What makes a good director great?

Selecting the right directors to sit on your corporate board is no easy feat. There are a great many aspects to consider, but which are the most important?

Corporate Secretary asked three award-winning directors which qualities they value most when trying to recruit directors who would potentially sit on their boards. All received honors for their board service in 2013, so their advice is sure to be instructive:

• Ilene Gordon, chairman, president and CEO of Ingredion, was the recipient of the National Association of Corporate Directors’ (NACD) director of the year award for leading the $5.1 billion ingredient solutions company through a successful global expansion and rebranding campaign.
• Richard Donnelly, chairman of the board of Oshkosh Corporation, was awarded Foley & Lardner’s inaugural National Directors Institute public company director of the year award for consistently seeking improvements that drive superior shareholder value and regularly engaging with company executives to help promote best practices throughout the business.
• Marie Meisenbach Graul, audit committee chairperson and a member of the board of directors at Pelican Products, won Foley’s first ever private company director of the year award for helping the fast-growing multinational manufacturing company expand into several countries while acquiring and developing new product lines.

What directors need most

When asked what qualities are most needed to be an effective director in today’s business environment, Gordon mentions three things she values most.

‘The first priority for me is having global experience or a global perspective,’ she says. ‘Most of my board members have had experience, either in a prior role or as part of my board, of understanding global challenges and how to do business in different parts of the world. Not every director has experience in every region, but if you build a diverse board with global experience, you can really glean a lot.

‘Next, you want board members who have a passion for the business. For my company, they have experience in some type of consumer product environment, large heavy manufacturing or a company with some type of global challenges. So you look for directors who have a passion for what you’re doing, but also have global experience and have something to bring to the party. I find most new board members are joining both to bring value and to learn about a successful global company.

‘The third thing I talk about is diversity – and it’s really not gender or race, but rather diverse experiences and opinions. So my board has people from many different industries, but with global experience. They’re very analytical and fact-based, but everybody is a little different, which is good because you get different experiences in the boardroom.’

Donnelly says it’s important ‘for all directors to understand that our role is to advance shareholders’ interests and support management. Next is strong business ethics, then excellent business experience, preferably in a C-Suite position.’

He believes directors should be gifted in one or more functional areas of importance to the company’s future. Having ‘strategic assessment capability’ and the ‘ability to analyze and ask the important questions that help the firm perform at its best’ are other qualities he looks for in a director.

‘I believe the most effective directors I have worked with at Pelican Products and Enesco Group have common sense and integrity, ask tough questions and are not afraid to push for answers when they need more information to make a board decision,’ says Meisenbach Graul.

She also believes having served on a board that has experienced a bankruptcy or some comparable crisis is important as such situations ‘are where directors show their intrinsic qualities and values, as they have to lead a company through a tumultuous situation and try to achieve the best outcome for all.’

Information is power

Often, the contribution of a director is only as good as the information he or she can access. When asked what kind of information directors need to help them be most effective at their jobs, Donnelly seems to prefer more technical information than his counterparts.

‘Directors need a comprehensive list of key performance indicators and management’s targets for short-term and long-term improvements; this is how we determine whether the company has set sufficient targets and how well it is performing to those targets,’ he explains. ‘It’s very important to have benchmarks for best-in-class approaches to important business processes, such as lean thinking [creating more value with fewer resources], quality management, product development and innovation.’

Meisenbach Graul has a higher appreciation for information gleaned from human capital. ‘Besides the financial statement information and analysis, charts, graphs and board book information, the most important information I receive is through unfettered access to the Pelican Products senior management team and the opportunity to visit our locations and facilities in order to understand and help support the CEO as the directors make their decisions,’ she says. ‘I believe the more educated we are as directors, the better decisions we will make as a board.’

A self-described ‘intellectually curious person’, Gordon gathers information to support her board service from a wide variety of sources. ‘Of course I read business publications every day,’ she says – and not just business newspapers, but also press clippings on industry trends and on Ingredion’s competitors. ‘I have to read quite a bit, and people help me make sure I’m reading the right information.’

When it comes to human capital, Gordon says she is ‘always learning from my team. I’ve built a very diverse team of people that includes my CFO, my head of strategy, my heads of business units and my legal counsel, and I’m relying on my team to bring me the issues and recommendations for decisions we need to make, so it’s not just outside information I’m receiving, but also information from my team.’

Gordon says she is always asking people questions, and that’s another effective way to get important information. ‘When I meet with customers, I might ask them about the trends they are seeing,’ she notes. ‘I’m on the board of International Paper, so we may be looking at global trends in the paper and packaging industry and I might surmise what those trends mean for International Paper and Ingredion. At the same time I ask questions of people on my team and other CEOs in order to understand the trends and challenges Ingredion and our customers face in the global economy.’

The corporate secretary’s role

The corporate secretary’s role in helping directors excel can take many forms. Even for a private company, Meisenbach Graul’s relationship with her corporate secretary is very similar to those of her colleagues. ‘Our corporate secretary provides me, as the only independent director, with legal advice on our acquisitions and refinancings,’ she explains. ‘Given that I represent all the stakeholders, I will request additional information and advice on transactions so that all the stakeholders’ interests are represented during board discussions and votes. The corporate secretary supports all requests for data and information needed to allow me to provide insight and direction at board meetings.’

The corporate secretary has a broader function at Oshkosh. ‘Our corporate secretary provides orientation for each new director,’ Donnelly says. ‘He suggests seminars for directors to attend that will help ensure we are all up to date on important shareholders’ interests, governance issues and legal/regulatory requirements.’ He adds that, like other corporate secretaries, his ‘prepares the meeting minutes, provides updates on issues particularly relevant to our corporate situation and engages outside experts and counsel whenever special expertise or advice is needed.’

Gordon’s corporate secretary also fills a larger role because she holds a dual title. ‘My general counsel, who is also my corporate secretary, is a very dynamic, smart person,’ Gordon says. ‘She replaced a general counsel who retired about a year ago. Her job is to be one of the key managers on my team and to make sure we are doing what’s required for good governance as a global company, as well as helping me prepare for board meetings and helping my board members be effective.’

Her corporate secretary sits in on board meetings with her, apart from executive sessions, which only independent board members attend. ‘She keeps us informed on different changes in governance requirements, laws and trends,’ Gordon explains. ‘She keeps both the board and the management team up to speed on requirements for corporate governance and how to be successful for shareholders in the long term.’

Last words on improving your board

‘Stay focused on shareholder interests,’ recommends Donnelly. ‘Help your chief executive to deliver the best possible performance. Regularly review management’s strategy and key performance indicators. Ask the questions your shareholders would ask if they were there with you. Provide guidance to management based on your experience, but don’t try to run the company.’

‘Work with smart people and learn about the business and its opportunities and risks,’ says Meisenbach Graul. ‘I would encourage all directors to keep current with their continuing professional education. I belong to the National Association of Corporate Directors and Women Corporate Directors, where we have education sessions on relevant topics and where we can network with other directors. Directors have to be up to date to do their best work for their boards.’

‘Prepare and deliver a strategy session to your board about your strategic direction over the next five years,’ Gordon advises. ‘Annually, we present our budget and an organizational review on talent management and succession planning: the best boards review those sorts of things annually because they want to understand what talent the company is developing and attracting, and how this talent might be used in order to grow the company in the long term.’