CM: Is the reform movement still advancing steadily in corporate governance today, or has it begun to abate?
Nadler: Well, we just did a joint study, which we're going to release soon, on the best practices of boards and CEO succession. We looked at 23 companies and were able to talk with the committees that managed succession.
And they see (for example, this is just one issue) that a succession used to be run by a CEO. Today, it's jointly run by the CEO and boards, and they now see a future where board members will be running the board, with the CEO providing input. So this indicates that the transition is continuing. It's not necessarily abating.
CM: What types of approaches are CEOs taking to energize their boards?
Nadler: Well, I think that there are two things. One is that we typically start with some form of board assessment that moves beyond just checking boxes. We're doing that probably with half a dozen boards now, where we're doing in-depth interviews as well as using different types of survey instruments to help the boards understand how they're performing now versus what they believe they should be doing, with input from both the board and management.
The other issue that comes up, and this is another indicator of change, is the rise of independent board leadership. We have this blue-ribbon commission, which I co-chair with Jay Lorsh. And the strong recommendation of the commission is that, given the nature of boards and their relationships to CEOs, there needs to be independent leadership of the board. It can come in two flavors, typically — either separation of chairman and CEO, or a lead director. We were agnostic; we are not arguing for separation.
CM: What is often the first order of business when you work with boards?
Nadler: Well, I'm heading off to spend two days with a board tomorrow, so I can give you a few thoughts.
The broadest generic issue is that the rules of the game have changed. In any board, you have a range of people. … There are those whom I would call passive directors. Then there is the other extreme of people, who now want to micromanage the firm, which isn't right either. And then there are some people in the middle. And this breakdown, of course, varies issue by issue.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.