In Demand: Marketing Researchers
Marketing research is getting a seat at the head table as never before. Alumni explore the new cachet— and challenges —facing their field.
What to Ask BEFORE Joining a Corporate Board
Being asked to serve on a corporate board is flattering. It shows your business expertise is valued outside your own organization. But don’t go in blind. That’s the advice Larry G. Stambaugh, former head of Maxim Pharmaceuticals gave in fall 2005 to attendees of Directors Summit™, an annual Executive Education program on corporate governance.
With corporate boardroom misfunctions making the front pages and Sarbanes-Oxley requirements continuing to up the stakes in terms of directors’ liabilities, UPDATE decided now was a good time to revisit Stambaugh’s recipe for people who want to get on a board—but stay out of hot water.
“Let me boldly suggest that most boards have some level of dysfunction and you want to know where that exists on the board you are considering,” said Stambaugh, who has been active in corporate governance education for more than 20 years.
He urged potential board members to consider more than just the information about financial results, pending litigation, strategic partnerships and competitive environment that can be found in a company’s business plan or SEC documents. He proposed making “softer side” inquiries to gain more insight into the culture of the board and its management and recommended talking to at least four or five members of the board, the CEO and three or four members of key management.
Ten steps to help understand the culture and functioning of any board before joining it:
- Find out what specific changes the board made to the strategic plan presented by management this year.
- Ask key members of management: “What are the three priorities of the company
and what are three things that need to be changed?” - Ask the lead director or head of the compensation committee about the compensation philosophy and how the board sets CEO compensation.
- Talk to the company’s investor relations firm or inside IR person about the company and management’s perception in the market and about shareholder relations.
- Ask the CEO (and separately the lead director) about the tone at the top and have them describe the company culture. Compare these answers to responses from key executives you interview.
- Inquire about how board and director evaluations are conducted and how results are shared.
- Ask what role each director plays on the board and what role you will be expected to play.
- Find out if any directors feel it necessary to have their own counsel (separate from the company’s) to personally represent them.
- Inquire about how often executive sessions of the board are held and how long they usually last.
- Ask board members how long they intend to continue to serve on the board and why.
Taking these 10 steps will enhance the likelihood that your service on a corporate board will be beneficial for the company —and for you.
Keynote speakers at this year’s Directors’ Summit™(from the top): John Morgridge, former CEO and chairman of Cisco Systems; Staples founder Tom Stemberg; and NASDAQ’s Patrick McGurn.
“You are the conscience of the enterprise.” That was the message that Lou Hughes, former president of Lockheed Martin and of GM International Operations, stressed to corporate board members who attended Directors’ Summit™. The two-day Executive Education conference, held in November, explored the complexities of today’s corporate governance environment.
The conference was keynoted by Tom Stemberg, the founder of Staples and a venture partner with Highland Capital Partners; John Morgridge, BBA ’55, former chairman and CEO of Cisco Systems; and Patrick McGurn, executive vice president and special counsel of Institutional Shareholder Services. They and other senior executives and leading government experts examined a range of issues involving board leadership and strategy—from setting appropriate executive compensation to strategies for coping when a company is under attack from anything from a hostile bid to a product recall.
Directors’ Summit™ was attended by corporate directors, CEOs, CFOs and other senior corporate officers from throughout the country. NASDAQ was the event’s title sponsor.
Next year’s Directors’ Summit™ will be held Oct. 25-27, 2007. For more information, go to www.directorssummit.com.
Update Magazine December 2006
Feature Stories
Real Estate Reality Check
Now that the super-hot residential housing market of recent years is cooling, real estate professors and practitioners explore the new reality.
Innovate or Else
Status quo is not an option. Management Professor Sanjay Jain explores why companies must innovate
and how successful companies have done it.
What Every New Board Member Should Know
Corporate boards are increasingly in the headlines—and often not in a good way. Ten things you should know before you agree to serve on that corporate board.
Women at Work
Companies must find ways to benefit from the talents of women leaders if they wish to remain competitive.
Departments
DECEMBER 2006 VOLUME 25 NUMBER 2
EDITOR: Lari Fanlund
DESIGN: Lori Strelow
INTERNS: Jessica Williams,
Annie Van Cleve and Megan Wood
PRINTING: Schumann Printers, Inc.
EDITORIAL BOARD:
Alisa Robertson, Chair
Melissa Amos-Landgraf, Jim Kubek, Richard Lee, Mark Matosian, Maureen O’Connor, Kaylene Reilly, Patricia Seaman, Steve Schroeder and Charlie Trevor
UPDATE is published in print and online each June and December by Wisconsin Business Alumni to inform alumni and friends about programs and activities of the University of Wisconsin-Madison School of Business and its alumni. Printing is paid for with private contributions. This issue, and previous ones, are available online. Correspondence should be sent to lfanlund@bus.wisc.edu or mailed to:
UPDATE
5151 Grainger Hall
975 University Ave.
Madison, WI 53706-1323
Visit the School of Business Web home page.