Leading the Board
The Critical Role & Qualifications of The Non-Executive Chairman
Excerpted from Governance Arbitrage: Blowing Up the Public Company Governance Model to Maximize Long-Term Shareholder Value
“I’ve been a big fan for years of splitting the jobs of the CEO and the chairman. And that is now beginning to happen. But that’s nowhere near enough. Having an outsider or an academic like me as the chairman isn’t the same thing as having Brian [Hoesterey] or Carl [Ferenbach] [private equity firm leaders] be the chairman. That’s a totally different world and we have a long way to go to get there.” Michael Jensen, Jesse Isador Strauss Professor of Business Administration Emeritus, Harvard Business School (1)
Corporate governance literature is full of many things. One of the things that it is most full of is the “best practice” of separating the Chairmanship from the CEO role. For those who advocate this and consider it a best practice, the argument is typically made within the context of the current compliance focused governance model. Said another way, the argument is made from the perspective of the board being the company’s “policeman” with an overall focus on the prevention of wrongdoing, As such, the key (and typically only) criteria is that the an individual filling the non-executive chairman role be independent as defined by regulations and guidelines.
What is most interesting about the above context for separating the two roles is the argument made by its detractors. Those in opposition (and some who are neutral) point out that there is no quantifiable proof that the separation of the roles leads to higher performance or stock price. But, why would anyone expect there to be? First, as noted, the governance model itself is not conducive the driving a company to its full potential. Second, there is nothing that speaks to the skills, experience and track record that a great candidate for the non-executive chairman role should have other than independence and being skilled at reaching consensus neither of which are attributes that speak to performance leadership. The non-executive chairman role is in essence neutered, in the same manner as the board, and thus falls far short of the value that can be provided by an exceptional chairman.
Conversely, the lynchpin of this more robust, value maximization model is the non-executive chairman position. In order to develop and implement this new model, the right leadership provided by the right individual will be essential. I have given this considerable thought yet am unable to envision a scenario in which there is a shift to a highly engaged value maximization governance model that could be successful with a chairman that does not have the responsibilities of the role properly defined and that does not possess, most, if not all, of the skills, experience and track record required to execute in this role at a high level. While perfection is certainly not a prerequisite, what is brought to the table must be more than independence and the ability to achieve consensus. In short, what should be sought in this role is a “value maximization leader.”
The following from two Wall Street Journal articles regarding the newly named non-executive chairman of HSBC, while again not perfection regarding the qualifications that will follow, will provide some interesting color as to what a good choice for a non-executive chairman could look like. Granted, UK domiciled companies typically have non-executive chairmen that are more engaged than U.S. companies. Yet, this particular choice is clearly focused on an individual who will bring an entrepreneurial mindset and solid value creation track record — two key qualities that are a must in a non-executive chairman in order to lead a value maximization focused board.
“HSBC, one of the world’s largest banks that has struggled to grow after a so-called “lost decade”, looks to have chosen well. Mr. Tucker has plenty of experience in Asia, the region that dominates HSBC’s earnings. As chief executive since 2010 of AIA, the insurance company spun out of AIG after the financial crisis, and before that as boss of Asia-focused Prudential PLC, Mr. Tucker has come to know the region’s complexities. AIA, for example, has managed to successfully expand its business in China despite a crackdown on the insurance industry there.
“Of more interest to HSBC shareholders may be Mr. Tucker’s focus on growth at AIA. He took on accretive acquisitions, expanded the company’s banking partnerships and ventured into new markets. The value of AIA’s new insurance business has quadrupled on Mr. Tucker’s watch, along with a doubling of its operating profits and a threefold increase in its dividends per share. Mr. Tucker’s prior experience at Prudential, divesting underperforming businesses and warding off a hostile takeover are also noteworthy.
“With his experience across different jurisdictions in Asia, Mr. Tucker could help make capital allocation more efficient at HSBC as it implements its next three-year strategic plan, starting from 2018. That’s important for a bank which still has a significant portion of its capital in businesses and geographies that don’t earn an adequate return on equity, according to Goldman Sachs analysts.” (2)
“HSBC is stepping out of its comfort zone in picking its first chairman from outside its executive ranks. In Mark Tucker, the hard-charging, entrepreneurial chief executive of insurer AIA, it has chosen someone of a very different breed.
“Investors will hope the bank has found a chairman who can pick up the pace at an institution whose privileged history — it was for decades Hong Kong’s de facto central bank — has at times slowed it down. HSBC has become good at returning capital, but partly because it is struggling to find profitable growth.
“Mr. Tucker will be a nonexecutive chairman, but he will be an engaged and demanding one for HSBC’s mostly Hong Kong- and London-based executives. The bank needs a tune up and Mr. Tucker has the potential to make some people’s lives uncomfortable.” (3)
Key Responsibilities of a High Performance Non-Executive Chairman:
“Let’s face it, to lead is to live dangerously.” Heiftetz and Linsky (4)
1. Leadership
A board that has its primary focus on compliance and “protecting” assets does not necessarily require strong leadership; at least not the type of leadership to be discussed here. But, in a new, more robust governance model that has as its primary raison d’être the optimization of capital allocation and the maximization of the performance of the business and shareholder value and in which the board is more intensely engaged in this value creation process, strong leadership from the non-executive chairman is essential.
Regardless of the circumstance or venue, all really great leaders set a direction and create a broad context for whatever group or organization they lead. This is as equally applicable to the non-executive chairman as it is for any other leadership role. At its best, a board is like any other high performance team with each member bringing specific skills, experience and track record directly relevant to the value creation focuses of the company (more on this in the section on director selection criteria). And, this team, like any other, needs a leader in order to achieve its full potential.
The core of the leadership responsibility of the non-executive chairman is to set an “overarching purpose” or governing objective of the board. And while there is much left to be desired of the current process for director nominations, it is the shareholders that elect the board. Therefore, as noted previously and viewed through the lens of the investors to whom the board is accountable, a high performance chairman will clearly recognize that the board has as its primary responsibility the maximization of shareholder value. As such, it will be this aim to which the chairman sets the “overarching purpose” of the board. In other words, the chairman has the clear responsibility to lead the board in the direction of ensuring that capital is allocated for the highest returns and maximizing the performance and value of the company.
Identifying the core responsibility of the non-executive chairman as leadership does not imply that the chairman should be an autocrat, in fact far from it. However, what this does imply is that the chairman needs to bring a crystal clear perspective regarding the board’s primary responsibility and in no manner waver from setting the tone, standards and expectations that ensure that the full board engages in seeking maximum results. Viewed a different way, the non-executive chairman, through his or her leadership, has the job of maximizing the potential and performance of the board so as to ensure the full potential realization of the company being governed.
Compliance is a fact of life for public companies. Yet far too many public company boards, lacking strong value creation oriented leadership, have allowed compliance to become the sine qua non of board focus. Inherent in the leadership responsibility of the non-executive chairman is the requirement to ensure that compliance requirements are met but not allowed to become the dominant focus. It is imperative for a new chairman who encounters an imbalance in focus toward compliance to exert his or her leadership to shift the primary activity of the board toward value maximization.
One of the greatest outcomes of strong value creation oriented leadership from the chairman is that the board will shift to a position of strength and control vis a vis management. This shift, with the proper leadership, does not result in an adversarial relationship with management but instead to one that firmly puts the board “in charge” as opposed to many boards that are either overtly or subtly dominated by management. The importance of this shift will become increasingly visible in later sections that involve certain actions that must be driven by the board rather than management, or at least management alone.
In addition, when the chairman provides strong leadership, the impact is felt not only by the board but also by the CEO and other members of senior management. In describing the exceptional qualities of Private Equity portfolio company governance, a paper entitled Corporate Governance and Value Creation: Evidence from Private Equity by Viral V. Acharya, Moritz Hahn and Conor Kehoe, states “Overall it seems that PE governance overcomes the principal-agent problems with management through an “encourage and challenge” approach. (5) Strong, value creation oriented leadership from the non-executive chairman can equal or at least approximate this same “encourage and challenge” approach with management in a public company especially when coupled with the other components of a value maximization board to be discussed.
The type of leadership referenced here on the part of the chairman creates an environment and an energy that pulls the board and management together with a common purpose of driving maximum performance and value coupled with a sense of urgency that is typically found only in private equity portfolio companies. This “sense of urgency” does NOT imply the current and dreaded “short-termism.” Instead the implication here is an aggressive and rapid action to toward the achievement of results as targeted in the value maximization plan (to be discussed in Chapter 6).
In short, the chairman should have a clear vision of what a value maximization focused board should be and should lead the board in that direction. The remaining summary of responsibilities provides a more concrete look at how this leadership can and should manifest.
2. Learn The Industry & Business
It is essential that the non-executive chairman commit whatever time is necessary to learn the industry in which the company operates and the company itself. If the newly appointed non-executive chairman has been a member of the board for a period of time, an intensive learning program may appear to not be necessary. However, it is highly doubtful that the degree of knowledge needed to perform at a high level as chairman has been obtained as a board member.
Also, if the non-executive chairman is from the same industry as the company, it is all too easy to assume that an intensive learning program is not necessary. At best, this is short-sighted as it is imperative that the chairman becomes intimately familiar with the company that he or she is accountable to the shareholders to ensure maximization of performance and value.
The most productive path for the non-executive chairman to take to learn the industry and business is to initiate a process that is exactly like the deep-dive due diligence that private equity firms launch when evaluating and valuing a prospective acquisition candidate. We will get into much greater detail later in the book regarding this board-driven process but here suffice it to say that the chairman must set the example by approaching this with the mindset of an investor. He or she must launch and engage in this process completely through the lens of a highly interested acquirer. Then and only then will the learning necessary to maximize value and mitigate risk take place.
Although learning can encompass a wide spectrum, the core objective should be an in-depth understanding of the value drivers and leverage points for value creation and growth and the core risk issues.
This can be a time consuming process. However, in order to execute at the highest levels, it is essential for the chairman to commit the time required which will likely be far more than is needed on the part of the other directors. This provides an example to support the argument to be made in subsequent section relating to time commitment required of the high performance non-executive chairman.
In addition to his or her own learning process, the chairman as the initiator of this diligence process, will set into motion a process whereby the other directors can also take a deep dive into the company and its industry. This then positions the entire board to become knowledgeable enough to fully engage with management in the development of the key value creation initiatives that will be the drivers of performance and value going forward.
3. Engage Regularly With CEO and Other Management
One of the first responsibilities a new non-executive chairman (or one who has decided to shift focus) has is to have an in-depth discussion with the CEO about the chairman’s plans and policies as it relates to a variety of issues. The chairman must take the initiative early on to communicate to the CEO (and other members of senior management) his or her plans to guide the board to a more engaged level of functioning and a shift in primary focus toward value maximization, higher performance expectations and greater sense of urgency. The chairman needs to be aware that this may be threatening initially to the CEO if historically the board has taken a more passive and/or compliance focused role. The chairman should exercise a degree of patience and be willing to listen to management’s response, concerns and questions. However, the chairman should not allow management’s discomfort to in any manner sway his or her intent for the board.
When discussing plans for engagement with management, the chairman should provide complete assurance to the CEO that he or she has absolutely no desire to become CEO or take on any other senior management role (see next section, Characteristics, Experience and Skills to Look for in a Chair). Further, it is important that the chairman explain to the CEO why regular engagement with management is essential to fulfilling the chairman’s role and at least broadly, how he or she plans to go about the engagement with management.
More so than is espoused in current literature or in practice, the high performance non-executive chairman will assume responsibility for regular engagement with the CEO and other members of management. In assuming this responsibility, the intent should not be to cross the line into day to day management or engage in such a manner that appears to be meddling. That said, this engagement should be at the chairman’s discretion coupled with clear communication to the CEO when visits with other members of management are to be scheduled. This communication is not to be viewed as “seeking permission” but instead as an act of respect and common courtesy to the CEO. (I would argue that common courtesy still has a place in the business world although it has declined precipitously).
In general, the chairman’s engagement with the CEO and other members of management should involve the following:
· To communicate, at a high level, the board’s primary role and expectations. This communication facilitates the downward cascading of the board’s expectations of capital allocation, performance and value maximization throughout the organization. Done well, it leaves no doubt as to the board’s expectations and simultaneously will increase the board’s credibility in the eyes of key management.
· To ask questions and most importantly to listen. This is crucial to the chairman’s ability to sense the pulse of the company and receive insights that might not be forthcoming without this level of engagement. Once the value maximization plan has been developed, the chairman should have some informal discussion with the various initiative owners on an ongoing basis.
· To be a sounding board. The sounding board role relates primarily to the CEO. The chairman needs to create an atmosphere of openness so that the CEO is comfortable with this function. This role on the part of the chairman is all too often underrated. The life of a CEO is pressure-filled and personifies the old adage that “it is lonely at the top.” Having a sounding board in the person of the chairman can be of immense benefit to the CEO.
· To coach. As with the aforementioned role of “sounding board” the role of “coach” is primarily applicable to the CEO. Here it is vital that the chairman use his or her judgment as to the extent that “coaching” is provided.
4. Set The Standards For The Value Creation Process
“Similarly, most companies manage value and performance via their financial systems and budgeting processes. Again, most have succeeded with this basic management task, yet few have specifically targeted the value drivers and leverage points for value creation and growth. In contrast, top performers (emphasis added) simultaneously target value creation drivers and focus on “risks that matter” to achieve superior financial performance, organizational effectiveness and value growth.” Directors & Boards Webinar Abstract (6)
Great leaders set high standards and push the envelope as much as possible. This is exactly what is required of the non-executive chairman in regard to the value creation process. Consider this hypothetical communication by a new non-executive chairman during his first board executive session meeting:
“Ladies and gentlemen, I believe that the status quo of public company corporate governance is an enemy to the company’s potential being realized and that the board has the responsibility to our shareholders to set the bar at a new height. To that end, I would like to share some information with you. ‘In a recent study which analyzed 70 successful private equity deals, McKinsey found that primary source of value creation in the majority of these deals was the out-performance of the company — not price arbitrage, not financial engineering and not overall sector gains or stock market appreciation — just better management of the business. Even more surprising, however, was McKinsey’s finding that this out-performance was primarily driven by changes to the way the boards of these enterprises worked — what McKinsey calls a more engaged form of corporate governance.’ (7) This is from an article written by an Egon Zehnder International senior executive and is substantiated by a different study done by Ernst & Young. In an in-depth study of private equity transactions focused on how private equity firms create value, Ernst & Young found, ‘The annual rate of growth in EV (Enterprise Value) achieved by the largest Private Equity-owned businesses outperformed equivalent public companies (in the same country, industry sector, and timeframe). Average annual EV growth rates were 33% in the US compared to public company equivalents of 11 %.’ (8)
“The Egon Zehnder article was written after that firm talked with a number of individuals who have served on public and private equity boards in order to better understand McKinsey’s findings. ‘Four key themes emerged from these discussions: private equity boards are characterized by focus — clear agreement with management about what is important; decisiveness — a preparedness to act; results orientation — a restless search for super-returns; and engagement — robust and regular communication within the board and with the executive team.’ I would submit to you that these findings can be even more succinctly summarized in that private equity boards implement extraordinarily focused value creation processes.
“These comparative results between private equity companies and their publicly traded peers are compelling and should not be ignored. In fact, the concluding paragraph in the Egon Zehnder article stated, ‘Regardless, the Chairmen of big public companies might well be advised to promote a more focused, results-oriented and decisive board culture.’ I have taken this “challenge” to heart. We owe it to our shareholders to set new standards of engagement and expectations for performance. To that end I propose that we set as job number one the establishment of a much more robust approach to the value creation process than is typically found in public companies. It will take work. It will not be easy. It is likely to be upsetting to management initially and possibly to some of you here in this room. But, implemented well, it will provide the optimal approach to doing what the shareholders put us in place to do and that is to maximize the value of their investment over the long term.”
Again, the above is hypothetical yet illustrative of the responsibility that the non-executive chairman has to set the standards for the board’s role and engagement in its all-important responsibility to the shareholders. The chairman cannot do this alone but can and should step up to the plate in a leadership role to pave the way for a significantly more vigorous value creation process.
The chairman’s leadership also comes into play in creating the right environment or atmosphere as a context for the board’s engagement in development of the value maximization plan. Executed well, nothing should be off the table during this process. The frame of reference should not be the past (other than as background) but the future and the full potential of the company. The environment created by the chairman should open the door for everything to be questioned and for directors be free to ask what may even seem to be naïve questions.
The development of the Value Maximization Plan will be covered in a later section of this book. This will require an approach that is quite different and far more in-depth than the typical “strategic planning” process. This will require a significant shift and raising of the bar on the part of the board which is why the chairman’s leadership is so vital.
5. Ensure Robust Engagement In Monitoring Value Creation Plan Progress
In one sense, this is an extension of the immediately prior responsibility. However, its importance warrants a separate discussion.
For the sake of discussion, assume that the chairman’s leadership in guiding the board to develop a more intense and engaged approach to the value creation process has been successful. The board has rolled up their collective sleeves and engaged with management in an in-depth review of the industry, the company’s place therein, markets, products productivity and efficiency improvements and the inherent risks associated with each area probed. Their process has been executed as if they were starting from scratch in regard to the company’s potential with a sophisticated view to developing an investment thesis for the company. Under the chairman’s leadership, they have done this with a clear view of developing a value maximization plan that is unparalleled in the company’s recent history. And, they have been successful. But, now what? If the now what is not asked, answered and responded to with intense execution, the entire process can easily come apart.
The “now what” once again demands leadership from the non-executive chairman. The development of the value maximization plan is only the first step. It now becomes critical that the board is intimately engaged in monitoring the progress toward the key milestones and targets reflected in the plan. This is not just a simple “oversight’ function. Instead, is one that requires the non-executive chairman’s leadership and initiative regarding the following:
· Ensure that management has developed the value maximization plan in a manner that clearly and simply spells out key timelines, milestones, targets, metrics and individuals accountable for each key plan component and specific results. This provides the data points needed by the board to effectively measure progress. Further, the chairman should take the lead in engaging the full board in the process, along with management, of developing the value maximization plan, especially as it applies to the first level identification of the key value drivers, the inherent risks around same and the major initiatives designed to drive the company to its full potential.
· Work with management to develop a reporting format and information flow system that provides frequent, timely and accurate information to the full board regarding progress toward the plan’s milestones, etc. In addition, the chairman should also counsel with board members to seek their input regarding the content of this essential flow of information. In order to maintain the focus necessary on plan progress, the frequency of the information flow to the board may need to be increased, in some cases, dramatically.
· Place the review of the execution progress of the value maximization plan as the primary agenda topic for each board meeting and schedule adequate time for presentation and discussion. The chairman should take the lead to ensure that each board meeting includes not only a report from the CEO but also detailed presentations by those executives who are the “owners” of the key initiatives of the value maximization plan. In addition and depending upon the situation at the time, additional reports by and engagement of, other management who have direct responsibility for segments of the key initiatives should be scheduled by the chairman.
· Lead the board, by example if necessary, especially in the early stages, to increase their engagement in the review and discussion of the plan execution. If value is to be maximized, board members need to be willing to not accept at face value everything that management states. There is a heightened need for much more robust debate. When there are variances from plan, the board must be willing to ask much tougher, more detailed and probing questions and not be satisfied with perfunctory or evasive answers. For many, if not most, public company boards, a shift toward greater engagement in this process will be awkward and uncomfortable. Many directors will resist as they will have been convinced at some time in the past that a board is not supposed to engage at this level. This is where the chairman’s highly focused value maximization intent must come into play in the form of leading the board toward this new and more vigorous manner of functioning.
6. Implement Strict Management Accountability Standards
All too often, boards fail, and sometimes miserably, in setting high standards of management accountability and in adhering to those standards in the rare cases where they are set in the first place. The issue of high management accountability standards is another crucial arena of leadership for the non-executive chairman. As with other aspects of the chairman’s role, he or she has to take the lead in setting the tone for holding management strictly accountable for results. Management accountability can cover a very broad spectrum, much of which is outside the scope of this book. For our discussion, there are two primary focuses that are most essential, both of which involve performance relative to plan.
First, is the achievement of key milestones, targets, etc. of the value maximization plan. As noted above, the board must be willing to address plan variances and to do so quickly and directly. If there are shortfalls to key plan milestones, targets and/or metrics this must be addressed head on. Management should be expected to provide concrete responses. Even more importantly, the expectation must be that management gets out ahead of the negative variance issue providing a targeted response as to how the shortfall will be corrected, by when and by whom. This involves a highly engaged process on the part of the board and is the core of how management accountability is made real in practice. The non-executive chairman has the key role in ensuring that the board engages in this manner.
Second, management accountability comes into play if performance relative to plan reaches a point where it is (or should be) clear that it is unacceptable. For many public company boards, this point comes far too late or not at all. The high performance chairman is simply not going to allow this to happen and will use all of his or her influence (if needed) to guide the board to making the needed management change(s).
Put simply, standards and expectations regarding management performance need to increase, and it falls squarely on the chairman to ensure that this becomes the new reality.
7. Influence Management Incentive Programs
One of the hottest topics in corporate governance today is executive pay. The topic is hot for two reasons: (1) The amount of pay and (2) The lack of a clear and direct link of incentive pay to real performance. It is the latter that should most concern the non-executive chairman. Boards today continue to fail at getting this critical issue right relative to their fiduciary responsibility to shareholders.
Incentive compensation, especially for the CEO, must be a front and center responsibility for the non-executive chairman. Although much of this may be delegated to the Compensation Committee in public companies, the non-executive chairman, who is taking a leadership role as it relates to company performance and shareholder value maximization, must take the responsibility to exert influence and guidance. He or she should have one objective in mind: That the CEO can only profit at a high level if performance warrants. The chairman should take all actions necessary to approximate the CEO and other key management incentive structures implemented by private equity firms. In the private equity world, management has an opportunity to create substantial wealth, but there is absolutely no ambiguity in regard to the link between this wealth creation and the performance of the business and increase in the equity value of the portfolio company.
At private equity portfolio companies, incentive compensation is rather straightforward. There is a concrete timeframe that commences at the time of the acquisition and at some point, the PE firm will exit from the investment either via a sale of the company or an initial public offering. In addition, the sale price or the IPO bring a further concreteness as to the value that has been generated, relative to the initial equity invested by the PE firm, over the life of the investment. Public companies do not necessarily have this degree of finite “beginnings and especially “endings.” This requires a bit more creativity in order to develop a truly performance based incentive compensation program. The non-executive chairman will need to take all of this into consideration when providing broad guidance for incentive compensation.
8. Influence Director Selection
It is important here to face the facts: Director selection in public companies has long left much to be desired. And, the regulatory changes as discussed previously have not helped this situation and in some ways have made it worse.
This more robust model of the non-executive chairman role should be part and parcel of a new model for the entire board. In this model, the sole reference point to director selection should be the industry, strategic focus and value creation requirements of the company in question. Period. Generally, directors should include three basic groups. (1) Individuals with relevant (and reasonably up to date) industry experience (and track record) (2) Individuals with expertise (and track record) as it relates to specific strategic needs, e.g. marketing, technology, etc. and (3) Individuals with broad value creation experience such as those with private equity experience (and track record) or large shareholders of the company (more on this in a later section of the book).
The above description is not in alignment with most public company boards. As such, and with the specific needs of the company in mind, the non-executive chairman has the responsibility to use his or her influence to shape the director selection process. This is obviously not an absolute power of the chairman nor is this an attempt to advocate this. However, the chairman can work closely with the chairman of the Governance & Nominating Committee to make his or her perspectives known. The non-executive chairman should take on the responsibility to complete an in-depth analysis of the needs of the board in an objective, “business case” fashion to underpin his or her work with the chairman of the G & N committee.
While a really great chairman through strong leadership can improve the functioning of a less than stellar board, the highest performance will come through a combination of strong leadership and the optimum “team” having been assembled. The chairman has the responsibility to influence the selection of this “team” to the degree possible.
9. Implement A Process of Continuous Improvement
Most boards now have formal evaluation processes. However, a high performance non-executive chairman will have the responsibility to develop his or own approach to continuous improvement. In addition, this will not be an annual exercise but one that is ongoing.
An analogy here may be helpful. Head football coaches review game films to assess the performance, both good and bad, of their teams and the individual players. They also develop other methods of evaluating performance and developing action plans for continuous improvement. The really great head coaches are masters at this but they do not rely on a formal or “canned” process in order to lead their team to higher levels. Instead, they use their own observation, judgment and individually developed methods.
The high performance non-executive chairman will have continuous improvement at the top of his or her agenda. The vision of the high performance board and its over-arching purpose as described previously provides the context for the chairman’s ongoing evaluation of the board and its functioning. Observations during board meetings, regular discussions with individual directors seeking both feedback and offering comments/suggestions, discussions with management and communication with shareholders all provide the flow of information needed for the chairman to determine needed improvements and to develop plans/actions to address these improvements.
10. Time Commitment
The time commitment needed to provide the leadership required of an engaged high performance non-executive chairman is considerably greater than that required per the current view of this role. The chairman has the responsibility to ensure at the outset that he or she has no issues with an extensive time commitment and is willing to commit the time necessary to fulfill all of the requirements of this more robust board leadership position.
It is difficult to suggest with any degree of accuracy what the actual time commitment will be as this will vary depending upon the situation. This is not to suggest that the non-executive chairman position is a full time role. However, it is relatively easy to propose that this commitment will go far beyond planning for and attending the board meetings and perfunctory contacts with the CEO. The engagement on the part of the chairman needs to meet whatever the requirements are to fulfill the responsibilities listed herein in addition to other duties that are more common to this role as it is currently viewed.
This section has focused on the new and expanded responsibilities of a more engaged and shareholder focused non-executive chairman with the key emphasis on leadership in that context. Other responsibilities such as agenda development, leading regular and executive session meetings, etc. that have been addressed in the old version of corporate governance remain but need no elaboration here other than this: These responsibilities and others remain but in a context that does not exclude, but moves beyond, compliance as the primary focus. The context here more closely resembles the highly active and engaged boards that are found at the best private equity and venture capital portfolio companies thus resulting in a shift of these basic responsibilities toward greater focus on the business and its potential.
Characteristics, Experience & Skills To Look For in a Chairman:
The separation of the Chairman and Chief Executive Officer positions has been at the forefront of the corporate governance movement for many years now. The focus, however, has been almost solely on the concept of separation and “independence” on the part of the Chairman. The idea seems to be that governance will take a major leap forward strictly as a result of the CEO not also having the Chairman’s title coupled with a Chairman who is “independent.”
This has been driven largely by an imbalanced focus on the compliance role of the board. The assumption seems to be that in order to ensure adequate compliance and all that this entails, “independence” on the part of the Chairman and other directors is the paramount qualification. What is glaringly missing from this governance prescription are three essential elements: (1) The role of the board beyond compliance, i.e. on the maximization of capital allocation, the company’s performance and shareholder value (which is the focus of this book); (2) the characteristics, experience and skills required for the non-executive Chairman role in that context; and (3) the specific skills and experience needed on the part of directors in the context of maximizing the performance and value of the company. As it relates to the Chairman, the argument underlying this section is that separation and independence are not enough. In order for real value to be added via the non-executive chairman role, who is in the role and what they bring to the table matters greatly. It would seem plausible to suggest that the lack of empirical performance evidence to support the separation of the Chairman and CEO roles would be due in large part, if not completely, to the failure to include the key qualifications of that role in the more expanded context of value maximization and to ensure that those individuals who fill the role meet those qualifications.
The following will explore the essential, yet broad, characteristics, experience and skills required for the non-executive Chairman position in the aforementioned more robust function of governance that stretches beyond compliance to performance.
1. Mindset
“Many smart companies — their top executives and their boards — are reviewing the PE (private equity) case and asking a key question: what would we do differently if we had a PE mind-set?” Orit Gadiesh and Hugh MacArthur (Bain & Company), Lessons From Private Equity Any Company Can Use” (9)
The type of mindset an individual brings to a particular role is not typically at the forefront of key criteria or qualifications. This is unfortunate as an individual’s mindset provides the core context for their view of situations, the overall intent they bring to the tasks at hand and the driving force behind actions taken.
I was once in a meeting with a senior member of a prominent private equity firm and the former CEO of a public company on which the PE firm was bidding. At the request of the former CEO, I had arranged this meeting for him to pitch his ideas and candidacy for the CEO role if this PE firm ended up as the winning bidder. Almost immediately upon sitting down, so that there was no lack of transparency regarding how private equity works, the PE firm managing director described the sense of urgency, high performance and stringent management accountability mindset that the firm brought to its portfolio companies. Prior to the meeting the assumption had been that the former CEO had very little, if any, understanding of the difference between being a CEO of a public company and that of a top tier PE firm. Our assumption was correct as the discomfort on the part of the former CEO as the managing director spoke was almost palpable. As a public company CEO no one on his board had even remotely the kind of mindset that the best PE firms bring to their companies.
Just as the PE firm managing director described in the previous paragraph, what is absolutely essential for the role of non-executive chairman is a mindset of performance and shareholder value maximization. Some individuals naturally go into organizational situations with an intense drive to influence the full realization of that organization’s potential. Foremost in their mind (ergo, mindset) is the desire and intent to raise the bar on performance, standards, expectation and value.
Although they may never have stopped to qualify this, the best activist investors and private equity firm leaders have this type of mindset.
The spirit of this mindset was embodied by Ed Whitacre shortly after accepting the non-executive chairman appointment at General Motors during its restructuring in 2009 at one of his first meetings with GM’s top executives. The following excerpt from the book Overhaul, the story of GM’s restructuring by its leader, Steven Rattner, captures the essence of Whitacre’s mindset: “Then, looking straight into the eyes one attendee after another, he [Whitacre] said, ‘I’m used to winning and have no intention of seeing that change at GM.’ The GM executives, unused to this sort of bluntness, were impressed, and so was I. It was superlative leadership as I had always imagined it.” (10)
Rattner and the Team Auto Task Force wanted a really strong chairman with a no-nonsense high performance mindset for the new GM board. It is possible to make the argument that the GM situation is one that is extreme and offers no applicability to more “normal” situations. That would be a mistake and would also be out of alignment with this book’s underlying thesis. It is essential that the non-executive chairman, regardless of the circumstance, bring a high performance mindset as the shareholders should expect nothing less.(Unfortunately in the GM situation, while apparently having the right mindset, Mr. Whitacre did not have another key quality for a non-executive chairman: No desire for the CEO role. This is always, among others, a potential problem when a former CEO takes on a non-executive chairman role).
It is important to expand a bit on what is implied by the type of mindset described. This is not in reference to an individual who would have an obsessive focus on quarterly earnings above all else. Instead, as Ed Whitacre stated, it is about winning which said another way, translates into a laser-like focus on building a great company and all that that entails including, but not limited to, the maximum value generation for shareholders. It is about having an intense desire to know how good a company can be and being willing to push to not only find out but to bring this into reality. It is this mindset that positions the chairman to set the tone and standards for the board which will ultimately cascade down throughout the organization.
In my view, to be clear, this is not a quality that can be taught. Individuals either have it or they do not. A non-executive chairman who does not naturally have this mindset will be unable to perform in the role in a manner that will lead to maximum results.
There is no way that the issue of the right mindset can be stressed too much. An individual can have all of the right education, experience and know-how and but without the right mindset still not be able to function at the level needed to lead a value maximization focused board. And, as this mindset is also important for other members of the board, we will return to this topic in a later section of this book.
2. Demonstrated Leadership
In the previous section which discussed the responsibilities of the non-executive chairman, the core and overall context was denoted as leadership. It therefore stands to reason that a non-negotiable quality to be sought in a non-executive chairman candidate is that of demonstrated leadership.
Ideally, the candidate should have a life-long track record of providing leadership, leading to results in a variety of different situations. The focus on leadership should not limit the qualifications to those individuals who are former CEOs. Instead, the requirements should be broader as the non-executive chairman role, at its best, requires someone who innately has the ability to lead in any applicable situation and has demonstrated this during the entirety of his or her adult (and earlier) life.
To take this discussion further, the leadership ability should be exemplified not only across a wide variety of situations, but should entail, in these situations, the following attributes:
· The setting of a long term vision with measurable milestones and targets.
· Inspiring and energizing the groups, both small and large, to whom the leadership has been provided.
· Setting and achieving new and higher standards of performance.
· Ensuring that members of whatever group to whom leadership is provided have a clear understanding of their role in achieving the objectives of the group and the fact that they are fully accountable for results.
· Clear and unambiguous actions to hold individuals accountable for results.
· Consistent, across all situations, ability to gain a high level of respect by those to whom leadership was provided and to act with respect for those who are being led.
· Consistent, but not necessarily “perfect”, achievement of targeted results
3. Understanding of Value Creation, the Value Creation Process and the Capital Markets
If the board’s primary responsibility is to ensure the long term maximization of shareholder value, it stands to reason that its leader should be well steeped in the broad process that must be implemented in order to fulfill this responsibility.
A more detailed discussion of value creation and the value creation process will be covered in a later chapter.. For now, suffice it to say that this approach to business analysis, planning and execution is much more in-depth, with much deeper analytics and more intense execution than the typical “strategic planning process” and is practiced by the best private equity firms and activist investors. The value creation process has as its ultimate objective the full maximization of a company’s potential, capital allocation, performance and value, leaving no stone unturned in the process.
As noted in the previous section on the non-executive chairman’s responsibilities via a hypothetical commentary by a chairman to the board and per the charts in Chapter 2, via various different studies, larger private equity owned companies outperform their publicly traded peers by wide margins. This outperformance includes both a faster rate of EBITDA and productivity growth and material spreads in the creation of enterprise value compared to their public company peers. There are a variety of reasons for this outperformance, but the underlying driving force is an intimate understanding of value creation and the value creation process around which private equity corporate governance is structured.
Over time, the best private equity principals and activist investors become extremely well versed in the value creation process which can be broadly applied to any business. This is actually a specialized expertise that is rarely found in the public company arena. However, in this more robust and engaged model of board leadership, which seeks to offer new standards of performance, it is essential that the non-executive chairman have the experience and understanding of the value creation process in sufficient measure to at least approximate the abilities of private equity and activist investors.
Coupled with the understanding of value creation is the need for at least a basic understanding of the capital markets and especially the equity markets. The non-executive chairman needs this understanding in order to ensure that the value creation plans for the company will in fact be viable vis a vis the market over the long term.
A hypothetical, yet all too common, public company case in point will be illustrative of the issues being addressed in this section: For many years, a company demonstrated a high growth rate and generated substantial free cash flow. Then at some point in its lifecycle, the growth that had driven its stock price slows as the business matures. Without a full understanding of value creation and its relationship to the market, the board and management “run out of options.” In an attempt to keep up the growth rate, they begin to make acquisitions that are divergent from the original and core business. It is extremely hard, if not impossible, to create value when acquisitions are made that are not related to the company’s’ core franchise. As is predictable, as a result of this departure from the core business, value is not created but instead is destroyed. This is not just a result of performance suffering but also the result of the market’s lower valuation on companies that are not “pure plays.” But, the board, its leadership and management have not understood this and have sought growth at all costs, so to speak. Now, a skilled activist investor does deep research and analysis of the company and clearly realizes not only what has happened but also sees the inherent value in the company’s core business. A stake is built up in the company by the activist until he becomes the company’s largest shareholder by a wide margin. This is eventually followed by his obtaining, either via a negotiated settlement or a proxy fight, seats on the board. The new directors bring perspectives, skills and a sense of urgency to the board that have been absent among the incumbent board members. They guide the board and management in the direction that will lead to the maximum level of value creation. Gradually, the various acquisitions that have been made are sold. Early in this process, with a strong focus on maximizing capital allocation while the stock price is still low, they also initiate a buy-back of stock before the market can get wind of their longer term plan. Over time, the acquisitions are divested and the capital is plowed back into the core or “jewel” business to fund growth and performance — opportunities to which the board and management were blind because they did not do a deep dive due diligence into the business as was done by the activist investor. As a result of these activities, two things happen. First, the core business begins to improve its performance in a meaningful way. Second, the market takes notice not only of the increase in performance but also the fact that company is once again a “pure play” leading to a higher valuation multiple.
In the hypothetical, somewhat generic, but all too real case described in the previous paragraph, it took an outside catalyst to drive the company in the direction of maximizing its value. But, what would have been the situation at this hypothetical company if the chairman had possessed the skills and experience to have seen the value decline that would result from the diversification? For example, a chairman with these skills would have been in a position to instigate a deep dive review of the business as it matured and growth slowed saying to the board and management, “Let’s do a review of the business as if we know very little about it and are in the process of a considering a buyout of the company. In other words, let’s go at this with an extensive process that would emulate the type of due diligence that a private equity firm would implement in an attempt to identify all of the potential value drivers that may not be readily apparent in the manner in which the business has been run historically.”
This skill and experience in the non-executive chairman is another essential ingredient in ensuring that the individual in this role makes the separation of chairman and CEO value added for the shareholders.
4. Ability To View Things Holistically
Holism, in philosophy, is the concept that the whole is greater than the sum of its parts. The ability to view things holistically allows an individual to simultaneously see all the parts, how they interact and how they come together in a manner that is greater their sum. This is an essential ability for a non-executive chairman.
This key skill is described, using different terminology, by Adrian Cadbury in his book Corporate Governance and Chairmanship, A Personal View, in which he states, “A second chairmanly attribute is the ability to integrate, to pull together the different threads of a complex issue, so that it acquires coherence. The skills of management are becoming increasingly specialized and so the fields of experience of directors are tending to become narrower. As a result, their approach to issues is likely to be determined in fair measure by their particular expertise. Chairmen, however, have to see the business as a whole, in the context of its environment, and need to integrate the skills and perceptions of all those seated around the board table.” (11)
In the board model that underpins the governance arbitrage thesis, the ability to view things holistically, to integrate complex issues, is essential but the context is also vital. In order to be the catalyst of performance and value maximization, the non-executive chairman must be able to see all the parts simultaneously and how they operate individually and collectively to move the company forward or to impede its progress. This skill is especially valuable and necessary in regard to both the development and the monitoring of the company’s value maximization plan. The plan may have, over the long term, only a few key initiatives but the underlying elements that make up the plan are myriad and diverse. The chairman must be able to simultaneously keep the targets on the horizon while quickly grasping the underlying elements and changes to same that drive results toward the targets.
5. Ethic Of Accepting Personal Responsibility
In 2012, Pershing Square Capital Management launched a proxy fight against Canadian Pacific Railway (CP) with the intent to replace 7 members of the CP board with their own nominees.
The team at Pershing Square, to put it mildly, did their homework with an approach that is similar in nature to the deep dive due diligence process executed by private equity firms but with only public data available. Resulting from this homework is a one hundred and two page PowerPoint presentation prepared by Pershing Square of their analysis of CP in order to make the case for the change they proposed which as noted above includes seven new board members and also a new CEO. The depth of the analysis reflected in this presentation is astonishing, but is also representative of the deep dive analysis described in a previous section of this chapter that a value maximization focused board should undertake. And, it clearly and unambiguously makes the case for the underperformance of the company and its incumbent board and management.
Per the Pershing Square website for CP, their case is summarized as:
“To summarize: for the past six years, the Board and Mr. Green [CEO] have led CP down the wrong track. Since Mr. Green became CEO:
· CP dropped to dead last in operating performance among Class I North American railroads.
· CP’s total return to shareholders prior to our investment was negative 18% while the other Class I North American railroads delivered strong positive total returns of 22% to 93%.
· Despite this poor record, the Board continues to support Mr. Green and the status quo.” (12)
At the time of this proxy fight someone posed a question to me as to what the proper response of the CP board should be to Pershing Square. The immediate answer was “The CP board’s first response to the case that Pershing Square has made should be to take a hard look in the mirror.” This was not intended to be flippant but a serious response made in a simplistic fashion. The intended point was that the members of the board should have the character to be willing, in the face of such overwhelming analysis (the complete PS analysis was extensive), to accept personal responsibility for the shortfalls in CP’s performance. This is not a suggestion that they should resign in mass but that they should be willing to take a hard look at reality rather than entrench behind new promises to shareholders after years of repeated and announced performance improvement initiatives that have not borne fruit.
Ideally, a non-executive chairman who will assume the responsibilities enumerated in this article and who has the qualities also described herein will not be in a position to have to look too often in the mirror. But, in order to fully and effectively take the lead in representing the best interests of shareholders, it is mandatory that the chairman have this ethic of personal responsibility. No one is perfect. Without this deeply embedded ethic it is simply not possible to acknowledge when corrective action is needed and to perform at the highest level possible.
The type of individual responsibility required here is not a common quality but is explained clearly in the book Extreme Ownership by Jocko Willink and Leif Babin, two former Navy SEAL officers with extensive combat and leadership experience in the Middle East conflicts:
“On any team, in any organization, all responsibility for success and failure rests with the leader. The leader must own everything in his or her world. There is no one else to blame. The leader must acknowledge mistakes and admit failures, take ownership of them and develop a plan to win.
“The best leaders don’t just take responsibility for their job. They take Extreme Ownership of everything that impacts their mission. This fundamental core concept enables SEAL leaders to lead high-performing teams in extraordinary circumstances and win. But Extreme Ownership isn’t a principle whose application is limited to the battlefield. This concept is the number-one characteristic of any high-performance team, in any military unit, organization, sports team or business team in any industry.” (13)
6. Industry Experience
It is essential for a board to be populated, in part, with directors who have both industry experience and a track record of performance and value creation in the industry. Modern corporate governance has become too enamored with the concept of independence [from management, not shareholders] at the expense of having the board, in part, made up of those individuals who deeply understand the business/industry and have demonstrated stellar performance in that context.
The importance of industry experience and a solid track record naturally leads to the question as to the whether this is an important, or even non-negotiable, criterion for the non-executive chairman. The answer to this question is that under the right circumstances it can be highly beneficial but the lack thereof should not be a disqualifier for a candidate who possesses the attributes summarized previously in this section. The circumstances under which industry experience can be of value are:
· The non-executive chairman candidate has not only deep industry experience but has a demonstrated track record of performance enhancements and impact on shareholder value increases.
· The experience is recent and, if not, the candidate has stayed abreast with the industry’s evolution and can demonstrate his or her current knowledge.
· As described in a preceding section, the chairman still initiates a deep dive into the company’s business.
· See next section for an additional and non-negotiable criteria, i.e. having no desire for the CEO role.
Industry experience and knowledge can be a benefit to an individual in the non-executive chairman position. However, it is strongly suggested that the other qualities and characteristics are of much greater import. In addition, many if not all, of the aforementioned criteria are innate and not subject to being “learned.” An individual with no industry experience but who possesses the qualities and characteristics enumerated previously will be a superior candidate to one who has been enmeshed in the industry but lacks some or all of the other qualities. And, once again it is important to stress that the “model” being presented for the non-executive chairman’s role includes the essential responsibility to do a “deep dive” into the company’s industry and business which can result in the depth of knowledge of the industry and the company required to be a catalyst for value maximization.
7. No Desire For The CEO Role
Absolutely nothing could be worse for the relationship between the non-executive chairman and the CEO, or more “invisibly” disruptive for the board, than a desire of the chairman to step into the CEO position.
Does an acceptance of this criterion for the non-executive chairman role axiomatically eliminate former CEOs? The answer is no but it does raise a caution flag. The model presented here prescribes a more engaged role for the non-executive chairman than is currently advocated but it does not imply crossing the line in a manner in which meddling in day to day management is advocated. For some former CEOs, refraining from too much engagement may be difficult, if not impossible, and will result in a diminishment of the effectiveness of the chairman’s role rather than enhancing it. It is also possible that just the opposite can take place such that the chairman who is a former CEO over compensates in reaction to desire to “climb into the saddle” one last time, resulting in a disengagement from what is needed on the part of the chairman.
By and large, it is essential that an individual assuming the non-executive chairman’s role not only fully understands the purpose of the position but is also energized by the role in and of itself. This will simply not be the case for anyone in the chairman’s seat that secretly longs for the CEO role.
In addition, the CEO needs to be able to see the non-executive chairman as an objective but available source of counsel and as a sounding board. The chairman’s role is not just about monitoring performance and holding management accountable for same. The CEO should be able to have the trust in the chairman that the latter is a source of counsel. This vital relationship between the two roles is simply not possible when the chairman secretly harbors a desire for the CEO’s job.
Finally, a really great chairman will challenge and inspire the CEO to become better regardless of how good he or she is. This is an important role for the chairman and simply cannot be fulfilled if the chairman longs for the CEO position.
In conclusion, if the chairman is obsessed, albeit secretly, with becoming the CEO, he or she will not be able to fulfill the chairman’s role in a high performance manner. The chairman needs to be focused on the big picture of performance and shareholder value maximization and through his or her leadership, guide the full board toward a focus on same. To quote Adrian Cadbury again, “I have also already made clear that I believe chairmanship to be a more demanding and specialized role than is generally appreciated” (14) To this point, the focus needed to execute at a high level in the chairmanship leaves no room for a desire to step into the CEO role.
At a very high level, the preceding list of qualities, characteristics and skills paints a picture of the core and vital attributes of a high performance non-executive chairman. Understood properly, this is a highly specialized role requiring unique individuals to fill it successfully. The movement toward the separation of the chairman and CEO roles was an important, but incomplete, first step. In the proposed more engaged and robust governance model, the separation can become value added by appointing individuals to the chairmanship with the essential qualities, skills, experience and track record resulting in the ability to execute the responsibilities enumerated in the previous section.
As another case in point, let’s take a look at another newly appointed chairman that embodies most, if not all, of the qualities described: On May 18, 2016, Diageo, the big UK based spirits company, named Javier Ferran as its new non-executive chairman. Ferran was previously with Martini & Rossi, the maker of vermouth and was the former CEO of rum maker Bacardi thereby bringing extensive industry experience He is also a partner at consumer products focused private equity firm Lion Capital. As such, Mr. Ferran brings the best of all worlds to the Diageo chairmanship. As John Harrington writes on the Proactive Investors website regarding a recent meeting between Diageo and U.S. investment bank Jefferies:
“ The ongoing recovery will be given extra impetus by sterling’s weakness in the short term, while over the medium term the broker (Jefferies) sees Diageo evolving into a different company under new chairman Javier Ferran, described as a ‘hands-on, heavyweight industry veteran.’
“According to Jefferies, Ferran’s deep root in the sector and his private equity background will bring fresh perspectives to cost discipline, use of the balance sheet, and the growth potential of the business.
“’We expect Ferran to bring a private equity lens to maximizing FCF (free cash flow) generation. (15)
This brief portrait of Mr. Ferran and the what he brings to the Diageo chairmanship, (similar to the new HSBC chairman previously highlighted in this chapter) is a far cry from the “qualities” of independence and ability to achieve consensus that has permeated U.S. public company governance thought since the issue of the separation from the CEO role first surfaced. What we see in these two situations are hard-charging, demanding individuals with high standards and expectations coupled with track records taking the leadership role in these two public companies. Individuals such as these in the non-executive chairman role provide the foundation for the shift to the kind of board that can truly result in a governance arbitrage.
Concluding Thoughts On The Chairmanship
This chapter is by far the longest in the book. The reason for this simple: The non-executive chairman role is the key to, and core of, this proposed governance model. This is not an “oversight model” but one that is designed to drive the highest performance possible. To that end, the leadership of the board is the critical factor in making this governance model work.
Although not normally thought of in this manner, a board is a team. And, in my view, by some undeniably huge margin, the best book ever written about what drives high performance teams is The Captain Class — The Hidden Force That Creates the World’s Greatest Teams by Sam Walker. This book is the result of Mr. Walker’s eleven years of research into what factors drive the performance of elite teams. As a result of this research he identifies sixteen “Tier One” teams that had extraordinary performance over extended periods of time. As he states in the book’s prologue:
“As I type this sentence, I have been working on the same line of inquiry for almost eleven years. I have reviewed and researched the accomplishments of more than twelve hundred teams across the world in thirty-seven major categories of sport since the 1880s. I have ripped through hundreds of books, articles, documentaries, scientific papers, and statistical analyses. I have tracked down interview subjects in Auckland, Barcelona, Boston, Chicago, Havana, London, Los Angeles, Madrid, Melbourne, Montreal, Moscow, New York, Paris, Perth Rio de Janeiro and dozens of sleepy hamlets in between.
“When I started out, I never expected to reach on emphatic conclusion. I assumed the fingerprints of these elite units would have many of the same whorls and ridges yet no perfect matches. In the end, I was shocked to discover that the world’s most extraordinary sports teams didn’t have many propulsive traits in common, they had exactly one. And, it was something that I hadn’t anticipated.
“The Captain Class is the culmination of a lifetime of watching sports, two decades of spending time in the orbit of world-class teams, and my own lengthy investigation into what drives the dynamics behind a surpassing collective effort. It’s not the story of one team’s triumph, although there are many triumphs recounted here. It’s not a biography of one transcendent star or coach, although many legendary figures will be discussed. Though it uses sports as its source material, it’s ultimately a book about a single idea — one that is simple, powerful, and can be applied to teams in many other fields, from business and politics to science and the arts.
“It’s the notion that the most crucial ingredient in a team that achieves and sustains historic greatness is the character of the player who leads it.”
Mr. Walker believes that the single idea that arose from his exhaustive research can be applied to business as well as sport. This is especially applicable to the high performance board discussed and delineated in this book. The Captain of an elite sports team is not superior in “rank” to the other players. On a board, the same is true for the Non-Executive Chairman. He or she is not superior in any sense of the word to the other board members, i.e. there is no hierarchy on a board just as there is no hierarchy on a sports team. Yet the Chairman, just as with the Captain of a sports team, still must lead. And, I would submit that the qualities of the Chairman are just as critical to the sustained performance of the board as the qualities of the Captain is to an elite sports team.
(1) Michael C. Jensen, Morgan Stanley Roundtable on Private Equity and Its Import for Public Companies, April 25, 2006 https://www.scribd.com/document/38284605/PE-Roundtable
(2) Anjani Trivedi, HSBC’s History-Making New Chairman Is a Wise Choice, The Wall Street Journal, March 13, 2017 https://www.wsj.com/articles/hsbcs-history-making-new-chairman-is-a-wise-choice-1489394421
(3) Paul J. Davies, HSBC: Fresh Eyes Give Investors Hope For Change, The Wall Street Journal, March 13, 2017 https://www.wsj.com/articles/hsbc-fresh-eyes-give-investors-hope-for-change-1489416325
(4) Ronald A Heifetz and Marty Linsky, “A Survival Guide For Leaders”, Harvard Business Review, June 2002 https://hbr.org/2002/06/a-survival-guide-for-leaders
(5) Viral V. Acharya, Moritz Hahn and Conor Kehoe, Corporate Governance and Value Creation: Evidence From Private Equity, November 2008 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324016
(6) Abstract of a Directors & Boards Magazine webinar Board Risk Management: How Boards Rate Themselves, Thursday March 22 2012
(7) Damien I. O’Brien, The Private Equity Board: A Good Governance Model? Leadership Insights, Egon Zehnder, January 8, 2012 http://www.egonzehnder.com/leadership-insights/the-private-equity-board-a-good-governance-model.html
(8) How Do Private Equity Investors Create Value: A Study of 2006 Exits in the US and Western Europe, Ernst & Young http://www.criticaleye.com/insights-servfile.cfm?id=202
(9) Orit Gadiesh & Hugh MacArthur, Lessons From Private Equity Any Company Can Use, Harvard Business Press, 2008
(10) Steven Rattner, Overhaul, Houghton Mifflin Harcourt 2010
(11) Adrian Cadbury, Corporate Governance and Chairmanship — A Personal View, Oxford University Press, 2002
(12) Pershing Square Capital Management L.P., CP Rising, www.cprising.ca 2012
(13) Jocko Willink and Leif Babin, Extreme Ownership — How U.S. Navy SEALS Lead and Win, St. Martin’s Press, 2015
(14) Adrian Cadbury, Corporate Governance and Chairmanship — A Personal View, Oxford University Press, 2002
(15) John Harrington, “New Chairman Will Bring a “Private Equity Lens” To Diageo,ProActiveInvestors.com, November 2016 http://www.proactiveinvestors.co.uk/companies/news/169532/new-chairman-will-bring-a-private-equity-lens-to-diageo-jefferies-asserts-169532.html
