The Directors Chair

34 Listed / /Fall 2011

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The Directors Chair

Risk,reward,repeat
In an era when women presidents, CEOs, chairs, corporate directors and business deans are still the exception, Carol Stephenson has excelled in all five roles
InterviewbyDavidW.Anderson,ListedContributingEditor PhotographybyEchoGardiner

Its fitting that Carol Stephenson is dean of the Richard Ivey School of Business, for her multifaceted career is a case study in the value of lifelong learning, peer interaction and the power of strong leadership. In addition to her work at Ivey, Stephenson currently sits on a number of boards and is ideally situated to impart her knowledge and serve as an example to others even as she adds to her own impressive record. In this instalment of The Directors Chair, governance expert and adviser David W. Anderson speaks with Stephenson about the risks and rewards of being a corporate director, board-CEO relationships, personal growth and leadership training and the art of good decision-making.

Carol Stephenson
Primary role Dean, Richard Ivey School of Business, University of Western Ontario Additional roles Director, General Motors Co., Director, Intact Financial Services, Director, Manitoba Telecom Services, Cofounder and director, Women on Board, Chair, Ontario Research Fund Advisory Board, Chair, Advisory Committee on Senior Level Retention and Compensation (federal government) Former CEO/president Lucent Technologies Canada, Stentor Resource Centre, Inc. Former chair Chair, 2010 United Way Campaign Cabinet, London & Middlesex Former director General Motors Canada, Ottawa Airport Authority, Partnership BC, Sears Canada, Markham Energy, Vancouver Olympic Games Organizing Committee (VANOC), London Economic Development Corp., Union Energy Education BA (Honours), University of Toronto, Executive Program, Graduate School of Business Administration, University of California at Berkley, Advanced Management Program, Harvard University Honours kOfficer of the Order of Canada kWomens Executive Network Canadas Top 100 Most Powerful Women k100 Exceptional Women List, The International Alliance for Women kCanadas Telecommunications Hall of Fame kCanadian Information Productivity Awards Hall of Fame k50 Most Powerful Women, National Post kWoman of Distinction, YWCA Current age 60 Years of board service 12

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The Directors Chair

David W. Anderson As dean of one of Canadas best-known business

schools, what role do you see for business education in preparing leaders to understand governance and to actually govern as well as manage? Carol Stephenson Our role is to teach leadership. We tie together the business school, boards and management so that our students understand the rise of governance and its clear importance to their careers and to their organizations. We have looked closely at the turmoil of the last decade and made sure our curriculum has been made richer because of it.
David W. Anderson The global financial crisis and its continuing

want to be on a board. Articulate what you can realistically contribute, based on your education, experience and positions. Remember that boards take a risk every time they invite someone to join. Appropriately, boards seek to mitigate that risk by knowing theres a track record. You must get known. Get started on not-for-profit boards where you can make a contribution and be noticed.
David W. Anderson As a CEO, how did you view your board? Carol Stephenson My relationship with my board evolved as I got to

aftershocks are part of that turmoil. Through the prism of this crisis, what have you learned about leadership? Carol Stephenson In lamenting the loss of wealth and jobs, and the damage done to businesses and markets, many were asking if the crisis was caused by pay practices, managerial greed, poor ethics, or lack of oversight by boards. At Ivey, we asked if it was about leadership. Were there aspects of leadership that differentiated those that did well from those that did not? In the immediate aftermath of the financial crisis, we surveyed and met with over 300 CEOs and learned that leadership did matter. Companies that did well had leaders with three characteristics: competencies to understand their business; commitment to the hard work of leadershipnot just occupying a position of power but getting involved to grasp the problem; and character which defined in practice the values and virtues of leadership. We published these findings in Leadership on Trial and turned the findings into practical means to prepare our students and to help managers and directors.

know them and they got to know me. As a brand new CEO out to prove myself, I found the idea of a board to be daunting. With experience, I realized the real value a board can offer a CEO.
David W. Anderson What advice do you have for CEOs facing their Carol Stephenson The best thing a CEO can do is be open and honest.

own boards?

CEOs shouldnt pretend they know everything. Its not CEO on trial. Share the issues youre facing and dont worry about looking like you dont have a handle on things. Put scenarios in front of the board to bring out the directors talent. Get as much insight as you can to help you make decisions. Spend more time listening than talking. I found my decision-making was faster and more effective when I used the boards expertise.

David W. Anderson Much attention gets paid to executive compensa-

Youre putting a lot at stake when you become a director. Go in with your eyes open and choose your purpose. Its got to be less about pay and more about why youre doing it
director education in the 1990s but didnt find a viable economic model in it. Whats your view on director education now? Carol Stephenson I would prefer to see directors take the approach I took as an executive: figure out where to strengthen yourself and tailor your education to yourself as a director and to the board and company as a whole. Experienced directors may be better to go to a focused seminar. In general, I think its far more effective for director education to be undertaken collectively as a board. This way it catalyzes discussion on relevant issues such as CEO succession and talent development.
David W. Anderson In your experience, what is the most likelyand Carol Stephenson Id offer three suggestions. One, build your reputaDavid W. Anderson Ivey School of Business was at the forefront of

tion. How should directorsthe ones who set executive paybe paid themselves? Carol Stephenson I think directors should be paid in a combination of cash and grants of deferred share units which cant be accessed until one year after retirement from the board. This shows commitment to the company and tells shareholders were all in this together. Personally, Ive chosen to continue to have a part of my director compensation in shares, even though Ive met the share ownership guidelines. Directorship is not a consulting assignment. energy and value, is director pay keeping pace? Are directors paid enough for todays performance expectations? Carol Stephenson It depends; in some situations, clearly not. Some boards find themselves dealing with issues not contemplated when directors were asked to join, such as complicated transactions (BCE going through a potential buyout), crises (Nortel dealing with accounting troubles) or shareholder, regulator and media scrutiny (Magna buying out its founder). The value of time and reputational risk to these directors is large. As a director, you never know when you may find yourself in such a situation. When directorship becomes a full-time job, the pay is way off the mark. David W. Anderson Yet directorship remains a desirable post. Do people appreciate the risks? Carol Stephenson Youre putting a lot at stake when you become a director. People should think long and hard about becoming a director. You can have your reputation damaged. How much risk do you want to take? Go in with your eyes open and choose your purpose. Its got to be less about pay and more about why youre doing itwhat value youre bringing. If youre doing it only for the money, youre making a big mistake. And not surprisingly, directors dont generally do it for the pay.
David W. Anderson So why do people become directors? What do you David W. Anderson As more is being asked of directors in time,

legitimatepath to directorship?

tion. You need to be known for something successful relevant to the business. People get caught up in their own world; get out into the wider environment to build an external point of view. It takes time so start now to make an investment in your future. Two, express your interest in directorship to people you know on boards, cultivating their support. Women think theyll just get discovered for being good at what they do. In truth, we all must network proactively. Three, know why you
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find rewarding?

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The Directors Chair

Carol Stephenson Directorship is about problem solving on every level. Its intellectually stimulating, challenging and provides great learning experiences. I enjoy my interaction with fascinating people. No board experience is the same. The biggest reward is giving back in some way. Directorship requires that you take your life experience and share some of the wisdom from one company to the next. So youre learning but also contributing, based on your knowledge and experience, to the company and its leadership team. By its nature, being a director keeps me on top of current issues, which is important to me as a business school dean. David W. Anderson At the core of a boards work is decision-making. Carol Stephenson Good decision-making is predicated on thorough,

is board evaluation. Many directors seem to struggle with this. In your experience, does evaluation make a difference? Carol Stephenson I agree directors are struggling with board evaluation and I think its because their experiences are mixed. Ive found board and committee feedback to be worthwhile, but the most useful board evaluation Ive seen was when the chair got personally involved and gave me feedback in a one-on-one conversation. Thats when board evaluation made a big difference to me.

David W. Anderson One tool for directors to improve their performance

What makes for good board decision-making?

deep discussion on strategy. To tee up those big decisions, boards must be engaged early and provided with good information. I like to see scenarios debated and real effort put into examining what possible outcomes may look like. The best decisions are made when there has been adequate think time; usually with debate going on for a few months, so that issues can be revisited. Its necessary to manage the board agenda to have information well in advance to prevent rushed decisions. For example, on one board I served, acquisitions were part of our strategy, so we knew in advance we would face such a decision. To increase the likelihood of a good decision, we reviewed acquisition concepts in advance, so that when an opportunity came up, we had the strategy nailed. We knew why we were doing it and what our other options were. So the discussion and decision-making focused on the specific transaction. This approach is much different from coming in to one meeting and being told by management: We have an opportunity here. Are you with me or not?
David W. Anderson Weve seen boards make poor decisions from time to time. What can directors do to create the conditions for good decision-making? Carol Stephenson Fundamentally, a board will be hamstrung if it doesnt have the right combination of skill sets and knowledge on the board. Selecting the right talent, prioritizing the agenda to cover issues early, asking relevant questions and ensuring those questions are being answered by management are all elements that will allow a board to explore big issues in depth and make better decisions. David W. Anderson If boards are to provide both independent over-

Good decision-making is predicated on thorough, deep discussion on strategy. To tee up those big decisions, boards must be engaged early. The best decisions are made when there has been adequate think time
trust and maturity among directors and the chair. Was there anything about the process that helped? Carol Stephenson Directors each shared with the chair, on a confidential basis, what they would like other directors to do more or less of. The chair took a very constructive approach to these conversations and showed respect for our views in aggregating a host of comments into key issues, which were then shared individually with each director. I much prefer that kind of evaluation process in which ideas are shared in conversations rather than in written form. The caveat is that some chairs are really good at listening and providing feedback while others are not. Unfortunately, some chairs just want to get it over with and dont take time to develop credibility in the conversation nor provide constructive feedback.
David W. Anderson What effect did that feedback have on you? Carol Stephenson I was chair of a human resources committee at the David W. Anderson Such personalized feedback requires considerable

sight of management and strategic counsel, doesnt that require boards have access to their own sources of information? Should directors seek out information other than from management? Carol Stephenson Its true that sometimes directors dont see the real big picture when they lack the relevant information to inform their judgment. I think its the responsibility of individual directors to read and listen and be knowledgeable of the company and industry. As a director, I spend time actively learning outside the boardroom. Beyond personal efforts to develop an independent perspective, I do think its important that boards take initiative to get independent information from experts. But I caution that this should always be with the CEO present. I dont think its useful for boards to be subject to dueling presentations from management and board advisers. So while putting relevant information on the table is vital for good decision-making, I think theres an issue of stylehow one raises alternative viewsthat must be managed. The style of inquiry must not be confrontational as a norm if we want to be good decision-makers.

time. Like many committee chairs, I thought I was doing a good job reporting to the full board. As a direct result of the evaluation feedback, I modified my presentations to the board. I began to talk more about the how and why of some of our committee decisions. I was relieved to find it was easy to implement my fellow directors suggestions. Importantly, follow-up feedback showed that others agreed my performance improved. I think most directors today actually appreciate the feedback. When youre used to getting feedback and you find yourself on a board that doesnt do it, you really miss it. I think that if youre not getting enough feedback as a director, take the initiative to ask the chair if you can do anything differently. Be open to the feedback. How else do we improve? David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independent advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises directors, executives, investors and regulators based on his international research and practice. E-mail: david.anderson@taggra.com. Web: www.taggra.com.

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