EY alumni bring top talent to leading boards
Taking the lead
Perspectives from EY alumni serving on leading corporate boards.
It may not come as a surprise that nearly 200 Ernst & Young LLP alumni serve in the C-suites of Fortune 1000 companies. But did you know that nearly as many serve on the boards of the Fortune 1000? That’s not to mention the hundreds of mid-size organizations and literally thousands of not-for-profit, civic, religious and other boards to which our alumni extend their time and talents.
For this issue of Connect, we convened a panel of five alumni who serve on leading boards to ask them about what it means to serve. What issues are they seeing? What have they learned? And what advice do they have for their fellow (or soon-to-be) alumni who may have an interest in board service?
Our panelists, who were chosen to represent a wide range of industries and board experience, included Jan Babiak, Denny Beresford, Karin Hirtler-Garvey, Walter Morris Jr. and Mike Goldstein. They spent nearly four hours gathered around a table in the Presidents’ Room at New York City’s Harvard Club. Mark Manoff, EY’s Americas Vice Chair — Accounts, facilitated.
Throughout the session, they debated the hot topics facing boards, including increasing regulation and the evolving role of the board with regard to strategy. They discussed the mounting pressure to bring both business acumen and diversity to boards. And they talked about the increasing importance of succession planning — both for boards and management. While there was no shortage of opinions expressed, one message came through loud and clear: these board members are deeply committed to the organizations and shareholders they serve, as well as to the role they play in guiding their organizations into the future.
Dennis "Denny" Beresford
“Until joining a board, I don’t think I ever fully appreciated the many complexities of running a business. I’ve enjoyed every moment.”
All of our panelists agreed that increased oversight and regulation are changing boards’ routines, often for the better. “Seven years ago, we didn’t have risk committees, we didn’t have board training, we didn’t have formal board self-assessments,” says Karin Hirt-ler-Garvey. She claims board meetings that used to last a morning now require up to a day and a half. Denny Beresford goes a step further, saying that increased regulation is creating a sense of “defensiveness” among boards. “You read the list of risks in a compa-ny’s 10-K, and it covers every risk imaginable in the world,” he notes. “As always, we as board members must focus on what’s most important.” Jan Babiak, who spent her last 19 years with the firm in Europe, brings a different perspective on regulation. “The US approach to regulation is much more rules- versus principles-based, and governance requirements are different,” she comments. “I find that you just don’t have the same hue and cry in other parts of the world that you do here.” Walter Morris, Jr. sees a silver lining to the regulatory cloud: while he admits the new rules can be challenging,“I think they force every company to say, ‘Wait a minute, do we have the right board? Do we have the right management team?’ And I think that has really improved things.”
When it comes to board involvement in corporate strategy, our alumni panel bristles at the notion of serving as a rubber stamp for management. However, they made it clear that the degree of board participation in strategy-setting varies widely, depending on cir-cumstances. Over the past two years or so, Beresford reports a “quite different” situation for three of the boards he currently serves or previously served.
For one company, it was “clear that management was taking the lead” in setting strategy (while keeping the board involved and getting buy-in). Beresford calls the second case “a joint effort,” with the board and management “kind of going back and forth” on the strategy. In the third instance, Beresford notes that the board felt management should be doing more in terms of setting strategy. Consequently, the board became proactive in helping the company develop an initial strategy.
When it comes to setting strategy, our panelists caution about guiding versus interfering. “There is a danger that a very active board, especially with a lot of participants who know the industry, will start micromanaging and cause more harm than good,” says Michael Goldstein. “My approach is ‘noses in, fingers out,’” adds Babiak. “I agree it’s a fine line,” says Hirtler-Garvey, “but ultimately, you’ve got to be sure that management owns the strategy.”
“Board members are not placed in a position of competing with each other. This creates the most collaborative environment I’ve ever experienced or seen in a company setting.”
A diversity of opinion
Another hot topic facing boards today is diversity. “If you put 10 CEOs together in a room, as near as I can tell, you have 9 redundancies,” says Babiak. “I start from the standpoint of having true diversity in terms of what you’re trying to achieve.” She points to the composition of one of her former boards, Logica, a UK-based high-tech firm that was acquired recently, as a great example of “functional” diversity. “We had a hardware manufacturer, a software developer, the CEO of a high-tech company, a big retailer who uses lots of technology, a banker, a telecommunications provider and myself, an accountant who happens to know IT.” This group included French, German, Italian, Indian, UK and US nationals. So rather than saying we need a woman or a person of color on our board, I come at it from the standpoint, let’s diversify everything about the board and all these other things will follow through.”
Former Toys “R” Us CEO and board chair Goldstein also appreciates a diverse board. However, he feels strongly that every board member must possess strong business acumen and add value. “There’s plenty of rich and diverse talent out there — it’s a matter of making the effort to find it,” he says.
Morris is encouraged that business, in general, is recognizing the need for more diversity on boards. “I see progress,” he says. “I see certain firms coming together to talk about it, executive search firms holding forums on it and so forth.” However, Morris believes that a “disconnect” exists in the methods of sourcing and identifying potential board members. “We’re looking for nontraditional people using traditional methods. That’s a problem.”
Mark Manoff, our normally neutral moderator, also weighed in: “I’m pretty passionate about this,” he told the panel. What Manoff espouses isn’t just more diversity, but more diversity of thought. “I’ve found that when you include someone from a different organi-zation or a different culture, the richness of the discussion is far better than I ever would have expected — it’s incredibly additive,” he states. Manoff believes there’s much that organizations, and boards in particular, can learn from this.
Is that seat taken?
Despite slightly differing viewpoints on diversity on boards, our panelists agree they see a shift in the way that board members are hired and recruited. “Fast fading,” they say, are the days of hiring a board member on the basis that he or she is a “good person” or simply hails from a prest