November 7, 2025 • 22 mins
Rob Gerberry, Senior Vice President and Chief Legal Officer, Summa Health, speaks with Michael Peregrine, Partner, McDermott Will & Schulte, about the release of a new report by the National Association of Corporate Directors on “Building a High-Trust Board-CEO Relationship.” They discuss the issues and concerns the report is trying to address, along with the report’s recommendations. Michael recently authored an article for AHLA's Health Law Weekly on this topic.
Watch this episode: https://www.youtube.com/watch?v=3ppXlG-9vy0
Read Michael's Health Law Weekly article: https://www.americanhealthlaw.org/content-library/health-law-weekly/article/ad2eb4da-1216-4c90-a5d5-d32f060a04e9/An-Important-New-Emphasis-on-the-Board-Management
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:04):
This episode of AHLA Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmerican Health Law.org.
SPEAKER_01 (00:17):
Hello, everybody.
This is Rob Gerbery.
I'm the Chief Legal Officer ofSumma Health and the president
like designate of the AmericanHealth Law Association.
I'd like to welcome you to thelatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's topic is Rip from theHeadlines.
It focuses on a pronouncementrelated to a report from the
(00:38):
National Association ofCorporate Directors and building
a high trust board CEOrelationship.
As many of our listeners knowwell, the demands on health
industry leadership, both CEOsand boards, is rapidly evolving.
Not only must they confront thesame technology, economic,
societal, and global disruptionsthat all complex businesses are
(00:59):
facing, but they also mustconfront the regulatory,
financial, and constituentdisruptions that are unique to
the healthcare industry.
And these demands anddisruptions place unusual and
undesirable pressures on theboard and the CEO's
relationship, sometimes to thedetriment of organizational
leadership.
To help these leaders confrontthese issues, the new NACD
(01:21):
report offers a series ofrecommendations as well as a
detailed toolkit.
And both the recommendations andtoolkit are tailor-made for
interpretation and applicationby the healthcare corporate
council in his or her primaryrole as governance counsel to
the board.
(01:46):
And as always, I'm joined todayby our HLA colleague, Michael
Peregrine of McDermott, who isalso an HLA fellow and a fellow
of the American College ofGovernance Council.
So, Michael, before we dive in,I understand you had the unique
privilege and joy of comingrecently to my home state to
hang out with some governanceregulators.
Tell us the story.
SPEAKER_02 (02:04):
Well, Rob, you got to remember I sent two kids to
college in Ohio, so I think youowe me a rebate given how much I
spent there.
But you're right, I did spend acouple of days of Columbus.
You know, over the years, I'vebeen really fortunate enough to
speak uh frequently to theannual meeting of what they call
NASCO NAG, the NationalAssociation of State Charity
Officials and the NationalAssociation of Attorney
(02:26):
Generals.
The NASCO folks are those whoserve in the charities bureaus
of our state attorneys generaloffices, and I think who do
really care very much about hownot-for-profit corporations,
including health systems, governthemselves.
And I, you know, I think it'simportant to note for our
audience that uh theseregulators, at least from my
(02:48):
perspective, are very committedto preserving the nonprofit
sector.
And they're committed,therefore, to its support.
And they want to be available tonot-for-profit organizations
with questions or comments orconcerns.
So I think it's good for ourlisteners who do work with
not-for-profit organizhealthcare organizations, know
who the charities officials arein their state, and to reach out
(03:10):
and and and maintain arelationship with them because I
think uh it's a good it's a goodmix.
And they're regulators indeed,but again, we have to keep in
mind they want thenot-for-profit sector to
succeed.
SPEAKER_01 (03:25):
So, Michael, turning to the uh report that we've uh
talked about and the issue athand, are we just talking about
general guidance uh that we'reused to coming out of the NACD?
Or is there a specific new oremerging concern they've
identified?
SPEAKER_02 (03:37):
Well, Rob, I think it's very much the latter.
Uh keep in mind that each yearuh NACD commissions a diverse
group of business leaders toexamine a governance issue of
big time importance and todeliver a report with very
specific practicalrecommendations and support of
aids.
The last couple of years, Ithink it in 2023, the report
(04:01):
focused on culture in theboardroom, and that was a
terrific one.
Last year it was board oversightof technology.
This year it's on the boardmanagement dynamic.
SPEAKER_01 (04:13):
So, Michael, I think most of our colleagues um have
an experience with the kind ofstress and strain between their
leadership groups at one time oranother in their career.
As you look at current dynamics,is there something special going
on in your opinion?
SPEAKER_02 (04:28):
I think uh the answer is yes.
And and what the report does isthey look at three very specific
trends they see, and a lot ofthese are CEOs, uh, as driving
the need to cultivate the boardmanagement relationship with
some sense of urgency.
In other words, I think uh theythink it's really time to focus
(04:49):
on this issue.
And the first issue, the firstreason they think so is they see
much more pressure on CEOs toperform than ever before, uh,
you know, with challenges from abroad group of activist
stakeholders, not justshareholders, but stakeholders
of all types of constituents onmatters going not just financial
(05:09):
performance, but a variety ofother issues.
So, number one, more pressure onthe CEOs.
Uh, number two, I think whatthey what the report calls is an
unmistakable evidence ofshrinking CEO and C-suite
tenure, uh, with the average CEOtenure declining and turnover
levels reaching really recordlevels.
(05:31):
So that's the second concern.
Uh CEOs are serving for a lotshorter tenure.
Third is that directors, theboard members, uh, for a lot of
the reasons we've talked aboutin our podcasts are confronting
just increased complexity andambiguity.
Um, and the same time they'refacing uh greater stakeholder
and regulatory and judicialpressure as well to be effective
(05:56):
uh overseers and to serve asstrategic advisors.
So I think you know, if youcould draw a picture, you'd have
two arrows coming uh uh right ateach other.
Uh both parties, the board andthe CEO, were feeling pressure
uh from outside forces, fromwithin.
Uh, and it's I think from thethe NACD's perspective, it's
(06:17):
creating an un an enormousamount of stress on their
relationship with each other.
SPEAKER_01 (06:23):
So as the board tries to stay calm with these
headwinds, can they adopt theapproach that these kind of
problems will just work out inthe ordinary course?
SPEAKER_02 (06:30):
Yeah, let's just you know, work, let's not worry
about it, it'll work themselveswork itself out.
And I think the answer is atleast the NADC uh commission is
saying a very loud no to thatquestion.
They won't work themselves out.
I I think a foundational premiseof the report is allowing these
issues to resolve themselvesorganically by default uh leaves
(06:52):
the answer to be resolved by onthe basis of personalities, uh,
implicit behaviors, you know,without any clear direction or
structure.
And in the current environmentwhere there's all sorts of
business and economicvolatility, that's not a great
thing.
Um organic evolution of theboard management dynamic without
(07:15):
support is going to fall short.
And you know, we've all seen it.
I certainly have seen it in mycareer.
Uh it's a sensitive issue.
Uh people don't want to don'twant to poke the bear.
They they know it's a concern,but they they don't want to
confront it, and understandablyso.
NACD is saying confront it.
SPEAKER_01 (07:31):
So, as we think about confronting it, what do
you think the alternative is?
SPEAKER_02 (07:36):
I think this is for our listeners, this is the real
message.
What the NACD report says, allright, we've got this problem.
It's a big problem, we've got toconfront it.
How do we confront it?
Um, we we again we just don'tlet it evolve organically.
We we we move towards a verydeliberate process.
We we have a deeper commitmentfrom both the board and the CEO
(07:59):
to implementing and thenrefining leading practices with
a lot greater purpose, a lotgreater intentionality, all with
an eye towards the problems thatthe organization is having.
In other words, it's a call forboards and their CEOs to really
build a strong foundation oftrust by clarifying the
(08:20):
parameters of theirrelationship, you know, who does
what, and by operationalizingthe trust between them by
building into their culturetrust-building behaviors like
better communications, uh, morespecific evaluations, use of
executive sessions, and personalsupport.
(08:41):
So stuff like that.
But they're saying formal,commit, let's really zero in on
focus on this.
Let's not let's let it back andresolve it.
So, because it probably won't.
SPEAKER_01 (08:52):
So, if our audience goes out and reads the report,
will they find more specificityon all that?
SPEAKER_02 (08:57):
Well, you know, I'm gonna show you on my camera.
I don't know if you can seethis, but uh, here's the report.
It's big, uh, it's about 90pages.
So they're gonna take some timeto, you know, don't don't pick
it up and and uh and try and getit during halftime of this
weekend's football game.
Um, but uh one of the the realvalues of these blue ribbon
(09:18):
commission reports um is it goesinto a lot of detail and and
they offer specificrecommendations.
This one uh on uh the boardmanagement dynamic, they break
into three particular categoriesand nine specific
recommendations.
SPEAKER_01 (09:37):
And so, Michael, you're very good at
encapsulating uh big reportsdown to a manageable uh set of
information for our audience.
Can you walk us through what yousee as the report's key
recommendations?
SPEAKER_02 (09:48):
Yeah, and you gotta understand I'm struggling with
it.
They had nine, not ten.
So I that that I have a hardtime coming to grips with that,
but I'll survive.
Uh but again, three specificcategories of recommendations.
And the first category theydescribe is building the trust
foundation.
And you've got to understandthat a big part of this report
(10:09):
is making sure that there iscomplete trust between the board
and the CEO.
So step one involves, again, anintentional effort, not just
letting it evolve organically,an intentional effort to
establish the basis for a realcollaborative relationship
between the board and the CEOand the discipline to go back
(10:29):
and kick the can kick the tiresof it uh over time to make sure
we're reinforcing this mutualtrust.
So they identify three specificaction items under step one.
Uh, number one, something that alot of us have done much over
the years, uh, uh delineatespecific roles for the board and
CEO.
(10:50):
The point is the more we clarifythe relationship, you do this,
we do that, uh, clear swim lane,so to speak, going to do better
to anchor a strong relationship.
But then explicitly define howthe board and the CEO will work
together in meetings and inother interactions.
And then I think importantly,Rob, for the the board chair,
(11:13):
it's strengthening theindependent board leaders,
whether that's a board chair orindependent or lead director,
strengthening that boardleader's role as the key, the
linchpin to the relationshipthat makes it all work.
So we're we're adding a bit ofuh responsibility to the chair's
role, and that may come uh as aproblem for some organizations
(11:34):
which which where this chairdoes not like to take a leading
relationship.
Um going back to your point,though, I think the report makes
it clear that none of thesesteps are you know particularly
new or unique or novel.
What NEC is doing isunderscoring the importance of a
renewed commitment, greaterconsistency, and more thoughtful
(11:55):
understanding to this criticalrelationship between leadership
factors.
Step two, all right, we we'vetalked about building the
foundation.
Step two is to operationalizeit.
This is intended to build thatstrong board-CEO relationship by
assuring that traditionalgovernance processes and board
(12:15):
and CEO interactionsintentionally, you know, we we
designed it to operate toreinforce trust.
So again, it's one we're we'repurposely structuring the way
the board deals with the CEO tobuild trust and to sustain
trust.
And that means to commit toongoing communications beyond
formal meetings, to enhanceboard and CEO evaluations, to
(12:40):
reinforce intended behaviors.
I think that means the messageto boards, we need to make sure
our evaluations of ourselves aretougher.
Um, to use executive sessions aslevers for accountability and
transparency.
And then an interesting one,Rob, to prioritize the CEO's
overall well-being, which Ithink is a really important
(13:00):
factor.
Um then step three is to onethat some of our listeners may
not be familiar with per se, andthat's leveraging trust for
strategic impact.
Um this step focuses onestablishing again consistent
behaviors.
We come back to talk about theconsistent behaviors and board
(13:22):
practices, and it focuses on twothings.
Number one, very important, veryimportant, maximizing the
board's value as a strategicadvisor to the CEO.
Number two, continuallyassessing board composition to
align with strategy and valuecreation.
(13:43):
Let me tell you what that meansto me.
Number one, I think a very majormessage of the NACD report is
that there is an expectationthat this that the board is
perceived as a truth realstrategic advisor, not just a
bunch of folks who come around,sit around the table, nod their
heads uh horizontally orvertically, that they bring,
(14:03):
they really bring value to thetable, their strategic vision,
their expertise, theirperspectives.
So they're a resource tomanagement.
And if the CEO and the executiveleadership don't see the board
in that light, it's a problem.
So again, it goes back toreinforcing roles and
relationships in the board'sthree recognized roles decision
(14:28):
maker, oversight body, andstrategic advisor.
I'll also say one thing that Ifound really interesting in all
this, and that is I found, and Imay be misreading it, uh, I
found the the report isencouraging boards to move away
in their composition processfrom uh competency-based boards.
(14:48):
In other words, trying to findfill every seat with someone
with a specific discipline.
Uh, and I I I've never been afan of that.
Um, but I think the NACD reportis is also encouraging moving
towards boards with people withtrue strategic vision, because
you're never going to get all ofthe uh subject matter experts
you need, you know, uh uh andthat are that that could, you
(15:11):
know, you'd have to go back to a40-person board.
So, anyways, I think those arethe three categories of
recommendations, and they arelaid out very colorfully, very
uh attractively, and veryclearly in the report.
It's tremendous risk for themill of both the CEO and the
board.
SPEAKER_01 (15:30):
So, wow, Michael, you're right.
There is a lot of detail there,but it sure seems to be a nice
checklist for boards and the CEOto be guided by.
I gotta ask, do they say how tooperationalize prioritizing the
CEO's overall well-being?
SPEAKER_02 (15:42):
Uh I I think that's one of them.
They they certainly draw thatand they they hammer home that
that's one of the important uhaspects of the interpersonal
relationship.
And it goes back to the pointthat uh that the the
interactions between the boardand CEO go well beyond the just
the strategic meetings.
And I think part of the factoris again concern that that CEO
(16:02):
tenure uh is is is increasinglyshort, and the pressures on the
CEO are great.
So I think this concept of theCEO's well-being is you know,
it's an obvious factor, but theydo emphasize it.
Um the report provides a lot ofsupplemental material on each of
the recommendations.
They just don't, you know, it'snot five or six words.
Again, it's an 80-page report,40 pages on recommendations, uh,
(16:23):
uh, and and that's a lot, youknow, a whole lot for the board
to dig into.
SPEAKER_01 (16:28):
One of the things I've always found valuable about
the NACD reports is they alsooffer practical tools to help
implement those recommendations.
Do you think they've achievedthat here?
SPEAKER_02 (16:37):
Oh, absolutely.
I I think almost half of the 80pages are are committed to uh
actionable and practicalguidance to help boards and CEOs
implement the recommendations.
They identify 12 specific toolsfor consideration, uh, ranging
from guidelines that clarify theboundaries of both parties.
In other words, a list of hereare the basic duties of the
(16:58):
board and the big of the CEO,uh, and we've all seen those,
but they they do a really goodjob of that.
And then specific ways of youknow institutionalizing the
board's role as a strategicadvisor.
Those are some of the ones thatI thought particularly
important.
There are there are a couple ofrec uh tools with respect to uh
the compensation committee andthe CEO's comp too.
(17:18):
So again, 40 pages on practicaltools, it really it's I think
from a corporate counselor'sperspective, boy, it's a
terrific resource.
SPEAKER_01 (17:27):
So after having gone through this report, would you
say the NACD report constitutesa best practice for us in the
industry?
SPEAKER_02 (17:33):
You know, you you and I have had this conversation
before, and it's and uh uh it'sa hot button for me, and not
just because I'm a crabby oldguy.
Uh, but I I do think the termbest practice is one of the most
misapplied and misunderstoodterms in governance discord.
To me, um uh best practices aredefined as uh a process, a
(17:56):
method, or a conceptual approachthat has a clear historical
record of success, achievement,or accomplishment.
It's worked.
It goes beyond uh the levelattained by less structured
efforts, it's more than what'sminimally required by law.
And again, the best practice isdesigned to identify or flag
(18:18):
behavior that's required thatgoes again beyond what's
accepted by minimum legalstandards.
It's not intended to reflect thefull spectrum of applicable law.
They're aspirational goals,they're not legal requirements
or mandates.
In the governance context,they're proposals designed to
enhance and improve corporateresponsibility and boardroom
(18:41):
conduct.
So again, I'm just reallycareful about saying that's best
practice, that's not bestpractice.
SPEAKER_01 (18:49):
So taking note of that and not wanting to hit that
hot button, do you think othersmay consider it a best practice
report?
SPEAKER_02 (18:55):
Well, you know, for a particular price, I'm happy to
say anything's best practice,but we can negotiate that
offline.
Um but the answer to yourquestion is sure.
I think I do think so.
Um, you know, it's a subjectivejudgment.
There's no accrediting body orcommissioner or a grand high
exalted Mystic Ruler who, and bythe way, if anybody on this
listening to this podcastremembers who the grand high
(19:17):
exalted Mystic Ruler is, callRob Gerbery and he will award
you a prize.
I have the answer to thatquestion, though.
Anyways, I you know, uh there'sno there's no body that says
this is a best practice.
With the NECD, I think theirBlue Ribbon Commission, the the
way they go about doing it, Iyou know, uh 20, 25 recognized
(19:37):
executives, board members fromacross the spectrum, uh who are
they the ones providing the realwork.
I think you gotta say that'sbest practice.
We're not talking about aconsulting firm survey.
We're talking about realintellectual capital from people
that have a strategicperspective.
Uh it's aspirational goalsetting at its best.
So, yeah, I tell my clients,consider this best practice.
(20:00):
And remember what the courtshave said for years, that the
conscientious pursuit ofgovernance best practices is the
best prophylactic for directreliability.
It, you know, it the effort toconsider and review and address
best practices and how theywould apply to your organization
is what counts.
(20:21):
It's not that you have aresolution of the board that
says we're going to adopt everyrecommendation in the NACD
report.
No.
It's you, you know, and I thinkthis is the real message that we
want to send for today'saudience.
Talk to the board chair, talk tothe CEO, say these are things
that you know we we think we werecommend that you consider.
Whether it's the governancecommittee or it's an ad hoc
(20:42):
committee with the CEO or uh andboard leaders, whatever, look at
these, review them, and decidewhat makes sense for our
organization, if at all, butit's the effort to consider
them, Rob, that I think is thereal demonstration of good faith
that you do get a goal star for.
SPEAKER_01 (21:00):
So, Michael, thank you as always for sharing these
thoughts with us.
We'll be back again next monthwith the first of our two-part
series where we'll be discussingthe guidelines for board
oversight of artificialintelligence implementation and
other ways in which the boardmay interact with new
technologies.
Until then, this is Rob Gerberryand Michael Peregrine saying
thanks again for joining us.
(21:21):
We look forward to talking toyou in our next podcast.
SPEAKER_00 (21:28):
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Law.org and stay updated onbreaking healthcare industry
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Daily Podcast, exclusively forAHLA comprehensive members.
(21:52):
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For more information, visitAmerican Health Law.org.
SPEAKER_01 (00:17):
Hello, everybody.
This is Rob Gerbery.
I'm the Chief Legal Officer ofSumma Health and the president
like designate of the AmericanHealth Law Association.
I'd like to welcome you to thelatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's topic is Rip from theHeadlines.
It focuses on a pronouncementrelated to a report from the
(00:38):
National Association ofCorporate Directors and building
a high trust board CEOrelationship.
As many of our listeners knowwell, the demands on health
industry leadership, both CEOsand boards, is rapidly evolving.
Not only must they confront thesame technology, economic,
societal, and global disruptionsthat all complex businesses are
(00:59):
facing, but they also mustconfront the regulatory,
financial, and constituentdisruptions that are unique to
the healthcare industry.
And these demands anddisruptions place unusual and
undesirable pressures on theboard and the CEO's
relationship, sometimes to thedetriment of organizational
leadership.
To help these leaders confrontthese issues, the new NACD
(01:21):
report offers a series ofrecommendations as well as a
detailed toolkit.
And both the recommendations andtoolkit are tailor-made for
interpretation and applicationby the healthcare corporate
council in his or her primaryrole as governance counsel to
the board.
(01:46):
And as always, I'm joined todayby our HLA colleague, Michael
Peregrine of McDermott, who isalso an HLA fellow and a fellow
of the American College ofGovernance Council.
So, Michael, before we dive in,I understand you had the unique
privilege and joy of comingrecently to my home state to
hang out with some governanceregulators.
Tell us the story.
SPEAKER_02 (02:04):
Well, Rob, you got to remember I sent two kids to
college in Ohio, so I think youowe me a rebate given how much I
spent there.
But you're right, I did spend acouple of days of Columbus.
You know, over the years, I'vebeen really fortunate enough to
speak uh frequently to theannual meeting of what they call
NASCO NAG, the NationalAssociation of State Charity
Officials and the NationalAssociation of Attorney
(02:26):
Generals.
The NASCO folks are those whoserve in the charities bureaus
of our state attorneys generaloffices, and I think who do
really care very much about hownot-for-profit corporations,
including health systems, governthemselves.
And I, you know, I think it'simportant to note for our
audience that uh theseregulators, at least from my
(02:48):
perspective, are very committedto preserving the nonprofit
sector.
And they're committed,therefore, to its support.
And they want to be available tonot-for-profit organizations
with questions or comments orconcerns.
So I think it's good for ourlisteners who do work with
not-for-profit organizhealthcare organizations, know
who the charities officials arein their state, and to reach out
(03:10):
and and and maintain arelationship with them because I
think uh it's a good it's a goodmix.
And they're regulators indeed,but again, we have to keep in
mind they want thenot-for-profit sector to
succeed.
SPEAKER_01 (03:25):
So, Michael, turning to the uh report that we've uh
talked about and the issue athand, are we just talking about
general guidance uh that we'reused to coming out of the NACD?
Or is there a specific new oremerging concern they've
identified?
SPEAKER_02 (03:37):
Well, Rob, I think it's very much the latter.
Uh keep in mind that each yearuh NACD commissions a diverse
group of business leaders toexamine a governance issue of
big time importance and todeliver a report with very
specific practicalrecommendations and support of
aids.
The last couple of years, Ithink it in 2023, the report
(04:01):
focused on culture in theboardroom, and that was a
terrific one.
Last year it was board oversightof technology.
This year it's on the boardmanagement dynamic.
SPEAKER_01 (04:13):
So, Michael, I think most of our colleagues um have
an experience with the kind ofstress and strain between their
leadership groups at one time oranother in their career.
As you look at current dynamics,is there something special going
on in your opinion?
SPEAKER_02 (04:28):
I think uh the answer is yes.
And and what the report does isthey look at three very specific
trends they see, and a lot ofthese are CEOs, uh, as driving
the need to cultivate the boardmanagement relationship with
some sense of urgency.
In other words, I think uh theythink it's really time to focus
(04:49):
on this issue.
And the first issue, the firstreason they think so is they see
much more pressure on CEOs toperform than ever before, uh,
you know, with challenges from abroad group of activist
stakeholders, not justshareholders, but stakeholders
of all types of constituents onmatters going not just financial
(05:09):
performance, but a variety ofother issues.
So, number one, more pressure onthe CEOs.
Uh, number two, I think whatthey what the report calls is an
unmistakable evidence ofshrinking CEO and C-suite
tenure, uh, with the average CEOtenure declining and turnover
levels reaching really recordlevels.
(05:31):
So that's the second concern.
Uh CEOs are serving for a lotshorter tenure.
Third is that directors, theboard members, uh, for a lot of
the reasons we've talked aboutin our podcasts are confronting
just increased complexity andambiguity.
Um, and the same time they'refacing uh greater stakeholder
and regulatory and judicialpressure as well to be effective
(05:56):
uh overseers and to serve asstrategic advisors.
So I think you know, if youcould draw a picture, you'd have
two arrows coming uh uh right ateach other.
Uh both parties, the board andthe CEO, were feeling pressure
uh from outside forces, fromwithin.
Uh, and it's I think from thethe NACD's perspective, it's
(06:17):
creating an un an enormousamount of stress on their
relationship with each other.
SPEAKER_01 (06:23):
So as the board tries to stay calm with these
headwinds, can they adopt theapproach that these kind of
problems will just work out inthe ordinary course?
SPEAKER_02 (06:30):
Yeah, let's just you know, work, let's not worry
about it, it'll work themselveswork itself out.
And I think the answer is atleast the NADC uh commission is
saying a very loud no to thatquestion.
They won't work themselves out.
I I think a foundational premiseof the report is allowing these
issues to resolve themselvesorganically by default uh leaves
(06:52):
the answer to be resolved by onthe basis of personalities, uh,
implicit behaviors, you know,without any clear direction or
structure.
And in the current environmentwhere there's all sorts of
business and economicvolatility, that's not a great
thing.
Um organic evolution of theboard management dynamic without
(07:15):
support is going to fall short.
And you know, we've all seen it.
I certainly have seen it in mycareer.
Uh it's a sensitive issue.
Uh people don't want to don'twant to poke the bear.
They they know it's a concern,but they they don't want to
confront it, and understandablyso.
NACD is saying confront it.
SPEAKER_01 (07:31):
So, as we think about confronting it, what do
you think the alternative is?
SPEAKER_02 (07:36):
I think this is for our listeners, this is the real
message.
What the NACD report says, allright, we've got this problem.
It's a big problem, we've got toconfront it.
How do we confront it?
Um, we we again we just don'tlet it evolve organically.
We we we move towards a verydeliberate process.
We we have a deeper commitmentfrom both the board and the CEO
(07:59):
to implementing and thenrefining leading practices with
a lot greater purpose, a lotgreater intentionality, all with
an eye towards the problems thatthe organization is having.
In other words, it's a call forboards and their CEOs to really
build a strong foundation oftrust by clarifying the
(08:20):
parameters of theirrelationship, you know, who does
what, and by operationalizingthe trust between them by
building into their culturetrust-building behaviors like
better communications, uh, morespecific evaluations, use of
executive sessions, and personalsupport.
(08:41):
So stuff like that.
But they're saying formal,commit, let's really zero in on
focus on this.
Let's not let's let it back andresolve it.
So, because it probably won't.
SPEAKER_01 (08:52):
So, if our audience goes out and reads the report,
will they find more specificityon all that?
SPEAKER_02 (08:57):
Well, you know, I'm gonna show you on my camera.
I don't know if you can seethis, but uh, here's the report.
It's big, uh, it's about 90pages.
So they're gonna take some timeto, you know, don't don't pick
it up and and uh and try and getit during halftime of this
weekend's football game.
Um, but uh one of the the realvalues of these blue ribbon
(09:18):
commission reports um is it goesinto a lot of detail and and
they offer specificrecommendations.
This one uh on uh the boardmanagement dynamic, they break
into three particular categoriesand nine specific
recommendations.
SPEAKER_01 (09:37):
And so, Michael, you're very good at
encapsulating uh big reportsdown to a manageable uh set of
information for our audience.
Can you walk us through what yousee as the report's key
recommendations?
SPEAKER_02 (09:48):
Yeah, and you gotta understand I'm struggling with
it.
They had nine, not ten.
So I that that I have a hardtime coming to grips with that,
but I'll survive.
Uh but again, three specificcategories of recommendations.
And the first category theydescribe is building the trust
foundation.
And you've got to understandthat a big part of this report
(10:09):
is making sure that there iscomplete trust between the board
and the CEO.
So step one involves, again, anintentional effort, not just
letting it evolve organically,an intentional effort to
establish the basis for a realcollaborative relationship
between the board and the CEOand the discipline to go back
(10:29):
and kick the can kick the tiresof it uh over time to make sure
we're reinforcing this mutualtrust.
So they identify three specificaction items under step one.
Uh, number one, something that alot of us have done much over
the years, uh, uh delineatespecific roles for the board and
CEO.
(10:50):
The point is the more we clarifythe relationship, you do this,
we do that, uh, clear swim lane,so to speak, going to do better
to anchor a strong relationship.
But then explicitly define howthe board and the CEO will work
together in meetings and inother interactions.
And then I think importantly,Rob, for the the board chair,
(11:13):
it's strengthening theindependent board leaders,
whether that's a board chair orindependent or lead director,
strengthening that boardleader's role as the key, the
linchpin to the relationshipthat makes it all work.
So we're we're adding a bit ofuh responsibility to the chair's
role, and that may come uh as aproblem for some organizations
(11:34):
which which where this chairdoes not like to take a leading
relationship.
Um going back to your point,though, I think the report makes
it clear that none of thesesteps are you know particularly
new or unique or novel.
What NEC is doing isunderscoring the importance of a
renewed commitment, greaterconsistency, and more thoughtful
(11:55):
understanding to this criticalrelationship between leadership
factors.
Step two, all right, we we'vetalked about building the
foundation.
Step two is to operationalizeit.
This is intended to build thatstrong board-CEO relationship by
assuring that traditionalgovernance processes and board
(12:15):
and CEO interactionsintentionally, you know, we we
designed it to operate toreinforce trust.
So again, it's one we're we'repurposely structuring the way
the board deals with the CEO tobuild trust and to sustain
trust.
And that means to commit toongoing communications beyond
formal meetings, to enhanceboard and CEO evaluations, to
(12:40):
reinforce intended behaviors.
I think that means the messageto boards, we need to make sure
our evaluations of ourselves aretougher.
Um, to use executive sessions aslevers for accountability and
transparency.
And then an interesting one,Rob, to prioritize the CEO's
overall well-being, which Ithink is a really important
(13:00):
factor.
Um then step three is to onethat some of our listeners may
not be familiar with per se, andthat's leveraging trust for
strategic impact.
Um this step focuses onestablishing again consistent
behaviors.
We come back to talk about theconsistent behaviors and board
(13:22):
practices, and it focuses on twothings.
Number one, very important, veryimportant, maximizing the
board's value as a strategicadvisor to the CEO.
Number two, continuallyassessing board composition to
align with strategy and valuecreation.
(13:43):
Let me tell you what that meansto me.
Number one, I think a very majormessage of the NACD report is
that there is an expectationthat this that the board is
perceived as a truth realstrategic advisor, not just a
bunch of folks who come around,sit around the table, nod their
heads uh horizontally orvertically, that they bring,
(14:03):
they really bring value to thetable, their strategic vision,
their expertise, theirperspectives.
So they're a resource tomanagement.
And if the CEO and the executiveleadership don't see the board
in that light, it's a problem.
So again, it goes back toreinforcing roles and
relationships in the board'sthree recognized roles decision
(14:28):
maker, oversight body, andstrategic advisor.
I'll also say one thing that Ifound really interesting in all
this, and that is I found, and Imay be misreading it, uh, I
found the the report isencouraging boards to move away
in their composition processfrom uh competency-based boards.
(14:48):
In other words, trying to findfill every seat with someone
with a specific discipline.
Uh, and I I I've never been afan of that.
Um, but I think the NACD reportis is also encouraging moving
towards boards with people withtrue strategic vision, because
you're never going to get all ofthe uh subject matter experts
you need, you know, uh uh andthat are that that could, you
(15:11):
know, you'd have to go back to a40-person board.
So, anyways, I think those arethe three categories of
recommendations, and they arelaid out very colorfully, very
uh attractively, and veryclearly in the report.
It's tremendous risk for themill of both the CEO and the
board.
SPEAKER_01 (15:30):
So, wow, Michael, you're right.
There is a lot of detail there,but it sure seems to be a nice
checklist for boards and the CEOto be guided by.
I gotta ask, do they say how tooperationalize prioritizing the
CEO's overall well-being?
SPEAKER_02 (15:42):
Uh I I think that's one of them.
They they certainly draw thatand they they hammer home that
that's one of the important uhaspects of the interpersonal
relationship.
And it goes back to the pointthat uh that the the
interactions between the boardand CEO go well beyond the just
the strategic meetings.
And I think part of the factoris again concern that that CEO
(16:02):
tenure uh is is is increasinglyshort, and the pressures on the
CEO are great.
So I think this concept of theCEO's well-being is you know,
it's an obvious factor, but theydo emphasize it.
Um the report provides a lot ofsupplemental material on each of
the recommendations.
They just don't, you know, it'snot five or six words.
Again, it's an 80-page report,40 pages on recommendations, uh,
(16:23):
uh, and and that's a lot, youknow, a whole lot for the board
to dig into.
SPEAKER_01 (16:28):
One of the things I've always found valuable about
the NACD reports is they alsooffer practical tools to help
implement those recommendations.
Do you think they've achievedthat here?
SPEAKER_02 (16:37):
Oh, absolutely.
I I think almost half of the 80pages are are committed to uh
actionable and practicalguidance to help boards and CEOs
implement the recommendations.
They identify 12 specific toolsfor consideration, uh, ranging
from guidelines that clarify theboundaries of both parties.
In other words, a list of hereare the basic duties of the
(16:58):
board and the big of the CEO,uh, and we've all seen those,
but they they do a really goodjob of that.
And then specific ways of youknow institutionalizing the
board's role as a strategicadvisor.
Those are some of the ones thatI thought particularly
important.
There are there are a couple ofrec uh tools with respect to uh
the compensation committee andthe CEO's comp too.
(17:18):
So again, 40 pages on practicaltools, it really it's I think
from a corporate counselor'sperspective, boy, it's a
terrific resource.
SPEAKER_01 (17:27):
So after having gone through this report, would you
say the NACD report constitutesa best practice for us in the
industry?
SPEAKER_02 (17:33):
You know, you you and I have had this conversation
before, and it's and uh uh it'sa hot button for me, and not
just because I'm a crabby oldguy.
Uh, but I I do think the termbest practice is one of the most
misapplied and misunderstoodterms in governance discord.
To me, um uh best practices aredefined as uh a process, a
(17:56):
method, or a conceptual approachthat has a clear historical
record of success, achievement,or accomplishment.
It's worked.
It goes beyond uh the levelattained by less structured
efforts, it's more than what'sminimally required by law.
And again, the best practice isdesigned to identify or flag
(18:18):
behavior that's required thatgoes again beyond what's
accepted by minimum legalstandards.
It's not intended to reflect thefull spectrum of applicable law.
They're aspirational goals,they're not legal requirements
or mandates.
In the governance context,they're proposals designed to
enhance and improve corporateresponsibility and boardroom
(18:41):
conduct.
So again, I'm just reallycareful about saying that's best
practice, that's not bestpractice.
SPEAKER_01 (18:49):
So taking note of that and not wanting to hit that
hot button, do you think othersmay consider it a best practice
report?
SPEAKER_02 (18:55):
Well, you know, for a particular price, I'm happy to
say anything's best practice,but we can negotiate that
offline.
Um but the answer to yourquestion is sure.
I think I do think so.
Um, you know, it's a subjectivejudgment.
There's no accrediting body orcommissioner or a grand high
exalted Mystic Ruler who, and bythe way, if anybody on this
listening to this podcastremembers who the grand high
(19:17):
exalted Mystic Ruler is, callRob Gerbery and he will award
you a prize.
I have the answer to thatquestion, though.
Anyways, I you know, uh there'sno there's no body that says
this is a best practice.
With the NECD, I think theirBlue Ribbon Commission, the the
way they go about doing it, Iyou know, uh 20, 25 recognized
(19:37):
executives, board members fromacross the spectrum, uh who are
they the ones providing the realwork.
I think you gotta say that'sbest practice.
We're not talking about aconsulting firm survey.
We're talking about realintellectual capital from people
that have a strategicperspective.
Uh it's aspirational goalsetting at its best.
So, yeah, I tell my clients,consider this best practice.
(20:00):
And remember what the courtshave said for years, that the
conscientious pursuit ofgovernance best practices is the
best prophylactic for directreliability.
It, you know, it the effort toconsider and review and address
best practices and how theywould apply to your organization
is what counts.
(20:21):
It's not that you have aresolution of the board that
says we're going to adopt everyrecommendation in the NACD
report.
No.
It's you, you know, and I thinkthis is the real message that we
want to send for today'saudience.
Talk to the board chair, talk tothe CEO, say these are things
that you know we we think we werecommend that you consider.
Whether it's the governancecommittee or it's an ad hoc
(20:42):
committee with the CEO or uh andboard leaders, whatever, look at
these, review them, and decidewhat makes sense for our
organization, if at all, butit's the effort to consider
them, Rob, that I think is thereal demonstration of good faith
that you do get a goal star for.
SPEAKER_01 (21:00):
So, Michael, thank you as always for sharing these
thoughts with us.
We'll be back again next monthwith the first of our two-part
series where we'll be discussingthe guidelines for board
oversight of artificialintelligence implementation and
other ways in which the boardmay interact with new
technologies.
Until then, this is Rob Gerberryand Michael Peregrine saying
thanks again for joining us.
(21:21):
We look forward to talking toyou in our next podcast.
SPEAKER_00 (21:28):
If you enjoyed this episode, be sure to subscribe to
AHLA Speaking of Health Lawwherever you get your podcasts.
For more information about AHLAand the educational resources
available to the health lawcommunity, visit AmericanHealth
Law.org and stay updated onbreaking healthcare industry
news from the major mediaoutlets with AHLA's Health Law
Daily Podcast, exclusively forAHLA comprehensive members.
(21:52):
To subscribe and add thisprivate podcast feed to your
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daily podcast.
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