JAMES E. NEVELS’ REMARKS AT THE DIRECTORS ROUNDTABLE: CRITICAL ISSUES IN LEADERSHIP

Last week at a breakfast, I had the opportunity to hear James E. Nevels, the non-executive Chairman of the Board of Directors of The Hershey Company.  That’s right, the company that makes so many of the candy bars that I grew up eating and still eat.  I probably average eating two Payday candy bars a week (more often, sadly, the supersized version).   Mr. Nevels spoke on “The Role of the Non-Executive Board Chair.” 

Mr. Nevels chairs the Governance Committee and the Executive Committee of the company.  He also serves on its Compensation and Executive Organization Committee.  He founded and heads The Swarthmore Group, a Philadelphia-based minority owned investment-advisory firm. 

James E. Nevels

Among his many accomplishments, he chaired the Philadelphia School Reform Commission and served as a director of the Federal Reserve Bank of Philadelphia.

Concept of Non-Executive Chairman

A non-executive chairman is unusual in the U.S. and is favored by corporate governance reform activists and thought leaders.  Recently, as a result of  the merger between United Airlines and Continental Airlines, Glenn Tilton, the chairman and CEO of United became the nonexecutive chairman of the new  16-member board and Jeff Smisek, the CEO of Continental became the president and CEO of the combined firm, United Continental Holdings Inc.

The idea behind a non-executive chair is to provide board independence from the CEO and to provide a check and balance on the CEO.  Ideally, the non-executive chair and the CEO should work as a team, the CEO focusing on running the business and the non-executive chair focusing on corporate governance and board functions.  The role of a lead director is similar to the role of a non-executive chairman – they both serve the purpose to provide appropriate controls on the CEO to ensure that the best interests of the shareholders are served.

Tension between CEO and Non-Executive Chairman

Separating the chairman position from the CEO position is a tricky business, because it is natural for a CEO to want to also be chair of the board of directors and to be his own boss with minimal interference from his board.  Also the danger from a management point of view is that senior management may feel it has two masters to serve, the CEO and the non-executive chairman.  In United Continental Holdings case, it will be interesting to see how former United CEO Tilton shares responsibilities with former Continental CEO Smisek.

If done correctly, it is hard to argue against de-concentrating the power of the CEO in order to avoid senior management excesses and wrongful conduct that can destroy a company.

Mr. Nevels had plenty to say about how a non-executive chair should navigate his duties and responsibilities in relation to the CEO, the board, and the company at large.  His comments concerning being a non-executive chair, by definition, would benefit a tiny audience, given the rarity of the position.

However, his comments about being on a corporate board will have greater utility to many readers of this blog.

Board Service

From Mr. Nevels’ talk, I distilled eleven takeaways on board service:

  • Be prepared for each board meeting.
  • Attend board meetings.
  • Understand that just because you are ready to be on a board does not mean you should be on a board.
  • Do not “run” for a board of directors; it is off-putting.
  • Know that you get on boards because of relationships you have developed.
  • Have integrity and cultivate good will, which are keys to being selected for a board and being effective on a board.
  • Do not seek to go on a board for the money; it is the wrong reason; board service well done is time-consuming and a lot of hard work.
  • Do go on a board because you believe in the company and have something to contribute.
  • Be sure to align executive compensation with the company’s financial measures.
  • Listen first and listen more than you speak.
  • Do not put anything on the agenda that you already do not know what the voting outcome will be.

Getting on a Board

One comment I will make on his takeaways is whether one should “push” to get on a board or wait to be “pulled” on a board.  I have heard advocates for each school of thought and I cannot declare one is more correct.  Like a lot of things, it will depend on the circumstances.  For example, some minorities and women would never have gotten on to a corporate board without some organization or person pushing them.  Also, some individuals who heard about a board seat opening, have said “Why not me?” and have sometimes gotten the nod as a result of their expression of keen interest.  One has to intuit one’s way through the particular circumstance.

No One “Deserves” to Be on a Board

I like the notion “that just because you are ready to be on a board does not mean you should be on a board.”  The person must be the right fit.  Despite the wonderful qualities and skill sets a board candidate  may have, there should be no  sense of  “entitlement.”

2 responses

  1. While this is a concerning subject for anyone who wants to run a company by not just being the CEO but also being one’s own boss, one subject that did not get discussed in this posting has to do with where does the effort or the main influence for a Non-Executive Chairman should come from. Does this additional level of assurance in a company be a driving force from debt holders, shareholders, and possibly the other very important steak-holders who are the everyday performers in the company, the employees? Plus, for the companies you know of to have Non-Executive Chairman positions, by any chance you have insights on what driving factors brought about their existence?

    • The non-executive chairman is found for the most part among British and Canadian companies. The driving force of influence for the non-executive chairman is enhancing the value of shares and protecting the shareholders’ interests. With the high volume of shares changing hands so rapidly, protecting a static shareholder’s interest is temporary and illusory. No matter who owns the shares or for how long, the board of directors and the non-executive chairman have fiduciary duties to shareholders. Mr. Nevels gave the example where the non-executive chairman persuaded executive staff and a board committee that $40 million should be spent in distributing dividends or buying back shares rather than speding that money on a thired corporate jet.

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