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Column

Robert H. Rock
Chairman and Publisher
Directors & Boards

‘MVP’

On every team there is usually someone who stands out as the most valuable player. Who is a board’s MVP?

By Robert H. Rock

With the 2008 baseball season wrapped up, sports writers will later this month select “the most valuable player” in each league. In the National League, the past two MVPs have come from my home team, the Philadelphia Phillies. This year the Phils may have a third straight winner, as suggested by chants of “MVP, MVP, MVP” echoing through Citizens Bank Park for our highly talented infielders.

On every team there is usually someone who stands out as the most valuable player. He or she leads by example, not only on the field but also in the clubhouse.

A board of directors is a team of players with different skills and experiences that must work together to assure good corporate governance. On the public and private boards on which I serve, I have worked with several directors whom I have come to admire as truly exceptional in the value they add to board deliberations and decision making. They are the MVPs of these boards.

Who are these board MVPs?

• First, they combine intelligence and experience with character and judgment. They bring relevant, firsthand business experience that both the board and top management can rely on when making tough decisions. They have gravitas, and their counsel holds weight when the company is venturing into uncharted waters. When they begin to speak, the boardroom gets very quiet.

• Second, board MVPs are willing to challenge management by asking penetrating questions and demanding supporting evidence for management’s recommendations. They bring to the boardroom heightened skepticism and increased scrutiny, and they delve deep to understand the implications of major business decisions. Without trying to upstage management, they are frequently assertive, and sometimes confrontational, in questioning top management. It is the board MVP who often leads the board’s frank and honest annual evaluation of the CEO’s performance.

• Third, board MVPs are truly independent and act independently. They bring an objective, outside perspective to board deliberations. In particular, they bring a shareholder’s perspective to the decision-making process. Their involvement starts with participating in setting the board’s agenda and demanding more detailed and more timely board materials, and it continues with active interaction with management during board meetings and candid critique during executive sessions. They ask tough questions and engender open debate that challenge management and hold them accountable for results.

• Fourth, director MVPs recognize and respect the line between corporate oversight and operational management, which has become blurred as boards in general and board committees have taken on some duties that traditionally had been deemed to be within management’s purview. With directors now spending approximately 200 hours on their board duties, some CEOs are complaining that their boards have crossed the line and are trespassing into management’s turf. Director MVPs help to assure that the independent directors do not usurp management’s responsibility to manage the company.

• Fifth, the foremost accountability of a board is to represent the interests of stockholders by ensuring there is a management team willing and able to pursue those interests. Therefore, succession planning is an important — and at times the most important — role of the board. Because shortfalls in performance or lapses in judgment may require them to replace CEOs, boards must constantly be planning for succession, which includes both the grooming of internal candidates and the search for outside talent. The board MVP embraces this accountability and often leads the succession planning process.

Although the lead director can be the board MVP, that designation does not make it so. He or she must earn it by demonstrating that they consistently add value, which goes well beyond reviewing board agendas, leading executive sessions, and providing feedback to the CEO.

This year, approximately 400 rookies begin their first-ever service as public directors. These select few have been chosen for their expertise, experience, and judgment. Who among them will rise to MVP status?

Robert H. Rock is chairman and publisher of Directors & Boards. He can be contacted at rrock@directorsandboards.com.