Directors & Boards: Column

Home |

Subscriptions |

Articles Archive |

Current Issue |

Back Issues |

Shopping

Advertising |

List Rental |

Editorial Calendar |

Background |

Column

Gail J. McGovern and John A. Quelch
Harvard Business School

Directors from Academia Can Fill Gaps in Talent
There are three types of candidates, and each can make a distinctive contribution to a board’s deliberations.

By Gail J. McGovern and John A. Quelch

Increasingly, U.S. public companies are turning to academics as nonexecutive directors. An industry survey reports that 10 percent of new independent directors appointed in 2005 came from academic or nonprofit backgrounds, compared with 2 percent in 2000.

This shift is attributable in part to availability. In a tougher corporate governance environment, with greater time commitments required of independent directors, it is not feasible for senior line managers--CEOs and CFOs--to serve on more than one public company board other than their own. The experience gained must also be offset against the financial and reputation risk, both personal and corporate, in a post-Enron world. Additional criteria for qualifying as an independent director, including restrictions on interlocking directorships, further limit the availability of CEOs and others in the business community for board appointments.

Academics can help to address the resulting gap in the talent pool. There are three types of academics serving on company boards: the specialist, the ex-practitioner, and the administrator.

Sources of Expertise
The specialist brings expertise in a particular topic or subject area relevant to the company’s strategy. For several decades, university scientists have been appointed to the boards of pharmaceutical and other research-intensive companies. These outside directors can connect their companies to the scientific community, to cutting-edge research, and to pools of doctoral students interested in thesis research and employment opportunities. The inclusion of scientists on boards reflects the important partnership of the private sector, universities, and government funding agencies in sustaining U.S. research and development leadership.

A second type of academic candidate for public company boards is the former senior executive who has switched career paths to become a professor of practice at a leading business or law school. Such candidates already know the dynamics of the boardroom and therefore can bridge the two cultures. Academics at professional schools are typically allowed one day per week for outside activities, partly so they can connect with the real world and bring that understanding back into the classroom, partly to alleviate the compensation gap between academic salaries and real-world compensation of professionals with comparable talents.

The third type of academic is the senior university administrator, often a specialized academic by training but subsequently appointed as a university president. Universities are notoriously challenging to run; they are populated by tenured professors, each with a mind of his or her own and no stock options to reinforce company loyalty. University presidents and deans must consider, respond to, and motivate a complex web of stakeholder groups--including students and alumni as well as faculty, staff, and the local community--all of whom are typically represented on a university’s governing body.

Good Teachers Are Well-Trained
As companies navigate the challenges of globalization and the new technologies, and as they are pressed to think beyond shareholder returns as their sole success measure, the broad and unique perspective that academics can bring to the boardroom is increasingly valuable. Their day jobs bring them into contact with today’s students--the next generation of leaders--in university environments where diversity has long been an important and respected goal and where the big social issues of the day (which must be addressed if business is to succeed) are commonly discussed.

Good teachers, after all, are trained to ask good questions, to look for evidence, to conduct research, and to base decisions on facts rather than emotions. That’s a recipe for boardroom independence.

Most academics with senior administrative responsibilities are careful consensus builders rather than freewheeling lone rangers. They can bring wise, responsible, and non-threatening counsel to a board’s deliberations. They can also provide much-needed balance on board committees that may otherwise be served exclusively by senior executives.

In particular, they bring a down-to-earth, practical, and independent view of compensation. (Of course, their lack of accounting training may preclude them from being audit committee chairs.) Additionally, as board members turn over, academics can help the company tap into fresh and different networks for potential new members.

Gaining experience as nonexecutive directors may also enhance the effectiveness of academics in their own professional work. Board deliberations expose them to current practical challenges across several functions--strategy, finance, and human resource management, for example. This makes for better-rounded professors who are able to integrate across functional boundaries in classroom teaching and more confident in engaging students on issues of corporate ethics and responsibility.

Academic directors are able to invite top company managers to campus, develop business case studies for classroom use, advise on campus recruiting and executive education opportunities, and connect their companies to academic colleagues who may have specialist expertise that they need.

Not All Qualify
Of course, only a minority of academics have the potential to be good nonexecutive directors. Some academics are hostile to business. Others are loners, brilliant but incapable of teamwork, or control-oriented to the point that they tend to second-guess or micromanage the CEO.

But among the ranks of university presidents, deans, and practice-oriented professors at professional schools--business, law, and medicine--are many with the time and temperament to become diligent and outstanding independent directors in a Sarbanes-Oxley world.

Gail J. McGovern is professor of management practice at Harvard Business School and John A. Quelch is Lincoln Filene Professor and senior associate dean of HBS (http://www.hbs.edu). McGovern serves on the boards of DTE Energy Co., Digitas Inc., and Hartford Financial Services Group Inc. Quelch serves on the boards of Inverness Medical Innovations Inc., Pepsi Bottling Group Inc., and WPP Group PLC. They can be contacted at gmcgovern@hbs.edu and jquelch@hbs.edu.