November 3, 2024 • 26 mins
Episode Summary
In this insightful episode of On Boards, hosts Joe Ayoub and Raza Shaikh welcome Pam Lenehan, a seasoned board member with over 22 years of experience on public company boards. Pam offers an in-depth look at the evolving responsibilities of boards and their members, including critical areas like cybersecurity, ESG, and CEO succession.
Drawing on her experience across seven public company boards, Pam discusses the increasing complexity of board roles, committee responsibilities, and the importance of a collaborative, learning-focused approach for today’s directors.
Key Topics Discussed:
- The Expanding Role of Boards in Risk Management
- Pam explains how boards are increasingly required to manage a broader spectrum of risks, from cybersecurity and AI to unexpected events like pandemics. She highlights the need for board committees (audit, compensation, technology) to coordinate their oversight on key issues and work with management to stay proactive.
- Board Dynamics: Shifts in Meeting Structure and Time Commitments
- The increased reliance on digital platforms has, among other things, led to voluminous board materials, often reaching hundreds of pages. Pam shares how boards are restructuring their meetings to prioritize discussion over presentation, with a growing emphasis on pre-meeting preparation.
- Pam notes how the frequency of both board and committee meetings has increased, with some public company boards now often holding eight or more meetings annually.
- Maintaining Collegiality Amid Virtual and Shorter In-Person Meetings
- As more meetings shift online or the agenda is so packed it leaves little time for social interaction, the value of planned social opportunities, even brief breaks, to foster trust and rapport among board members. Pam’s insights on “planned socialization” underscore its role in facilitating effective communication and decision-making.
- Evolving Expertise on Boards: Moving Beyond Generalists
- With a growing need for specialized knowledge in finance, industry, and technology, boards are increasingly composed of directors with specific expertise. Pam shares practical advice on balancing specialized skillsets and emphasizes that most board member should still possess a solid understanding of broader governance areas, even beyond their primary expertise.
- The Role of the Board Chair and Lead Director
- Raza and Pam discuss the crucial role of the board chair in ensuring all voices are heard and the board remains aligned. With a diverse array of specialists now joining boards, the chair’s leadership is increasingly important to synthesize perspectives and guide effective discussions.
- The Influence of Shareholder Activism and Public Company Challenges
- Pam recounts her experiences with shareholder activists, noting how modern boards must be prepared to engage with
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:05):
Hello, and welcome to On Boards, a deepdive at what drives business success.
I'm Joe Ayoub, and I'm herewith my co-host, Raza Shaikh.
Twice a month, On Boards is the place tolearn about one of the most critically
important aspects of any company ororganization - its board of directors
or advisors - with a focus on theimportant issues that are facing boards,
(00:28):
company leadership and stakeholders.
Joe and I speak with a wide range ofguests and talk about what makes a board
successful or unsuccessful, what itmeans to be an effective board member and
how to make your board one of the mostvaluable assets of your organization.
Before we introduce today's guest,we want to thank the law firm of
(00:50):
Nutter McClennen & Fish who are againsponsoring our On Board Summit this year
taking place on October 22nd in theirconference center in the Boston Seaport.
They've been incrediblepartners with us in every way.
We appreciate all they havedone to support this podcast.
Our guest today is Pam Lenehan.
(01:11):
Pam has 22 years of experience as apublic company director serving on
seven public company boards, whichshe has been chair of the board,
presiding director and has chairedboth audit and compensation committees.
Pam currently serves on the boardof ATN International where she
chairs the audit committee and isa member of the nom-gov committee.
(01:35):
During the course of her years of boardservice, she has been involved in IPOs,
equity and debt financings, acquisitions,divestitures, restructurings, auditor
changes, sale of the company, cyberbreaches, activist engagements, and
planned and unplanned CEO succession
(01:57):
Pam also serves on the boards ofthe Center for Women and Enterprise
and NACD's New England chapter.
She is also co-chair of the Bostonchapter of Women's Corporate Directors
and a member of the Women Leaders Networkand the Massachusetts Women's Forum.
Welcome,
(02:20):
Pam.
Thanks for joining us today on On Boards.
Well, thank you for having me.
So, before we get into details, talka little bit about the deep public
company board experience you have.
You've been exposed to multiple governancesituations over these many years,
(02:40):
and it'd be helpful if you could justelaborate a little on some of that.
Well, I've been lucky enoughto be on a number of different
boards in a variety of industries.
When you're a financial expert asI am, you really don't have to do a
deep dive at any particular industry.
You can take that expertiseacross different industries.
So, I've been on boards oftechnology companies, which includes
(03:04):
telecommunications, software, clean tech.
I've also been in health services company.
I've been on a plastics companyboard, so very interesting to really
get exposed to different industriesas well as the different companies.
It must be interesting to be ableto move from industry to industry.
In a former life, I was atrial lawyer, and what I did
(03:27):
was largely industry agnostic.
So, I would learn everything aboutlaser beams and then I would learn
everything about some other subject,and that's part of why I loved it.
So, I can really relate to the factthat each board in its way, while there
are so many common things, but eachboard is actually unique and provides
(03:48):
a unique experience for a board member.
That's true.
I think one of my fellow board memberssaid that your board experience is
an N of one, that every company isdifferent, and that even if you're in
the same industry as a prior company,the management team is different, the
industry dynamics are different, theproducts are different, and so you really
have to go in with a learning mindset.
(04:09):
You have to be a lifetime learnerin order to really understand the
business you're getting involved with.
I love thinking about goinginto it with a learning mindset.
I think that's part of what we talkedabout earlier and we'll get into that
being a board member is a job, andobviously, if you're taking a new job,
there's a lot to learn no matter howmuch you've learned in the past so
(04:31):
it's a great, great attitude to have.
One of the things we talked about whenwe spoke last week was how much in
the new world, so to speak, has beenadded to the plate of fiduciary boards.
There's all the stuff that boardsalways had to do, and then there's
(04:53):
a whole bunch of new things.
Anything from cyber to AI, wecan go through it later, but it
has created a situation that manypeople think has really added
to the board responsibilities.
So, we'd like to talk a little bitabout how you've experienced the
evolution of board responsibilities.
What are some of the things you'venoticed that have changed over the years
(05:17):
requiring more time from a board member?
Well, I think one of the thingsis that boards have always
really had to focus on risks.
What are the risks that businessesface, both externally and their own
product development, their own people.
I always say that we historicallyimplicitly considered risk, but now we
have to explicitly consider risk becausewe're having much more reporting, and
(05:40):
so really you have to specifically thinkabout not only what are the risks we have,
but how are we going to allocate thoseamong the different board committees?
There's much more focus on board oversightof those risks, and therefore, how
do we, as a board, think about risk?
How do we ask our committees, whether it'saudit or compensation or, in some cases,
risk committees or technology committees,how do we divide up these risks and
(06:03):
then come back together in a board anddiscuss them with management to be sure
that we understand them, and not to saythat you can anticipate all of the risks.
I mean, who really thought about apandemic, but we need to be very forward
thinking in how we consider the business.
And that's only one aspectof what a board has to do.
(06:23):
So, even getting ready for boardmeetings, there's more work to do.
Am I right about that?
That's true, and it's interestingbecause I think technology has
both helped and hurt in this way.
Most boards transmit their informationthese days through electronic platforms,
and back in the old, old days whenyou had to have a person physically
(06:45):
copy and bind and distribute thematerial, there was a cutoff date,
people thought seriously about, "Do Ireally want to get this out to people?"
But now, "Oh, we'll just add this articleor we'll just add this presentation,"
and so it's just really easy to uploadmaterial onto these databases and so
it's not uncommon for board books to be400, 500, 600 or more pages, and it's all
(07:08):
interesting reading, but you better besure that you set aside time to do that.
That's a lot of reading.
Is it because there's more beingcovered or is it part what you've
just said, which is, it's so mucheasier to just add it to the binder.
Well, I think it's both, and I thinkboards are asking companies to provide
them more information in advance.
I think that we've talked about one issueis that it used to be that boards kind
(07:32):
of arrived and sat there, and there wasPowerPoint after PowerPoint, and now
what boards are saying is, "Look, wehave very limited time together, so let's
spend that time together discussing.
hearing what each other think,talking to the management team.
So, let's do a lot of the work beforethe board meeting so we walk in
there educated and then we're ableto really discuss and analyze things.
(07:53):
As we've discussed, I think that'sgreat because it means people
taking the role of a board memberseriously, because it is serious.
Well, any company, public or private,it's serious so that's a good thing.
Part of the question that regularly ariseswhen discussing how board meetings and
governance has changed is, do you losesome of the social trust interaction
(08:19):
among board members because there isn'tas much time to have a cup of coffee or
to have a drink or to have lunch together.
How does that work?
How is the more limited time forsocializing impacted board interactions?
Well, I think boards have to be verydeliberate in thinking about that.
We've gone to more meetings.
(08:40):
When you look at our schedulefor the year, do we really need
to fly in for every meeting?
Or should some of thosemeetings be on a video platform?
And that's where you really miss,it is not to say you don't have good
discussions and good interaction, therearen't those little side issues in
between presentations or getting up andwalking out to lunch and just having
that casual chats to people or let's saythat you're going on a tour and you're
(09:05):
getting on the bus together and you'resitting talking to your fellow directors.
So, therefore, when you are together, youreally do need to plan that time, whether
they're dinners, whether they are timesfor the independent directors to have
breakfast together, but there definitelyis less socializing than there used to be.
Yeah, and I will say that when we cameout of COVID and there were meetings
(09:27):
that we are starting in person.
It really struck me how much thatI, as a board member, but the
board had missed being together.
There's stuff that gets done overvirtually that you can get it done,
but at least what I sense was a littleless amicable back and forth, "People,
(09:48):
you know, let's get this going.
Let's move.
Let's talk."
And of course, time is veryvaluable, but it was less collegial,
I guess is what I experienced.
I don't know if that evercame through to you at all.
I was on two boards during COVID andboth CEOs were very much in-person
meeting people, and so I rememberwe still laugh about one of them.
(10:10):
Our first board meeting, it was probablyMay of 2020, so very early in COVID,
we decided we'd have an outdoor boardmeeting for the board members who were
local, and it turned out to be one ofthose days, for those of you who are
in New England, you know this, whereyou think April spring, it's not.
It was like mid-40s and we had itoutside at a nonprofit and our CEO
(10:34):
was not very good on the technology.
So, the people who weren't there basicallysaw his chest the entire time that they
couldn't see the camera focused on therest of us and it turned out it was
near an old airport where someone wastaking off and landing, and so they laugh
about how our early days of doing videomeetings, we were not very successful.
(10:55):
But I think we've gotten better atthat, and I'm not saying that you can
actually have a good conversation.
Sometimes, like my nonprofitthat we talked about, it
schedules in some social time.
So, it isn't just, "Here's thepresentation, now we terminate," and
maybe boards need to do that too.
Maybe we need to have some breaks wherewe just talk about the latest books we've
read or what we're watching on Netflix.
(11:16):
Yeah, I agree.
That is a good idea, actually,because I think the trust among
board members is so critical.
So, another thing we talked aboutwas how both board meetings and
committee meetings are longer.
Committee meetings are more frequentbecause so much is flowing down to
committees, and in addition, one thingcommittee members are doing is meeting
(11:38):
more often with members of the C suite.
If you could just talk a little bitabout how that has impacted the time
and energy that it takes to reallydo your job as a board member.
Well, I think you justhave to really schedule it.
So, I'm chair of an audit committeeand we look out two years to really
schedule meetings, but also, whatare we supposed to be covering?
(11:59):
What does our charter look like?
What meetings are we goingto cover those topics?
In this particular company, weseparate the earnings calls,
which are usually very pressured.
You need to understand what those earningsare, what's the message you're going to
communicate, are you changing guidance,what's the press release look like.
And then we have a separate meetingwhere we cover the other issues that we
want to talk about, what's going on onthe accounting side, what's going on in
(12:23):
cyber security, you get your updates, alot of the new disclosure requirements,
where do we stand on those, and so weend up with at least eight meetings a
year; the four calls, and then the fourwhere we're covering other subjects.
That's a lot of meeting time.
It really is.
I was going to ask you, how aresome of these things impacting
particularly public company boards,which you just kind of went through.
(12:45):
Are there other things that because it'sa public company, it is added to the time
that might not impact private companies.
Right, right.
Well, I think I told you that Iwas on two private equity companies
that eventually went public, andmy experience with private equity
companies was very positive.
You're sitting next toyour major shareholder.
(13:05):
Your entire focus is reallyon the strategy of the
business and the execution.
Whereas when you're on a public company,not that you don't do that, but you
also need to talk about disclosure, sowhat are you going to be disclosing?
The SEC keeps adding on rules, andit started with Sarbanes–Oxley,
but it's been additive.
So, first, we've hadcybersecurity disclosures.
(13:25):
There's ESG disclosures.
Even though they're technically onhold, a lot of companies are already
releasing that information becausethere's pressure from shareholders.
So, we're spending a lot of time, not juston what we're doing, but how we're going
to communicate that outside shareholders.
Is there more shareholderactivism, do you think?
Oh, yes.
I've been involved in three pretty activeactivist situations and we all need to
(13:51):
think like activists because these peopleare smart and they have good ideas.
Now, they might not alwaysunderstand how it impacts the
company and then they can't alwaysunderstand what the board is doing.
In one particular case, the company wasin the process of trying to affect a
sale of the company and the activistscame in and said, "I think you should
sell the company," and we agreed withthe activists, but we couldn't say that
(14:14):
because we hadn't publicly disclosed it.
Ah.
So, you have to be really carefulwhat you say to these shareholders.
Yeah, that I believe.
Pam, with this backdrop of increasedresponsibility, If we consider board
a team at each level and committeesare teams as well, then you need
(14:34):
a leader for that team, and that'susually the chair or the independent
director or lead director- type of role.
Maybe talk a little bit aboutthe importance of the increased
responsibility of the boardchair under these circumstances.
Well, I think that the board chairhas always had one of the major jobs.
it is to be sure that all the voices inthe boardroom are heard, and so as we put
(14:59):
together boards these days, I'm sure we'lltalk about board composition, it used to
be very much of a group of generalistsand so people who were very good at
a lot of different things and peoplewho were just good general managers.
But that's not what isrequired of us these days.
We need three people understand financeto be on the audit committee, one of
whom needs to be a financial expert.
(15:20):
You are probably looking forone or two industry experts.
You may be looking for peoplewho have technology backgrounds.
You may be looking for aformer public company CEO.
So, these people are very diverse andyou need to be sure that you're getting
the best performance from all of themand we all learn from each other.
So, you can't just have one or twopeople monopolize the board conversation,
(15:45):
you need to hear from each of thedirectors, and you need to think about
what is the composition of the board,what skills do we want to have in the
boardroom, and what could our expertisethat we can hire from the outside.
It almost sounds like that's notjust the team, it's an elite sports
team that has to not only worktogether well, but each has its
(16:05):
individual strengths in areas as well.
Any tips for the board chair?
I think that we often see thatphenomenon of the expert in the room.
How do you deal with that, like not tohave just one person who really just
knows something about an area, how can theboard collectively be doing all of that?
(16:30):
Right, well, I think we talked about how Iwas talking to a private equity investor,
he was looking for new directors, andhe said he couldn't afford to have a
pommel horse guy, and I said, "Well,what do you mean by a pommel horse guy?"
For those of us who watch the Olympics,we remember that the men's gymnastics team
had very talented people, but one personwho went on to get a medal, he was the
(16:51):
expert on the pommel horse and he wasn'tinvolved in any of the other activities.
I think that no matter what your expertiseon a board of directors, you need to have
some level of knowledge of other things.
You may not want to be on theaudit committee, but you need
to understand finance and youneed to understand budgets.
You may not be a technology person,but you need understanding of the
technology impacting the business andthe major issues in cyber security.
(17:13):
Yes, maybe each have your expertise,as you said, in a sports team, but
you still need to be a team and youneed to know what the rules of the
game are and what the objectives are.
Yeah, and I think that's a great analogy.
I would come back, as I did thelast time we talked about this,
and say, yes, not every board canafford to have the pommel horse guy.
(17:34):
On the other hand, having him on theOlympic team allowed them to get the gold
medal, which means that there are caseswhen that guy or that gal is critical to
the operation of the team or the board.
So, what are some of the areas ofexpertise where board might want to
consider having that pommel horse guy?
(17:55):
Well, I think one areamight be the industry.
For example, I was on a board where we hadsomebody who, in fact, was an entrepreneur
and had sold a major piece of the businessto the company and understood the industry
at a level that none of us really couldbecause grew up in that industry, he had
built a large company industry, he hadunderstood the customers and he'd never
(18:16):
been in a public company board before.
And so you might say, "Oh, well, whywould we want somebody who is not a public
board member on this large company board?"
But the fact is that that hehad a tremendous experience and
he was a wonderful voice for uscustomer wise in the boardroom.
Great example.
Thanks.
One of the thing implicationsof that has been the time
(18:38):
commitment to serve on boards.
We can guess and estimate that it could beanywhere between 100 to 300 hours per year
for a given board service, or maybe evenmore, so talk a little bit about that and
advice for board members on how many ofthese should they take, how do I actually
(19:00):
effectively then be able to contribute toall of the boards that you're a member of.
Well, I've never heard anybody say it's100 hours, so I'd like to see that board,
well over 200, and I think what Iadvise people is what they forget is a
lot of these hours are weekend hours.
The management team leaves and on aThursday night, they load everything up
(19:22):
to these board portals, and there youare reading over the weekend to be sure
that you've read these multiple 100-pagedocument so that you can be prepared
for the board meeting the next week.
The other thing to realize is that nomatter what timetable you have, you
may know these meetings two to threeyears in advance, you plan them all
out, there are mergers that come up,there are customer issues that come up,
(19:43):
there are succession issues, CEOs getill, they might need to be replaced,
so you need to really have flexibility.
So, if you're somebody who's got afull-time job and say that I could
only attend these meetings and nothingelse, you probably shouldn't be on a
board at that point in your career.
The most boards I was on was threeboards and it was difficult, but the
(20:05):
only reason it worked for me is theyhad three different fiscal year ends.
It worked that way because I was onthe audit committee and all that heavy
time of the end of the year and the endof quarter, it just happened to work
out well for their reporting schedule.
I think it comes back to what one ofour colleagues said that being on a
board is not an honorific position.
(20:26):
It is a real responsibility.
It involves a lot of time,commitment and effort.
Be aware of that and don't take boardpositions just for the sake of it.
Anybody who's been involved in an activistsituation where there are a lot of
unplanned calls will tell you that youmay think that you're being paid a lot,
but you might be paid less the minimumwage when you start trying to figure out
(20:49):
the hours, which none of us like to do.
24/7 in some cases, it's crazy.
So, along the lines of the increasedresponsibilities of board members, one
thing is with all the issues that we.
now have for boards, it's reallyincumbent upon the board member
themselves to stay on top of the issuesthat are impacting their company.
(21:11):
What kinds of things shouldboard members be expected to do?
How much comes from the company and howmuch is really up to each individual
board member to make sure that he orshe is up to date on the issues that
are impacting the boards they sit on.
I think that you get a lot about theindustry from the company and the
company can really tell you what they'refacing, what they're seeing with their
(21:32):
customers, et cetera, and you may wantto do some outside education on that.
But I think that where the areas wherewe have a lot of resources are on
the governance side and a lot of theissues with public company reporting,
and so what you see is you see that,for example, National Association of
Corporate Directors, which is the largestdomestic director education group.
(21:55):
I'm a member of Women Corporate Directors.
As you mentioned, we havevery good conversations there.
The auditing firms all haveboard excellence centers.
They have great programs.
The law firms have very good programs.
In fact, you could spend a lot of yourtime, in fact, some people say most
of your time, just being educated.
But it really is interesting to hearother directors and what they're facing
(22:19):
because I've learned a tremendous amountfrom not just my fellow directors in my
own boardrooms, but from other companiesand hear about what they're facing.
Yeah.
And when you think aboutit, it makes perfect sense.
I mean, your board may be great,but it's only so many people.
So, having a broad group of boardmembers who may have faced different
(22:40):
things seen and had to address differentrisks, for example, incredibly valuable.
One thing you brought up before is thatfrom the perspective of the CEO, the
work that senior management has to putin for these meetings is significant,
and so the expectations of the CEO andthe management team are also significant.
(23:00):
It's not nothing howmuch are getting paid.
I think you said if you have 10 boardmembers and they're making 250, 000 a year
in stock and equity, that does add up.
So, what are the expectations ofthe CEO and senior management?
How has that changed?
Well, I think in some ways they're findingus more critical, so I think we have to
(23:21):
be careful how we provide our criticism.
But I think it's best expressed by oneof the CEOs that I work closely with who
told me that we need to do as directorsis not to tell him what to think, but
what we should be thinking about, andso I think that really a challenge
for directors is how to add value.
I think that is a greatway to frame it too.
(23:43):
Thank you for that.
One of the things you've talked aboutis how you really devoted time to
helping with board governance andyou've done that with Center for Women
in Enterprise, NACD's New Englandchapter, where you're on the board,
and some other organizations as well.
Could you tell us a little bit aboutthat, because I think part of being a
(24:07):
board member is the responsibility tohelp generally the board member pool
out there and to make sure that you'rekind of giving back a little bit.
Well, I know that there are a lotof women who grew up in a time where
there weren't a lot of women on boards.
In many cases, I was thefirst woman on a board.
(24:28):
I've never been the last woman on aboard, and so I have worked with other
women to help get women educated andto make them ready to be on board.
So, we've seen a lot of the accountingfirms, a lot of the universities, have
programs to train women to be on boards.
It's interesting that not many mentake advantage of this opportunity
(24:49):
to be trained for boards.
Is that true?
You don't think men aredoing as much as women?
I think directors are, but if you go toNACD New England's events, you'll find
generally these days more than 50% women,and maybe we're just lucky in New England,
we have a lot of highly educated boarddirectors here, but I think that all of us
really need to have an open mind and lookfor ways to learn more about governance.
(25:14):
So it's not just I go into these meetings,not what am I going to tell you, but
here's what I know what do you knowand learn about this, and I think that
a lot of directors, it's an informalnetwork, women and men, where if you
face a tough issue, you may call up atrust advisor and talk to them about
that topic, "Have you seen this before?"
(25:34):
Whether it's a difficult CEO healthproblem, whether it's a succession issue,
whether it's a activist situation, I knowthat when I've known people in activist
situations, I've called them up andcontacted them and said, "Look, hey, I've
been in this place before, and I knowthree other directors who've been in this.
Would you like to talk to usindividually about ways that our
boards handled the situation?"
(25:56):
Because sometimes these thingscan get very emotional and
they really shouldn't be.
They're just issues that needto be unpacked and discussed.
It's a great way to think about it.
Really appreciate that.
Thanks.
Pam, it's been greatspeaking with you today.
Thank you so much forjoining us on On Boards,
Well, thank you for having me.
And thank you all for listening to OnBoards with our guest, Pam Lenehan.
(26:20):
Please visit our websiteat OnBoardsPodcast.com.
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(26:41):
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Thanks.
Hello, and welcome to On Boards, a deepdive at what drives business success.
I'm Joe Ayoub, and I'm herewith my co-host, Raza Shaikh.
Twice a month, On Boards is the place tolearn about one of the most critically
important aspects of any company ororganization - its board of directors
or advisors - with a focus on theimportant issues that are facing boards,
(00:28):
company leadership and stakeholders.
Joe and I speak with a wide range ofguests and talk about what makes a board
successful or unsuccessful, what itmeans to be an effective board member and
how to make your board one of the mostvaluable assets of your organization.
Before we introduce today's guest,we want to thank the law firm of
(00:50):
Nutter McClennen & Fish who are againsponsoring our On Board Summit this year
taking place on October 22nd in theirconference center in the Boston Seaport.
They've been incrediblepartners with us in every way.
We appreciate all they havedone to support this podcast.
Our guest today is Pam Lenehan.
(01:11):
Pam has 22 years of experience as apublic company director serving on
seven public company boards, whichshe has been chair of the board,
presiding director and has chairedboth audit and compensation committees.
Pam currently serves on the boardof ATN International where she
chairs the audit committee and isa member of the nom-gov committee.
(01:35):
During the course of her years of boardservice, she has been involved in IPOs,
equity and debt financings, acquisitions,divestitures, restructurings, auditor
changes, sale of the company, cyberbreaches, activist engagements, and
planned and unplanned CEO succession
(01:57):
Pam also serves on the boards ofthe Center for Women and Enterprise
and NACD's New England chapter.
She is also co-chair of the Bostonchapter of Women's Corporate Directors
and a member of the Women Leaders Networkand the Massachusetts Women's Forum.
Welcome,
(02:20):
Pam.
Thanks for joining us today on On Boards.
Well, thank you for having me.
So, before we get into details, talka little bit about the deep public
company board experience you have.
You've been exposed to multiple governancesituations over these many years,
(02:40):
and it'd be helpful if you could justelaborate a little on some of that.
Well, I've been lucky enoughto be on a number of different
boards in a variety of industries.
When you're a financial expert asI am, you really don't have to do a
deep dive at any particular industry.
You can take that expertiseacross different industries.
So, I've been on boards oftechnology companies, which includes
(03:04):
telecommunications, software, clean tech.
I've also been in health services company.
I've been on a plastics companyboard, so very interesting to really
get exposed to different industriesas well as the different companies.
It must be interesting to be ableto move from industry to industry.
In a former life, I was atrial lawyer, and what I did
(03:27):
was largely industry agnostic.
So, I would learn everything aboutlaser beams and then I would learn
everything about some other subject,and that's part of why I loved it.
So, I can really relate to the factthat each board in its way, while there
are so many common things, but eachboard is actually unique and provides
(03:48):
a unique experience for a board member.
That's true.
I think one of my fellow board memberssaid that your board experience is
an N of one, that every company isdifferent, and that even if you're in
the same industry as a prior company,the management team is different, the
industry dynamics are different, theproducts are different, and so you really
have to go in with a learning mindset.
(04:09):
You have to be a lifetime learnerin order to really understand the
business you're getting involved with.
I love thinking about goinginto it with a learning mindset.
I think that's part of what we talkedabout earlier and we'll get into that
being a board member is a job, andobviously, if you're taking a new job,
there's a lot to learn no matter howmuch you've learned in the past so
(04:31):
it's a great, great attitude to have.
One of the things we talked about whenwe spoke last week was how much in
the new world, so to speak, has beenadded to the plate of fiduciary boards.
There's all the stuff that boardsalways had to do, and then there's
(04:53):
a whole bunch of new things.
Anything from cyber to AI, wecan go through it later, but it
has created a situation that manypeople think has really added
to the board responsibilities.
So, we'd like to talk a little bitabout how you've experienced the
evolution of board responsibilities.
What are some of the things you'venoticed that have changed over the years
(05:17):
requiring more time from a board member?
Well, I think one of the thingsis that boards have always
really had to focus on risks.
What are the risks that businessesface, both externally and their own
product development, their own people.
I always say that we historicallyimplicitly considered risk, but now we
have to explicitly consider risk becausewe're having much more reporting, and
(05:40):
so really you have to specifically thinkabout not only what are the risks we have,
but how are we going to allocate thoseamong the different board committees?
There's much more focus on board oversightof those risks, and therefore, how
do we, as a board, think about risk?
How do we ask our committees, whether it'saudit or compensation or, in some cases,
risk committees or technology committees,how do we divide up these risks and
(06:03):
then come back together in a board anddiscuss them with management to be sure
that we understand them, and not to saythat you can anticipate all of the risks.
I mean, who really thought about apandemic, but we need to be very forward
thinking in how we consider the business.
And that's only one aspectof what a board has to do.
(06:23):
So, even getting ready for boardmeetings, there's more work to do.
Am I right about that?
That's true, and it's interestingbecause I think technology has
both helped and hurt in this way.
Most boards transmit their informationthese days through electronic platforms,
and back in the old, old days whenyou had to have a person physically
(06:45):
copy and bind and distribute thematerial, there was a cutoff date,
people thought seriously about, "Do Ireally want to get this out to people?"
But now, "Oh, we'll just add this articleor we'll just add this presentation,"
and so it's just really easy to uploadmaterial onto these databases and so
it's not uncommon for board books to be400, 500, 600 or more pages, and it's all
(07:08):
interesting reading, but you better besure that you set aside time to do that.
That's a lot of reading.
Is it because there's more beingcovered or is it part what you've
just said, which is, it's so mucheasier to just add it to the binder.
Well, I think it's both, and I thinkboards are asking companies to provide
them more information in advance.
I think that we've talked about one issueis that it used to be that boards kind
(07:32):
of arrived and sat there, and there wasPowerPoint after PowerPoint, and now
what boards are saying is, "Look, wehave very limited time together, so let's
spend that time together discussing.
hearing what each other think,talking to the management team.
So, let's do a lot of the work beforethe board meeting so we walk in
there educated and then we're ableto really discuss and analyze things.
(07:53):
As we've discussed, I think that'sgreat because it means people
taking the role of a board memberseriously, because it is serious.
Well, any company, public or private,it's serious so that's a good thing.
Part of the question that regularly ariseswhen discussing how board meetings and
governance has changed is, do you losesome of the social trust interaction
(08:19):
among board members because there isn'tas much time to have a cup of coffee or
to have a drink or to have lunch together.
How does that work?
How is the more limited time forsocializing impacted board interactions?
Well, I think boards have to be verydeliberate in thinking about that.
We've gone to more meetings.
(08:40):
When you look at our schedulefor the year, do we really need
to fly in for every meeting?
Or should some of thosemeetings be on a video platform?
And that's where you really miss,it is not to say you don't have good
discussions and good interaction, therearen't those little side issues in
between presentations or getting up andwalking out to lunch and just having
that casual chats to people or let's saythat you're going on a tour and you're
(09:05):
getting on the bus together and you'resitting talking to your fellow directors.
So, therefore, when you are together, youreally do need to plan that time, whether
they're dinners, whether they are timesfor the independent directors to have
breakfast together, but there definitelyis less socializing than there used to be.
Yeah, and I will say that when we cameout of COVID and there were meetings
(09:27):
that we are starting in person.
It really struck me how much thatI, as a board member, but the
board had missed being together.
There's stuff that gets done overvirtually that you can get it done,
but at least what I sense was a littleless amicable back and forth, "People,
(09:48):
you know, let's get this going.
Let's move.
Let's talk."
And of course, time is veryvaluable, but it was less collegial,
I guess is what I experienced.
I don't know if that evercame through to you at all.
I was on two boards during COVID andboth CEOs were very much in-person
meeting people, and so I rememberwe still laugh about one of them.
(10:10):
Our first board meeting, it was probablyMay of 2020, so very early in COVID,
we decided we'd have an outdoor boardmeeting for the board members who were
local, and it turned out to be one ofthose days, for those of you who are
in New England, you know this, whereyou think April spring, it's not.
It was like mid-40s and we had itoutside at a nonprofit and our CEO
(10:34):
was not very good on the technology.
So, the people who weren't there basicallysaw his chest the entire time that they
couldn't see the camera focused on therest of us and it turned out it was
near an old airport where someone wastaking off and landing, and so they laugh
about how our early days of doing videomeetings, we were not very successful.
(10:55):
But I think we've gotten better atthat, and I'm not saying that you can
actually have a good conversation.
Sometimes, like my nonprofitthat we talked about, it
schedules in some social time.
So, it isn't just, "Here's thepresentation, now we terminate," and
maybe boards need to do that too.
Maybe we need to have some breaks wherewe just talk about the latest books we've
read or what we're watching on Netflix.
(11:16):
Yeah, I agree.
That is a good idea, actually,because I think the trust among
board members is so critical.
So, another thing we talked aboutwas how both board meetings and
committee meetings are longer.
Committee meetings are more frequentbecause so much is flowing down to
committees, and in addition, one thingcommittee members are doing is meeting
(11:38):
more often with members of the C suite.
If you could just talk a little bitabout how that has impacted the time
and energy that it takes to reallydo your job as a board member.
Well, I think you justhave to really schedule it.
So, I'm chair of an audit committeeand we look out two years to really
schedule meetings, but also, whatare we supposed to be covering?
(11:59):
What does our charter look like?
What meetings are we goingto cover those topics?
In this particular company, weseparate the earnings calls,
which are usually very pressured.
You need to understand what those earningsare, what's the message you're going to
communicate, are you changing guidance,what's the press release look like.
And then we have a separate meetingwhere we cover the other issues that we
want to talk about, what's going on onthe accounting side, what's going on in
(12:23):
cyber security, you get your updates, alot of the new disclosure requirements,
where do we stand on those, and so weend up with at least eight meetings a
year; the four calls, and then the fourwhere we're covering other subjects.
That's a lot of meeting time.
It really is.
I was going to ask you, how aresome of these things impacting
particularly public company boards,which you just kind of went through.
(12:45):
Are there other things that because it'sa public company, it is added to the time
that might not impact private companies.
Right, right.
Well, I think I told you that Iwas on two private equity companies
that eventually went public, andmy experience with private equity
companies was very positive.
You're sitting next toyour major shareholder.
(13:05):
Your entire focus is reallyon the strategy of the
business and the execution.
Whereas when you're on a public company,not that you don't do that, but you
also need to talk about disclosure, sowhat are you going to be disclosing?
The SEC keeps adding on rules, andit started with Sarbanes–Oxley,
but it's been additive.
So, first, we've hadcybersecurity disclosures.
(13:25):
There's ESG disclosures.
Even though they're technically onhold, a lot of companies are already
releasing that information becausethere's pressure from shareholders.
So, we're spending a lot of time, not juston what we're doing, but how we're going
to communicate that outside shareholders.
Is there more shareholderactivism, do you think?
Oh, yes.
I've been involved in three pretty activeactivist situations and we all need to
(13:51):
think like activists because these peopleare smart and they have good ideas.
Now, they might not alwaysunderstand how it impacts the
company and then they can't alwaysunderstand what the board is doing.
In one particular case, the company wasin the process of trying to affect a
sale of the company and the activistscame in and said, "I think you should
sell the company," and we agreed withthe activists, but we couldn't say that
(14:14):
because we hadn't publicly disclosed it.
Ah.
So, you have to be really carefulwhat you say to these shareholders.
Yeah, that I believe.
Pam, with this backdrop of increasedresponsibility, If we consider board
a team at each level and committeesare teams as well, then you need
(14:34):
a leader for that team, and that'susually the chair or the independent
director or lead director- type of role.
Maybe talk a little bit aboutthe importance of the increased
responsibility of the boardchair under these circumstances.
Well, I think that the board chairhas always had one of the major jobs.
it is to be sure that all the voices inthe boardroom are heard, and so as we put
(14:59):
together boards these days, I'm sure we'lltalk about board composition, it used to
be very much of a group of generalistsand so people who were very good at
a lot of different things and peoplewho were just good general managers.
But that's not what isrequired of us these days.
We need three people understand financeto be on the audit committee, one of
whom needs to be a financial expert.
(15:20):
You are probably looking forone or two industry experts.
You may be looking for peoplewho have technology backgrounds.
You may be looking for aformer public company CEO.
So, these people are very diverse andyou need to be sure that you're getting
the best performance from all of themand we all learn from each other.
So, you can't just have one or twopeople monopolize the board conversation,
(15:45):
you need to hear from each of thedirectors, and you need to think about
what is the composition of the board,what skills do we want to have in the
boardroom, and what could our expertisethat we can hire from the outside.
It almost sounds like that's notjust the team, it's an elite sports
team that has to not only worktogether well, but each has its
(16:05):
individual strengths in areas as well.
Any tips for the board chair?
I think that we often see thatphenomenon of the expert in the room.
How do you deal with that, like not tohave just one person who really just
knows something about an area, how can theboard collectively be doing all of that?
(16:30):
Right, well, I think we talked about how Iwas talking to a private equity investor,
he was looking for new directors, andhe said he couldn't afford to have a
pommel horse guy, and I said, "Well,what do you mean by a pommel horse guy?"
For those of us who watch the Olympics,we remember that the men's gymnastics team
had very talented people, but one personwho went on to get a medal, he was the
(16:51):
expert on the pommel horse and he wasn'tinvolved in any of the other activities.
I think that no matter what your expertiseon a board of directors, you need to have
some level of knowledge of other things.
You may not want to be on theaudit committee, but you need
to understand finance and youneed to understand budgets.
You may not be a technology person,but you need understanding of the
technology impacting the business andthe major issues in cyber security.
(17:13):
Yes, maybe each have your expertise,as you said, in a sports team, but
you still need to be a team and youneed to know what the rules of the
game are and what the objectives are.
Yeah, and I think that's a great analogy.
I would come back, as I did thelast time we talked about this,
and say, yes, not every board canafford to have the pommel horse guy.
(17:34):
On the other hand, having him on theOlympic team allowed them to get the gold
medal, which means that there are caseswhen that guy or that gal is critical to
the operation of the team or the board.
So, what are some of the areas ofexpertise where board might want to
consider having that pommel horse guy?
(17:55):
Well, I think one areamight be the industry.
For example, I was on a board where we hadsomebody who, in fact, was an entrepreneur
and had sold a major piece of the businessto the company and understood the industry
at a level that none of us really couldbecause grew up in that industry, he had
built a large company industry, he hadunderstood the customers and he'd never
(18:16):
been in a public company board before.
And so you might say, "Oh, well, whywould we want somebody who is not a public
board member on this large company board?"
But the fact is that that hehad a tremendous experience and
he was a wonderful voice for uscustomer wise in the boardroom.
Great example.
Thanks.
One of the thing implicationsof that has been the time
(18:38):
commitment to serve on boards.
We can guess and estimate that it could beanywhere between 100 to 300 hours per year
for a given board service, or maybe evenmore, so talk a little bit about that and
advice for board members on how many ofthese should they take, how do I actually
(19:00):
effectively then be able to contribute toall of the boards that you're a member of.
Well, I've never heard anybody say it's100 hours, so I'd like to see that board,
well over 200, and I think what Iadvise people is what they forget is a
lot of these hours are weekend hours.
The management team leaves and on aThursday night, they load everything up
(19:22):
to these board portals, and there youare reading over the weekend to be sure
that you've read these multiple 100-pagedocument so that you can be prepared
for the board meeting the next week.
The other thing to realize is that nomatter what timetable you have, you
may know these meetings two to threeyears in advance, you plan them all
out, there are mergers that come up,there are customer issues that come up,
(19:43):
there are succession issues, CEOs getill, they might need to be replaced,
so you need to really have flexibility.
So, if you're somebody who's got afull-time job and say that I could
only attend these meetings and nothingelse, you probably shouldn't be on a
board at that point in your career.
The most boards I was on was threeboards and it was difficult, but the
(20:05):
only reason it worked for me is theyhad three different fiscal year ends.
It worked that way because I was onthe audit committee and all that heavy
time of the end of the year and the endof quarter, it just happened to work
out well for their reporting schedule.
I think it comes back to what one ofour colleagues said that being on a
board is not an honorific position.
(20:26):
It is a real responsibility.
It involves a lot of time,commitment and effort.
Be aware of that and don't take boardpositions just for the sake of it.
Anybody who's been involved in an activistsituation where there are a lot of
unplanned calls will tell you that youmay think that you're being paid a lot,
but you might be paid less the minimumwage when you start trying to figure out
(20:49):
the hours, which none of us like to do.
24/7 in some cases, it's crazy.
So, along the lines of the increasedresponsibilities of board members, one
thing is with all the issues that we.
now have for boards, it's reallyincumbent upon the board member
themselves to stay on top of the issuesthat are impacting their company.
(21:11):
What kinds of things shouldboard members be expected to do?
How much comes from the company and howmuch is really up to each individual
board member to make sure that he orshe is up to date on the issues that
are impacting the boards they sit on.
I think that you get a lot about theindustry from the company and the
company can really tell you what they'refacing, what they're seeing with their
(21:32):
customers, et cetera, and you may wantto do some outside education on that.
But I think that where the areas wherewe have a lot of resources are on
the governance side and a lot of theissues with public company reporting,
and so what you see is you see that,for example, National Association of
Corporate Directors, which is the largestdomestic director education group.
(21:55):
I'm a member of Women Corporate Directors.
As you mentioned, we havevery good conversations there.
The auditing firms all haveboard excellence centers.
They have great programs.
The law firms have very good programs.
In fact, you could spend a lot of yourtime, in fact, some people say most
of your time, just being educated.
But it really is interesting to hearother directors and what they're facing
(22:19):
because I've learned a tremendous amountfrom not just my fellow directors in my
own boardrooms, but from other companiesand hear about what they're facing.
Yeah.
And when you think aboutit, it makes perfect sense.
I mean, your board may be great,but it's only so many people.
So, having a broad group of boardmembers who may have faced different
(22:40):
things seen and had to address differentrisks, for example, incredibly valuable.
One thing you brought up before is thatfrom the perspective of the CEO, the
work that senior management has to putin for these meetings is significant,
and so the expectations of the CEO andthe management team are also significant.
(23:00):
It's not nothing howmuch are getting paid.
I think you said if you have 10 boardmembers and they're making 250, 000 a year
in stock and equity, that does add up.
So, what are the expectations ofthe CEO and senior management?
How has that changed?
Well, I think in some ways they're findingus more critical, so I think we have to
(23:21):
be careful how we provide our criticism.
But I think it's best expressed by oneof the CEOs that I work closely with who
told me that we need to do as directorsis not to tell him what to think, but
what we should be thinking about, andso I think that really a challenge
for directors is how to add value.
I think that is a greatway to frame it too.
(23:43):
Thank you for that.
One of the things you've talked aboutis how you really devoted time to
helping with board governance andyou've done that with Center for Women
in Enterprise, NACD's New Englandchapter, where you're on the board,
and some other organizations as well.
Could you tell us a little bit aboutthat, because I think part of being a
(24:07):
board member is the responsibility tohelp generally the board member pool
out there and to make sure that you'rekind of giving back a little bit.
Well, I know that there are a lotof women who grew up in a time where
there weren't a lot of women on boards.
In many cases, I was thefirst woman on a board.
(24:28):
I've never been the last woman on aboard, and so I have worked with other
women to help get women educated andto make them ready to be on board.
So, we've seen a lot of the accountingfirms, a lot of the universities, have
programs to train women to be on boards.
It's interesting that not many mentake advantage of this opportunity
(24:49):
to be trained for boards.
Is that true?
You don't think men aredoing as much as women?
I think directors are, but if you go toNACD New England's events, you'll find
generally these days more than 50% women,and maybe we're just lucky in New England,
we have a lot of highly educated boarddirectors here, but I think that all of us
really need to have an open mind and lookfor ways to learn more about governance.
(25:14):
So it's not just I go into these meetings,not what am I going to tell you, but
here's what I know what do you knowand learn about this, and I think that
a lot of directors, it's an informalnetwork, women and men, where if you
face a tough issue, you may call up atrust advisor and talk to them about
that topic, "Have you seen this before?"
(25:34):
Whether it's a difficult CEO healthproblem, whether it's a succession issue,
whether it's a activist situation, I knowthat when I've known people in activist
situations, I've called them up andcontacted them and said, "Look, hey, I've
been in this place before, and I knowthree other directors who've been in this.
Would you like to talk to usindividually about ways that our
boards handled the situation?"
(25:56):
Because sometimes these thingscan get very emotional and
they really shouldn't be.
They're just issues that needto be unpacked and discussed.
It's a great way to think about it.
Really appreciate that.
Thanks.
Pam, it's been greatspeaking with you today.
Thank you so much forjoining us on On Boards,
Well, thank you for having me.
And thank you all for listening to OnBoards with our guest, Pam Lenehan.
(26:20):
Please visit our websiteat OnBoardsPodcast.com.
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