Index

Abramson, Jill, 191, 192

accountability

of boards, 33, 61, 86

boards as drivers of, 218–219

individual, 5, 12, 15

of shareholders, 40–41, 46, 47, 65

Ackman, Bill, 39, 40, 51, 55, 68

Actavis, 67

activist investors, 39–40, 50–51, 54–56, 65, 67–72, 98

Adelphia Communications, 1, 6

African American board candidates, 130–132

age, of board members, 5–6, 106

Millennials on boards, 125

agency costs, 43

agency model, 40–56, 62–63, 65

flaws in, 43–48

foundations of, 42–43

implications for companies of, 52–54

in practice, 48–52

agency theory, 40–48, 56–60, 64

agenda management, 10, 31, 33–34, 37, 95

Alaska Air Group, 202

Allergan, 39, 40, 46–48, 51, 55, 67–71

Allstate, 124, 126

Alza, 13

Amazon, 75, 130–133, 151

Amelio, Gil, 160

American Express, 10

anchoring, 141

anonymous surveys, 11

Apple, 55, 133, 151, 160

Arthur Andersen, 13

assumptions, challenging, 4, 11, 13–14

AT&T, 7, 75, 164

audit committees, 7–8, 34

Axcan Pharma, 35

backroom decision making, 108

Balanced Scorecard, 146

Bank of America, 171

Barton, Dominic, 75–83

Baxter, Clifford, 13

Bell, Charlie, 168

Bell, Deborah, 103–117

Bennett, Benjamin, 203

Bennis, Warren, 176–177

Berkshire Hathaway, 7

Berle, Adolf, 44

best practices, conventional wisdom on, 2–8

Bettis, J. Carr, 203

Blair, Don, 219

board meetings

agendas for, 31, 33–34, 37, 95

attendance at, 2

of nonprofit boards, 96–97

board members

accountability of, 5, 12, 15, 86

age of, 5–6, 106, 125

back channels to line managers by, 10

election of, 49, 52

equity involvement of, 3

evaluations of, 30–32

expertise of, 122, 124–125, 211–213

female, 103–117

meeting attendance by, 2

new CEOs and, 182

on nonprofit boards, 85–86, 98–99

outside interests of, 109

quality of, 29–31

roles of, 5, 12, 14–15

skills of, 3–4

trust and respect between, 8–11

boards of directors

accountability and, 218–219

of Amazon, 130–133

building better, 19–38

business disasters and, 1

CEO transition and, 187–188

climate of trust on, 4, 8–12

committees, 5, 7–8, 16, 34, 89, 93–95

composition of, 29–31, 124–125

conventional wisdom on, 2–8

corporate responsibility and, 210–223

culture of, 36–38, 72–73

cybersecurity and, 154–155

diversity of, 130–133

dynamics of, and gender, 112–115

encouraging dissent on, 11, 13–14

evaluating performance of, 5, 12, 16, 20–22, 30–32

failures in, 39–66

fiduciary responsibility of, 44, 73–74

high-performance, 20, 21

independence of, 1, 6–7, 29

information sharing with, 34–36, 73, 96–97

innovation and, 119–129

insiders on, 1, 6–7

interactions between management and, 123–124, 127–128

interest balancing by, 71–74

lack of diversity on, 103–117

models for, 21, 22–24

nonprofit, 85–102

performance evaluations, 20–22

political factions on, 10, 11

power balance between management and, 74

power of, 49–50

role of, 43

setting executive performance targets by, 195–204

size of, 7

as sounding board, 213, 216–217

as source of knowledge and expertise, 211–213

standards for, 1

succession planning and, 157–178

sustainability issues and, 209–223

tactics for building better, 4–5, 8–16

tasks of, 24–28

Boeing, 158

Booz Allen Hamilton, 158, 160

Boston Consulting Group, 52

boundaries, 139

Bourgeois, L.J., 14

Bower, Joseph L., 39–66, 68, 72

BP, 135, 140

bright prospects, 52, 53, 54

Brokaw, Tom, 168

Buffett, Warren, 7

Burns, Ursula, 189

Business Roundtable, 6

business strategy, 59, 70–73, 114, 126. See also strategy risks

Calloway, Wayne, 15

Cambia Health Solutions, 119

candor, 4, 8–11, 12

Cantalupo, Jim, 168

capabilities profiles, 30

capital gains taxes, 70

cash cows, 52–53, 54

CBS, 168

Cendant, 8

Center for Effective Organizations, 20

CEO. See chief executive officer (CEO)

certifying boards, 22, 23

Chait, Richard P., 85–102

Chan, Elsa, 131

change, resistance to, 101

Charan, Ram, 157–178

Charles Schwab, 5

chief executive officer (CEO)

board building and, 33

board diversity and, 132–133

boomerang, 158

development of, 161, 163–164

failure of new, 180–182, 188–189

information sharing by, 9–11

innovation and, 122

interactions between boards and, 123–124, 127–128

nonprofit boards and, 88–90, 92

outsider, 159–160

power balance between board and, 71–72, 74

presence of past, on board, 6

role of outgoing, 184–185

succession of, 157–178

tenures of, 158

360-degree feedback for, 202

transition process for, 179–203

trust building by, 11

chief human resources officer (CHRO), 185–187

China Mobile, 60

Ciampa, Dan, 158, 179–189

Cisco, 5

Citrin, James, 182

CKE Restaurants, 6

Cliffe, Sarah, 67–74

CLP, 154

Coca-Cola, 119, 168

codes of business conduct, 139

Colgate-Palmolive, 174–178

committees, 5, 7–8, 16, 34, 89, 93–95

communication, between boards and senior management, 9–11, 34–36, 73, 96–97

company-centered model, 56–65

Compaq, 13

compensation committees, 7–8

competence, of board members, 29–31

competitive advantage, 119

competitive compensation packages, 200–201

competitive risks, 151

compliance issues, 135

Conference Board, 6

confirmation bias, 141

conformity, 4, 11

constituents. See stakeholders

constructive criticism, by board, 213, 216–217

Continental Airlines, 30

Conway, Jill Ker, 209–217, 219–220

Cook, Tim, 192

Corning, 158

Corporate Accountability and Standards Committee, 6

corporate culture, 69, 138

corporate governance

agency-based model of, 40–56, 62–63, 65

company-centered model of, 56–65

keys to better, 19

long-term performance and, 61

models of good, 40

reform, 38

sensitive issues in, 99–100

Corporate Horizon Index, 78–79, 80

corporate law, 43–44, 74

corporate leadership. See leadership

Corporate Leadership Council (CLC), 157

Corporate Library, 2, 3, 5

corporate responsibility committees, 214–223

corporate scandals, 1–3, 19

corporate social responsibility, 42, 43, 57, 60, 210–223

corporate values, 138, 202

corporations

ethical standards of, 59–60

functions of, 58–59

interests of, 60–61

leadership of, 57–58 (see also chief executive officer (CEO); leadership)

long-term prosperity of, 58

objectives and strategies of, 57, 59

socioeconomic systems and, 60

value creation by, 59

corruption, 1

Costco, 130

creative abrasion, 121, 126

credit risk, 139

crises, 97–99

critical thinking, 126

CtW Investment Group, 130

culture

of boards, 36–38, 72–73

changing, 38

corporate, 69, 138

of dissent, 11–14

risk, 141

customers, 59

customer satisfaction, 202

cybersecurity, 154–155

Daleo, Robert, 172–173

Davis, George, 119–129

Davis, Kim, 132

Deepwater Horizon, 135

Dell, Michael, 5–6

Dell Computer, 5–6

devil’s advocates, 143

digital directors, 125

Dimon, Jamie, 156

director independence, 1, 6–7, 29

discrimination, 110

disloyalty, 13–14

disruptive technologies, 151

dissent, fostering open, 4, 11–14

diversity

at Amazon, 130–133

benefits of, 110–111, 133

of board members, 130–133

innovation and, 124–125

lack of, 103–117

in practice, 115–117

quotas for, 116

Dodd-Frank Act, 210

dogs, 52, 53

Domet, Jack J., 154

Dow Chemical, 158

DuPont, 54

Dutch East India Company, 60

DyeCoo Textile Systems, 221

earnings per share (EPS), 196, 197

earnings growth, 79

earnings quality, 79

Ecomagination, 60

economic disasters, 150

economic profit, 80–81

Edmonson, Amy, 129

Eisenhardt, Kathleen, 14

Eitel, Maria, 212, 218, 219

Ely, Robin, 110

embedded experts, 144–145

Emerson Electric, 174

employee satisfaction, 202

engaged boards, 22, 23, 24

engaged cultures, 36–38

engagement

models of, 22–24

philosophy, 24–25

Enrico, Roger, 15

Enron, 1, 3–6, 8, 9, 13, 15, 47

environmental changes, 150

equity-based pay, 48–49, 58

equity involvement, 3

ethical standards, 59–60

executive committees, 98

executive compensation, 48–49, 58, 73

disclosure of, 49

intrinsic motivation and, 206–207

long-term incentive plans, 204–207

multiple metrics for, 196–198

nonfinancial targets and, 202–203

relative pay and, 206

relative to competitors, 200–201

setting targets for, 195–204

executive recruiters, 166–168, 171

executive sessions, 7, 99–100

expertise

boards as source of, 211–213

collective, 124–125

lack of, 122

experts

consultations with, 90–91

embedded, 144–145

independent, 142–143

external risks, 136, 137, 140, 149–153

facilitators, 143–144

failure

of governance, 2–8

living with, 128–129

FCLT Global, 75, 78

Federal-Mogul, 6

feedback

lack of, 16

360-degree, 202

female directors, 103–117

fiduciary duty, 44, 73–74

financial literacy, 3, 4

financial services industry, 144–145, 151

Fink, Larry, 77

Ford, 119

Franklin, Barbara Hackman, 71–74

Fraser, John, 144

free market system, 59

Friedman, Milton, 42, 43

Gallagher, Michael, 48

Ganz, Mark, 119, 120

gap analysis, 25

gender diversity, 103–117

gender dynamics, 112–115

General Electric (GE), 3, 7, 15, 60, 158, 162, 174, 177

General Motors, 164

geopolitical changes, 150

George, Bill, 11, 13

Gerstner, Lou, 161

Global Alliance for Workers and Communities, 212

global financial crisis, 80, 81, 135, 150, 153, 156, 210

Goldman Sachs, 156

Goldner, Brian, 122

golf, 108

good governance, 40

Google, 133

Gopalan, Radhakrishnan, 195–204

governance committees, 5, 16

governance failures, conventional wisdom on, 2–8

governance reform, 6

government regulations, 70

Gow, Ian, 51

groupthink, 11, 133, 141

Grove, Andy, 6

growth share matrix, 52–54

Groysberg, Boris, 103–117

Harrington, Richard, 172–173

Hasbro, 122

Hayward, Tony, 135

hedge fund activists, 51, 55–56, 67–72

Hekman, David, 130

Hewlett, Walter, 13

Hewlett-Packard, 13

high-performance boards, 20, 21

Hill, Linda A., 119–129

Holland, Thomas P., 85–102

Home Depot, 4, 5, 6, 7, 13–15

Horn, John, 195–204

hostile takeovers, 67–71

Houghton, Jamie, 158

human element, importance of, 8–16

Hydro One, 144, 147

hyperbolic discounting, 205

IBM, 161, 164

incentive packages, 195–204

incumbent CEOs, 184–185

independence, of boards, 1, 6–7, 29

independent experts, 142–143

individual accountability, 5, 12, 15

information sharing, 9–11, 34–36, 96–97

Infosys, 146, 147, 150

Ingram, Doug, 70

innovation, 55, 119–129, 142, 219–222

insiders

on boards, 1, 6–7

for CEO candidates, 158, 160–161, 163–164, 183

institutional investors, 44–47, 50

institutional priorities, 93–95

Institutional Shareholder Services, 3

Intel, 6, 7

internal audit department, 139

international assignments, 107

International Youth Foundation, 212

intervening boards, 23, 24

intrinsic motivation, 206–207

investment, 79, 80

investor activism, 39–40, 50–51, 54–56, 65, 67–72, 98

investor relations, 67

Jager, Durk, 174

Jensen, Michael, 42–43, 57

Jet Propulsion Laboratory (JPL), 141, 142–143

job creation, 81

Johnson, Stephanie K., 130–133

Johnson & Johnson, 138, 174

Jones, Hannah, 218, 220, 221

Joy, Bob, 174, 175, 176–177

JPMorgan Chase, 156

JP Morgan Private Bank, 145, 147

Kaplan, Robert S., 135–156

Kelleher, Herb, 6

Kendall, Don, 15

Kmart, 3, 6

Knight, Phil, 209–213, 218

Kozlowski, Dennis, 9

Kozmetsky, George, 5–6

Lafley, A.G., 174

LaManna, Mary Ellen, 191

Lancaster, Richard, 154

Langone, Ken, 7, 11, 14

leadership

corporate, 57–58

development of, 61, 161, 163–164, 168–169, 173–178

failures in corporate, 39–66

innovation, 119–129

judgment, 176–177

risk management and, 153, 156

succession planning and, 157–178

Lee, Gentry, 141, 142

Lewicki, Chris, 143

Lewis, Ken, 171

limited liability doctrine, 46, 59

line managers, back channels to, 10

long-term growth, 70–72

managing for, 75–83

long-term incentive plans, 204–207

LTV Steel, 6

male social networks, 108, 113

management responsibilities, 50

Manyika, James, 75–83

Marcus, Bernie, 4, 6, 13–14

margin growth, 79

Mark, Rebecca, 13

Mark, Reuben, 174

Marriott, 154

maternity leave, 114

McColl, Hugh, Jr., 171

McDonald’s, 168

McGinn, Daniel, 190–193

McGurn, Patrick, 3

McKessonHBOC, 8

McKinsey Global Institute, 75, 78

Means, Gardiner, 44

Meckling, William, 42–43, 57

Medtronic, 11, 13

meeting attendance, 2

Mercer Delta, 20

micromanagement, 124

Microsoft, 7, 130

Mikes, Anette, 135–156

Milbourn, Todd, 195–204

mindset, for board building, 20–22

minority candidates, 130–132

Minow, Nell, 2

mission statements, 138

moral hazard, 46–47, 56, 152

Mulcahy, Anne, 189

Nadler, David A., 19–38

National Association of Corporate Directors (NACD), 6, 157

National Endowment for the Arts, 90

natural disasters, 150

NBC, 168

negative externalities, 60

Nestlé, 119

New York Stock Exchange, 6, 20

New York Times Company, 188, 190–193

Nike, 209–223

nonprofit boards, 85–102

CEOs and, 88–90, 92

collaborative character of, 98–99

composition of, 85–86, 98–99

crisis handling by, 97–99

discussion sessions of, 96–97

experts on, 90–91

information sharing with, 96–97

institutional priorities and, 93–95

key stakeholders and, 89–90

meetings of, 96–97

new work of, 86–100

old work of, 94

outside experts and, 91

performance indicators and, 91–92

policy implementation and, 92–93

problems with, 100

resistance to change in, 101

senior management and, 87–88

task forces, 95

normalization of deviance, 141

old boys’ club, 108, 111, 113

onboarding, 182, 189, 191. See also transition process

operating boards, 23, 24

organizational biases, 140–141

organizational forms, 57

organizational judgment, 177

out-of-the-box thinking, 125. See also innovation

overconfidence, 140–141

Paine, Lynn S., 39–66, 68, 72, 209–223

Pan Am, 10

parental leave, 114

Parenty, Thomas J., 154

Parker, Mark, 218

partnerships, 57

passive boards, 22, 23, 36

pay for performance arrangements, 49, 55–56, 73, 195–204

Pearson, Mike, 39, 68

peer pressure, 15

peer reviews, 16, 31, 32. See also 360-degree feedback

Peltz, Nelson, 54

Pepper, Alexander, 204–207

PepsiCo, 16

performance, focus on long-term, 75–83

performance evaluations, of board, 5, 12, 16, 20–22, 30–32

performance metrics, 91–92, 128, 196–198

performance targets, 195–204

Pershing Square Capital Management, 51, 55, 67, 68

personal judgment, 176

poison pills, 49–50

political factions, 10, 11

preventable risks, 136, 138–139

prevention focus, 132

Price, Paula, 120

Procter & Gamble, 174

promotion focus, 132

proprietorships, 57

protectionism, 150

proxy fights, 51

public company shares, average holding period of, 45

Pyott, David, 67–71

quarterly earnings expectations, 75, 77, 79

quotas, 116

Ranganath, M.D., 146

Rather, Dan, 168

regulations, 70

relative pay, 206

reputation, 14

research and development, 55, 56, 77, 80

respect, 8–11

risk assessments, 140–142

risk aversion, 205

risk culture, 141

Risk Event Cards, 148, 150

risk function, 153

risk management, 72, 120–122, 135–156

to counteract biases, 141–142

of external risks, 149–153

function trap and, 145–147

leadership and, 153, 156

risk categories and, 136, 137–140

rules-based, 135, 137, 140, 141–142

of strategy risks, 142–149

risk managers, 145

Risk Report Card, 149

risk review boards, 142–143

risks

categories of, 136, 137–140

competitive, 151

credit, 139

external, 136, 137, 140, 149–153

incubation of, 141

preventable, 136, 138–139

strategy, 136, 137, 139–140, 142–149

risk taking, 128–129

Robinson, Jim, 10

role models, 139

Rooney Rule, 130, 131

rules-based risk management, 135, 137, 140, 141–142

Sandberg, Sheryl, 192

Sarbanes-Oxley, 29, 72, 210

scenario planning, 151–152

Schwab, 7

ScottsMiracle-Gro, 202

Selander, Bob, 127

self-assessments, 16, 20–22

self-dealing, 46

senior management

agency theory and, 50

alignment of interests between shareholders and, 47

communication between boards and, 34–36

of corporations, 57–58

fiduciary responsibility of, 44

information sharing by, 73

innovation and, 120–121

interactions between boards and, 123–124, 127–128

nonprofit boards and, 87–88

performance targets for, 195–204

power balance between board and, 71–72, 74

responsibility of, to shareholders, 42–43, 50

as role models, 139

strategic choices by, 53–54

See also chief executive officer (CEO)

Session C, 162

shareholder returns, 49

shareholders, 59

accountability of, 40–41, 46, 47, 65

activist, 39–40, 50–51, 54–56, 65, 67–72, 98

agency theory and, 42–43

balancing interests of, with other stakeholders, 71–74

communication with, 73

interests of, 60

intervention by, 47

versus owners, 44–47

rights of, 43–44, 47, 49

role of, 41–42

uniformity of, 48

shareholder value, 39–41, 43, 50, 51, 53–56, 58, 59, 65, 69

Shell Oil, 151

Sherwin-Williams, 174

short-term focus, 73, 75, 77, 78, 81–82, 121–122, 195, 222

Siegel, David, 160

Smith, Jim, 169, 172–173

social networks, 108, 113

society, functions of corporations in, 58–59

Sonnenfeld, Jeffrey A., 1–17

Southwest Airlines, 6, 7

speculators, 64

Spencer Stuart, 182

Sprunk, Eric, 218

Srinivasan, Suraj, 51

staggered boards, 49–50, 61

stakeholder judgment, 177

stakeholders

balancing interests of all, 71–74

new CEOs and, 182

nonprofit boards and, 89–90

standing committees, 34

stars, 52, 53, 54

status quo bias, 131, 133

Stavropoulos, Bill, 158

Stemple, Bob, 164

stocks, average holding period of, 45

Stonecipher, Harry, 158

strategic choices, 53–54

strategic planning, 146

strategy meetings, 126

strategy risks, 136, 137, 139–140, 142–149

stress tests, 151

succession planning, 61, 157–178

chief human resources officer and, 185–187

executive recruiters and, 166–168, 171

“fit” and, 170–173

internal candidates and, 158, 160–161, 163–164, 183

leadership development and, 161, 163–164, 168–169, 173–178

outgoing CEO and, 184–185

outside candidates and, 159–160, 172–173

results of poor, 158

search committees, 170, 171–172

tips for succeeding at, 168–180

Sulzberger, Arthur, Jr., 191

Sunbeam, 8

suppliers, 59

sustainability issues, 209–223

tail-risk stress tests, 151

tandem assessment, 162

Target, 16, 33

tax rates, 70

Taylor, Barbara E., 85–102

team judgment, 176–177

Teledyne, 5

Thomas, David, 110

Thomas, Richard, 160

Thompson, Mark, 188, 190–193

Thomson Corporation, 168–169, 172–173

360-degree feedback, 202

Tichy, Noel, 176–177

time constraints, 122

total shareholder returns (TSR), 49, 59

transition process, for new CEO, 179–203

Trippe, Juan, 10

Trump Hotels and Casino Resorts, 6, 7

trust, climate of, 4, 8–11, 12

trustees, of nonprofits, 85–102

Tyco, 1, 3, 6, 9–10, 13

Unilever, 75, 119

United Parcel Service, 7, 8–9

United Way, 93

US Airways, 6, 7, 160

Valeant Pharmaceuticals, 39, 46, 51, 55, 67–71

value creation, 54–56, 59, 75–83

value statements, 138

value transfer, 54–56

Visa, 202

vision, 22

Volkswagen, 146–147, 148, 149

Wachner, Linda, 6

Wal-Mart, 7

WannaCry attack, 154

war-gaming, 152–153

Warnaco, 3–4, 6

Waste Management, 8

Watkins, Sherron, 9

Welch, Jack, 7

whistle blowers, 139

Williams, Brian, 168

Williamson, Sarah Keohane, 75–83

Wilson, Tom, 124, 126

Wise, Phyllis, 221–222

Wiseman, Mark, 77

women

on boards, 103–117

obstacles facing, 112–115

WorldCom, 1, 2, 3

Wright, Patrick, 184

Xerox, 160, 164, 189

Zhikarev, Gregoriy, 145

Zubrow, Barry, 156