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Reader Profile

Michael Freedman
Chief Executive Officer and Member of the Board
Fuel Outdoor Holdings LLC

Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. If you'd like to participate in this section in the future, please email Scott Chase.

For Fuel Outdoor, and for all companies, what is corporate governance?
Simply put, for Fuel Outdoor and any major company, corporate governance is leadership. Governance matters are usually set forth in the articles of incorporation, or the LLC or Operating Agreements, and lay out the rules of the road between the Shareholders, Partners, or members as the case may be, and the management of the company.

In your past experience, how important has corporate governance been to the strength of the company you are working with?
In the long term, corporate governance is an extremely important part of a company’s overall success or failure. Ethical managers executing a business plan, with a strong understanding of management’s relationship with its owners, ensures an effective balance of power between the interests of the various constituencies (owners, management, customers, suppliers and employees) that enables a corporation to survive.

How do you incorporate a policy of corporate governance?
More deeply, , corporate governance is the system by which Fuel’s owners and their representatives on the board ensure that management pursues the company’s defined purpose and appropriately allocates resources to that purpose. For us, it is neither a process of compliance nor an additional level of management; it is a task that underlines all of our work. In effect, I see management as   the corporate representative for owners and through our actions promote long-term shareholder interest. To make sure that these interests are properly calibrated, it is important that management is also a shareholder.

How does your view of governance protect stockholders or shareholders?
Fuel’s approach to governance is based on balancing good corporate behavior and maximizing shareholder value. Good governance involves clarifying roles within the organization by outlining distinct skills and processes for undertaking the tasks at hand. The board at Fuel Outdoor governs the company on behalf of its owners, while the day-to-day management is delegated to the chief executive who is empowered to execute the board’s policies. These policies use a straight-forward, policy-based approach that ensures both our board and our management operate within a well-defined set of parameters that helps to ensure short-term and long-term interests are met. This includes attaining a positive ROI, pursuit of new technologies, risk management, M&A activity, as well as building the brand value of our portfolio.

Is this a regulatory burden on Fuel Outdoor?
For us, as a private company, it is less a regulatory burden and more of a way to manage our business, our people and our risk. In a way, this is how our board reduces the risk we have in managing the business at hand. By setting out key initiatives, policies, practices and procedures, as well as clearly outlining areas of responsibility, our board is better able to focus on more macro issues such as market variables, investments, and optimizing growth factors. By developing a sound policy for corporate governance, we empower our day-to-day managers to identify interdependencies and synergies among business units and departments, reducing costs and duplication of efforts. We also minimize our exposure to risk by enabling managers to target areas of concern. Most important, we offer a consistent set of tools to test new business opportunities, creating a more transparent process that reduces regulatory scrutiny and potential litigation.

An important theme of corporate governance is accountability; have you established policies to ensure proper accountability?
Establishing policies for accountability is something I have done with all the companies I have managed. Accountability starts from the top down. But setting policies is just the first step. Creating the communication platform and the procedures to ensure the policies we set are followed is the key to managing a business that sets the standards for the industry.

Do you think the collapse of Enron and Worldcom were directly related to poor corporate governance and a lack of accountability?
So many companies look at short term profits over long term viability. Every business faces tough decisions. Do I tread the line, or do I push the boundaries in search of greater profits? Businesses like Enron and Worldcom faced the same situation that a lot of us face on a daily basis. They simply had a board that was perhaps not as vigilant as it should have been.

For me, the board is in place to ensure quality governance, to provide leadership, and maintain accountability. If they drop their standards, very few below them will adhere to them.   For these companies, the board, the top of the totem pool, may not have overseen their companies in the way they should have. Yes, they were profitable for the short term. However, that failed to last under greater scrutiny.

Michael Freedman is an original founder of Pacific Media; he led the management team that grew Pacific Media into the largest Out-Of-Home media company in Japan, building Pacific Media from foundation into a company that controlled a 15% market share in the highly fragmented Japanese market. In 1996, Mike was instrumental in selling control of Pacific Media K.K. to Catalina Marketing Corporation (NYSE-POS) in exchange for cash and Catalina’s business in Japan. From 1996 through July 2003, Mike had overall management responsibility for both Pacific Media K.K. and Catalina Marketing Japan K.K., both of which grew over that period to become the major players in their respective industry segments in Japan. Mr. Freedman is a cum laude graduate of Harvard College with an AB in East Asian Studies.