A ‘home run' for Buffett's board
From The Women of Berkshire Hathaway by Karen Lindner. Copyright ©2012 by the author. Published by Wiley (www.wiley.com).
Susan L. Decker is one of two female members of the 12-member board of directors of Berkshire Hathaway and is also the youngest director, at 49 years old. She's been a member of the board since May 2007, and is also a member of the governance, compensation, and nominating committee and the audit committee.
At the time of her recruitment to the board, Sue was president of Yahoo! Berkshire Hathaway Vice Chairman Charles Munger, Washington Post Co. Chairman Donald Graham, and David Gottesman, a fellow Berkshire board member, recommended her for board membership.
“She passed some pretty tough tests when she got A-pluses from all three,” Warren Buffett, chairman of Berkshire Hathaway, recalls. He describes Decker as a “home run” for a Berkshire board seat. “We made the right choice. She's young, so she's going to be there a long time. When we next have to find a director, I'd be very happy if we find someone like Sue.”
Buffett adds, “In selecting a new director, we were guided by our long-standing criteria, which are that board members be owner-oriented, business-savvy, interested and truly independent. That's exactly what we've found in Susan Decker. We are lucky to have her. She scores very high on our four criteria. We will seek more young directors in the future, but never by slighting the four qualities that we insist upon.”
Karen Lindner is the founder and CEO of Linspiration, a corporation that supports entrepreneurship, creativity and education (www.linspiration.org).
What a benefit: Time to think
From Management in 10 Words by Terry Leahy. Copyright ©2012 by the author. Published by Crown Business (www.crownpublishing.com).
By 1992, morale at Tesco was flagging and a sense of crisis was beginning to set in. Sitting at my desk one October day, I was suddenly summoned upstairs for a meeting with the CEO, Ian MacLaurin. I walked in to find David Malpas, his managing director, there too. I immediately thought I was going to be fired. We were losing customers and I shared more than just some of the responsibility — at the time I was commercial director of Fresh Foods, buying and selling a large part of what Tesco sold. Instead, they asked me if I wanted to be marketing director and on the board. A promotion.
The color drained from my face. The only thing I felt missing from the room was a poisoned chalice. But I accepted. I had just been made an offer I could not refuse. There was no choice.
Although it sounded powerful, the role of marketing director had been created for me and so was untried and untested. On my first day I had no team, no meetings scheduled, just an empty office. For someone who is not innately confident, and who likes the structure that action points, agendas and plans bring, I found it all deeply unsettling. But the lack of paraphernalia that usually goes with a new job gave me something I now realize is the most precious thing of all — time to think.
My task was quite simple: to find out why Tesco was struggling, and fix it.
Sir Terry Leahy stepped down as CEO of British retailer Tesco PLC in February 2011. He is a senior adviser to investment firm Clayton, Dubilier & Rice.
When to say no to a board invitation
From Before You Join a Board by John Balkcom. Copyright ©2012 by the author. Published by Dog Ear Publishing (www.dogearpublishing.net).
A board candidate recently asked me, “Okay, when do you say ‘no'? Give me a one-liner.” In response, I came up with several one-liners, any of which would be sufficient to evoke a “no” from me:
• The seniormost leadership demonstrates little or no transparency to independent members of the board.
• The organization has an excessive level of indebtedness from which it will take years to recover, if recovery is even a prospect.
• Either voting or operating control rests in the hands of one or two members of the board, and everyone else on the board is engaged in a sort of Kabuki theater of governance.
• There is no outside auditor, and no independent eyes (or experts) provide support in the preparation of financial statements.
• The senior leadership has no concrete, verifiable definition of success.
• The board and senior leadership pay little attention to risk in its manifold forms.
• The board membership exhibit unconsciousness or naiveté to the organization's competition.
These obstacles are fundamental to your invitation to any board of directors or trustees or governors.
These points propose when to say no, but how? Here, I urge selfishness. Even if a good friend initiates the opportunity for you to join a board, you (and I) have no obligation to save an existing board from itself. Among the negative responses I have given are the following:
• My dance card is full. It's an intriguing opportunity, and I appreciate the invitation, but I just cannot take on this added responsibility.
• Let's talk again in 18 months, when some of my current responsibilities will be more manageable than now. (If they come back to you, you will have 18 months' more evidence to support a yes or no.)
• This role with this organization is just not lined up with my personal goals and aspirations. It also does not play to my greatest strengths. May I suggest two or three others who may be better suited to this board? (I have never received a “no” in response to this question.)
John Balkcom has been a longtime adviser to management and boards. He serves as a corporate director and advisory board member for a number of public and private enterprises.
The myth of governing for shareholder value
From The Shareholder Value Myth by Lynn Stout. Copyright ©2012 by the author. Published by Berrett-Koehler Publishers Inc. (www.bkconnection.com).
Back when I was a law school student in the early 1980s, my professors taught me that shareholders “own” corporations and that the purpose of corporations is to “maximize shareholder value.” I was just out of college at the time and not very familiar with the business world, so this made sense enough to me. When I first began lecturing and writing in business law myself, I incorporated the shareholder value thinking that I had been taught into my own teaching and scholarship.
It soon became apparent to me there was a problem with this approach. The more I read business law cases, the more obvious it became that U.S. corporate law does not, in fact, require corporations to maximize either share price or shareholder wealth. My first reaction was puzzlement and frustration. Shareholder value thinking was almost uniformly accepted by experts in law, finance, and management. Why then, I asked myself, wasn't it required by the actual rules of corporate law?
Put bluntly, conventional shareholder value thinking is a mistake for most firms — and a big mistake at that. Shareholder value thinking causes corporate managers to focus myopically on short-term earnings reports at the expense of long-term performance; discourages investment and innovation; harms employees, customers, and communities; and causes companies to indulge in reckless, sociopathic, and socially irresponsible behaviors. It threatens the welfare of consumers, employees, communities, and investors alike. This book explains why.
Lynn Stout is the Distinguished Professor of Corporate and Business Law, Clarke Business Law Institute, at Cornell Law School.
Women take risks in very different ways
From Vital Voices by Alyse Nelson. Copyright ©2012 by Vital Voices. Published by Jossey-Bass (www.josseybass.com).
A common trait of world-changing women leaders: When confronted with tough challenges, women put forward audacious new ideas and take bold risks to improve the lives of others. Leaders do not hesitate to voice their opposition in defense of core values or principles, even at great risk to their safety or reputation. Risk is necessary to transformative change, and leaders take it on — not without fear but secure in the knowledge that they are advancing positive change.
At Vital Voices we have found that contrary to gender stereotypes, women are incredibly risk-adept. However, it is worth noting they take risks in very different ways from men. In our experience, women take calculated risks in response to need, as opposed to aggressive risks in response to opportunity. In essence it's not a question of one gender having the guts. It's a question of when members of each gender opt to expose themselves in high-stakes situations. A 2010 study similarly found that “the power to make impact” motivates women to take bold risks.
Sometimes this leadership trait is easiest to see in times of turbulence or crisis.
Alyse Nelson is president and CEO of Vital Voices Global Partnership, a nongovernmental organization founded by Hillary Rodham Clinton that identifies, trains and invests in emerging women leaders (www.vitalvoices.org).
Find common ground with your shareholders
From Voices of Governance by Karen Kane. Copyright ©2012 by the author. Published by Karen Kane Consulting (www.karenkaneconsulting.com).
In the face of the changes that are coming to corporate governance, boards would be well advised to begin their examination of the input they receive from shareholders and stakeholders by looking for common ground.
A synonym for input is contribution. Imagine if boards saw the comments and suggestions that they receive from shareholders as the way that shareholders want to contribute to the improvement and long-term strength of the company.
Trust fosters trust. If boards want to engender more trust among shareholders, they can start by trusting that their shareholders sincerely care about the issues they raise and want what's best for the company and all shareholders.
Boards that start with finding common ground with shareholders can then build outward. Neither directors nor shareholders expect to be in complete agreement. But such an approach is respectful and has as its goal the shared long-term health of the enterprise.
Karen Kane is a communications and shareholder engagement strategist who works with corporate and nonprofit CEOs and boards.