Editor: Welcome Dr. King. Please start our discussion with a description of NACD and its value proposition.
King: As you can imagine, I find it very exciting to describe NACD. Celebrating its 35th anniversary last year, NACD is the oldest and largest organization for directors and boards in the United States. We have more than 13,000 corporate director members and are still rapidly growing. Importantly, NACD has over 950 Full Board members, meaning their company’s full board is an NACD member. NACD’s 12-member board of directors and outstanding staff are passionately committed to advancing exemplary board leadership.
Our mission is to inspire directors and boards to perform as strategic assets for the enterprise. Typically, a board member is selected on the basis of knowledge, experience and contribution to the board’s collective knowledge base. NACD empowers boards collectively and their members individually, and we particularly focus on effective performance of boardroom responsibilities. This objective for full board engagement equally applies to our own NACD board and will be a priority for me in my role as chairman.
As a membership association where directors invest precious time and money for educational services, NACD is especially conscious about delivering top value to our members. We offer a variety of programs, including online learning opportunities; peer education, such as seminars and events; and in-boardroom development/advisory programs, which involve fellow board members learning together at a site of their own choosing.
We also offer a fellowship or credentialing program, which recognizes members who achieve a defined level of education. There are two fellowship programs: NACD Board Leadership and NACD Governance Fellow, and both enable members to showcase their commitment to boardroom excellence.
Editor: In your 40 years of boardroom service, what would you say are the attributes of a great board of directors?
King: This is a very important question, so let me offer just a few key attributes based on my own experiences. Collectively, a great board knows its role and key responsibilities, and with the help of the board’s leadership and ongoing work with management, a great board is engaged and proactive about exercising its duties. In these changing times, if something needs fixing, delays will only exacerbate the problem. It’s important to lay out a plan for assessing and discussing the problem, and then move quickly toward corrective action.
A great board understands its role relative to management. The board oversees, advises and serves as a resource – as distinct from managing the company. While they are informed by past experiences, great boards are future oriented, which is particularly important when discharging their key duty of selecting a CEO.
A great board is mindful about fostering a “culture for candor” amongst board members and between the board and management. This kind of culture enables each board member to contribute fully to the overall board effectiveness, regardless of the sensitivity of the topic.
NACD conducts primary research through our Blue Ribbon Commissions, and one of their annual reports identifies key duties of board members, including decision-making and risk oversight. Reports like these can inform boards in a comprehensive way about their duties and responsibilities.
Editor: What are the critical attributes of directors individually?
King: Similar to attributes of great boards, a good director is knowledgeable about his or her duties and obligations to the enterprise and board. A good director stays informed about key enterprise and industry developments, such as environmental and compliance trends, and also recognizes knowledge gaps that signal a need for continuing education.
For example, cybersecurity concerns have crept into prominence over the last 20 years, which means that directors now must become familiar with the issues. Further, since 2008 we’ve seen greater emphasis on clarifying the board’s role for risk oversight. These emerging areas of new knowledge are layered on top of traditional areas of responsibilities, which remain compelling, so we continue to hear a lot about audits, disclosure and transparency and about compensation, nomination and governance committee responsibilities.
Certainly, directors must be aware of new technological developments affecting their companies. Without aiming to become an expert, I constantly seek to be informed about relevant technological changes in order to help my board in governing the company. The objective is to fully understand how the board’s oversight role and responsibilities might change over time, and this objective should translate into questions that a good director will ask at different times while serving on the board.
A good director diligently prepares for board and committee meetings, actively contributes to the discussions and makes time to participate in special board member events, such as visits to facilities and other learning opportunities that help with understanding a company’s culture beyond the executive levels of management.
Editor: Please give our readers an introduction to NACD’s Directorship 2020 program.
King: The NACD Directorship 2020 is a forward-looking initiative that helps boards understand, define and prepare for the emerging and evolving issues that will shape the future of directorship. The initiative is premised on NACD’s solid organizational foundation and existing strengths: our strong mission, board and executive team; a large membership of individuals and corporate boards, including a 22-chapter network; many partner organizations; and a strong director education/recognition program. Collectively, these assets provide the platform and a solid footing for approaching the future with confidence.
In the future, companies will wrestle with a range of internal and external sustainability issues that are important for the company’s long-term success. As new issues and questions arise for companies, the related question is “What is the board’s role, and how can the board best govern in the new environment?”
The NACD Directorship 2020 initiative supplements our longstanding efforts to help NACD members gain insights and build confidence through education programs that leverage peer-to-peer exchange in sharing best practices and forward-thinking approaches. The theme for NACD’s 2013 Board Leadership Conference is “Future-Proofing The Boardroom,” which is a very bold indication of our desire to help board members prepare for the future.
Editor: What is your sense of the how proxy issues are currently playing out?
King: The current proxy season reflects considerable progress on the critical issues facing corporate boards, though I hasten to add that more can be done. Based on surveys by NACD and other governance organizations and on my own sampling of public documents from individual companies across different industries, we can see substantial progress on numerous publicized proxy issues, especially since the financial downturn in 2008.
Individual company reports are reflecting more transparency and quality information as companies become more progressive in the areas of executive compensation, risk oversight, describing the qualifications of board candidates and improving disclosures on topics like risk oversight by their boards. Companies are reporting noticeable refinements in their CD&A statements. As a long-time participant on several board compensation committees, I understand firsthand the rigorous work involved in improving these documents. Also, I co-chaired the NACD Blue Ribbon Commission report on Risk Governance, which inspired a natural curiosity about how this information is presented to the public and how it improves company communications with shareholders and investors. There is always room for improvement, but I resist letting a few poor performers color the image of companies and boards that are doing excellent work in this area of governance.
Now if a company isn’t as progressive as it wants to be, then it will discover the deficiency in its own board evaluation. NACD can help with evaluations of boards as a whole or of individual members, and regular evaluations can help identify concerns or weaknesses and prompt changes to improve board performance.
Editor: How do the challenges we’ve been discussing figure into the development of programs for NACD members? Is this done in collaboration with your membership?
King: Absolutely. We often develop programs based on NACD surveys and excellent member feedback about issues and target areas for aggregate improvement. We talk to companies and board members all the time so we can develop programs for companies of all sizes, and we also work with many partner organizations to improve governance. Finally, we ensure ongoing quality by asking participants to evaluate each NACD event and answer open-ended questions as to what we should cover in the future. These efforts ensure that NACD programs reflect the collective wisdom of peer exchanges on emerging needs for educational services.
Another important resource for members and anyone interested in governance is NACD’s signature Blue Ribbon Commission Report. For two decades, these annual reports have targeted important topics and sought to influence board development, board effectiveness and board action. We carefully select knowledgeable and influential people to write the reports, which we consider to be fine resources for stimulating improvements in corporate governance.
Editor: Please tell our readers about the 2012 Blue Ribbon Commission (BRC) report on board diversity.
King: It’s a magnificent report because of both its content and its timing. The title is “The Diverse Board: Moving from Interest to Action,” which provides a clue to the commission’s thinking on why diversity is important for companies. Our primary conclusion is that diversity is a business imperative and a means to competitiveness. Here are just a few highlights from the Report, and let me suggest that interested persons obtain the full Report from NACD.
The report has three key and straightforward recommendations for a board: discuss the need for diversity, select and implement solutions and, finally, reach beyond the required disclosures by providing shareholders with a thorough explanation of the directors search process and the potential value a diverse outcome brings to the company.
Board discussion is important because boards, companies and industries should define diversity in a way that is meaningful for their particular situation. For example, gender, race, minority background, global cultures for multinational companies, and other criteria might be considered in defining diversity. Selecting and implementing solutions involves reviewing and evaluating board composition, setting some goals, and expanding your horizons for seeking candidates.
In different ways, the BRC Report emphasizes the central importance of the board’s action in increasing board diversity, which is embodied in the report’s subtitle – “Moving From Interest to Action.” Many groups outside of the boardroom are pushing to “move the needle” on diversity. It was clear to our commission that if the boards do not act, the needle won’t move.
Editor: In closing, please tell us why NACD’s mission matters.
King: NACD’s mission matters because it advances exemplary board leadership and excellence, and it matters for both boards and their individual members. Continuing education for directors is important for sustained director effectiveness in our changing, complex environment, and strong corporate boards are important for the long-term, sustainable success of companies. With effective governance, companies are better able to increase value for shareholders and investors and to positively influence the well-being of communities.
As a corporate director, I always believed that what boards do to help their companies will benefit society as well. This is another reason why NACD’s mission matters so much to me.