Bank of China
The great American author Willa Cather once said, “Too much information can be deadening.” What my kid's call “TMI” is a common public ailment with today's technology-driven communications. And it can be fatal for boards of directors who need enough information to ask the right questions of management and make reasoned decisions, but who can quickly lose sight of the important issues if inundated with too much minutiae.
This challenge to know how much information is enough has been particularly acute for the directors of large banking organizations who have been hit with a raft of new regulations since the 2008 financial crisis. Bank supervisors have — justifiably — looked to governing boards to make sure regulatory concerns are addressed in a timely way. Yet I hear from many large bank board directors, particularly in the United States, that they are overwhelmed by the sheer weight and complexity of regulatory matters addressed to them by bank examiners.
To its credit, the Federal Reserve Board proposed guidance last August to more clearly distinguish supervisory expectations for boards from those of senior management. I applaud this effort which Fed Chair-nominee Jerome Powell describes as intended “to enable directors to spend less board time on routine matters and more on core board responsibilities.” Importantly, Chair-nominee Powell has clarified that while supervisory matters will now be addressed to management, boards will receive copies of examination and inspection reports so they can hold management accountable for remediation. The Fed has struck a good balance in this guidance, which should be welcome relief to beleaguered bank directors.
Sheila Bair was chair of the U.S. Federal Deposit Insurance Corporation from 2006-2011. She is a founding board member of The Volcker Alliance, a nonprofit dedicated to excellence in public service.
STEVE ODLAND, DIRECTOR:
General Mills, Inc. and Analogic Corporation
As a former CEO and board member of two companies that recently have gone through a CEO change, CEO succession is top of mind. About 86% of new CEOs are chosen from internal candidates. So review of internal bench strength, development plans and performance of all senior team members is critical. Boards are making a far greater commitment to grooming internal talent to become the next CEO because these individuals already know the company, the culture and the strategy. This is important as new CEOs must engage like they are merging onto a freeway — come up to speed and get into the flow without causing major accidents!
Boards also should be involved in external recruiting for key positions from which CEO successors will be chosen. Even when companies bring in an outsider, they generally bring the candidate on below the CEO to try them out and bring the candidate up to speed. Succession plans are becoming more transparent as well. This allows a board to monitor internal and external reaction to potential candidates. In the end, a well-developed and frequently evaluated CEO succession plan can determine the success of any company.
Steve Odland is the CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone.
(If you’re a director of a publicly traded company board and want to offer your Top of Mind insights for an upcoming issue email Eve Tahmincioglu, eve@directorsandboards.com)