November 22, 2016
“In Conversation” is a regular feature on Board Intelligence highlighting the perspectives of boardroom and governance leaders and their contributions to advancing the conversation on corporate leadership.
At the recent Board Leadership Forum, co-hosted by Equilar and Nasdaq in New York City, keynote speaker Steve Odland engaged in a Q&A session with TK Kerstetter, host of “Inside America’s Boardrooms.” Odland, who is now the CEO of the Committee for Economic Development and on the board of directors at General Mills and Analogic Corporation, also formerly served as the Chairman and CEO of Office Depot and AutoZone. Odland drew from his experience to discuss a range of topics about the relationship between the management and the board and how they work together to create shareholder value. Below is an abridged transcript of the conversation.
TK Kerstetter: The foundation of good leadership is the relationship between the CEO and the board. How can the two work together to ensure value creation across the organization?
Steve Odland: I wouldn’t limit it just to the CEO—and it’s important to have a relationship with the full management team. I was brought in from the outside three different times as a CEO, and while you’d think it would be empowering, it’s actually very frightening—like merging onto a freeway. You’re eager to perform well, and you want to be institutionally accepted. As a new board member it’s similar. Obviously they want you to be on the board, but leadership does not exist in a vacuum. How do you inspire people to follow you?
You have to have trust between management and the board. It’s important to know people at both a personal and group level, and we skip the personal part of it oftentimes. When you hear about confrontation, it’s almost always because trust has been violated in some way through breakdown in communications.
Kerstetter: What are the key factors that make a good executive-board relationship?
Odland: To build off the notion of trust, you have to get to know people. You can’t do everything strictly through meetings—you have to make time outside them. This isn’t just about playing golf.
In order for any team to be effective it needs collegiality. If you think you need a dissident on the board and someone to be a naysayer and argue, that’s not going to drive a highly effective team that creates innovation and good results. The dissonance has to be baked into the process. People will say ‘I want to get on a board because we’re going to take this company apart.’ The attitude shouldn’t be specifically to shake things up radically, but at the same time a company has to move ahead. When things need to be shaken up, you need to be able to do it in concert with one another.
Kerstetter: What were the key traits for you in being an effective leader as CEO? What would you pass along?
Odland: Great leaders are capable of inspiring followership. No two situations or individuals are alike. There are books that you read that are sort of formulaic—you can do 1, 2, 3 or here are the six things you should do. The issue is you have to work within your own style and who you are and how you are effective with the group. The best leaders are able to adapt to the styles of the people around them. In order to move people ahead you can’t just act a certain way.
Kerstetter: As a CEO, you can influence board effectiveness, but you have to do it without looking like you’re ruling with an iron fist. Is there a way to influence the board without letting them know they’re being influenced?
Odland: As a young CEO, I was on a panel with Jack Welch, and he was very tough and powerful—I had to tell him the world has changed. The idea of being dogmatic one way in leadership and communications, it doesn’t work. And he agreed with that. The corporate world is more diverse. Millennials don’t respond to being told what to do, everything should be inclusive. So you can do the six things and follow the checklist and still be ineffective as a leader. It’s about connecting and being able to change with the people around you.
Kerstetter: Shifting gears a bit to your current role, the CED is at the forefront to get women on boards—specifically, the Every Other One initiative. What is your role in leading that and what’s trying to be accomplished? My concern is that there are so many different messages and there isn’t a fully coordinated effort looking at the same goal.
Odland: We did a report back in 2012 that essentially shows women make up more than half the population of the world and this country, more than half of college graduates, more than half of post-graduate degrees, the majority of consumers, investors, on and on and on. About 70% of the U.S. economy is driven by consumer spending, and 85% of consumer decisions are driven by women. Women make up the majority of customers, employees, shareholders, the community—every constituency of a corporation is made up majority of women, but the group that has the accountability and oversight for the what the company does has women in a distinct minority. It’s still in the teens in terms of percentage by any measure.
So to your point, we decided that instead of setting numerical goal, we should try to change behavior. We christened the effort Every Other One, replacing every other board member as they retire with a woman. It’s so easy and so logical. There’s a myth that there is a supply issue, and we debunk that in about 10 seconds. If they have to be CEO of a Fortune 50 company, well then sure, but you have thousands of women in the C-Suite, partners in law firms, partners coming out of the multiple accounting firms, business owners—it’s not a supply issue. It’s a matter of focusing on it and setting goals and doing it. I’m the chair of the nom/gov committee at General Mills, and we have four to six women on the board at any given time. You say you’re going to do it and you do it. There are 650 companies in the Russell 3000 who have no women? That’s just stupid.
Kerstetter: You’ve been passionate about the issue of short-termism and long-termism. Can you talk a little about your position and why this is so important?
Odland: This whole environment of activists and short-termists started in a good way. There were a lot of boards asleep at the switch, and a lot of underperforming companies. And now it’s become an asset class. There are something like $250 billion in assets for activists, and even some long-term shareholders are behind the scenes throwing in to try to shake loose in a little slow to no return environment. There were 300 campaigns launched in 2013, 344 in 2014, and a similar number in 2015.
It’s a different deal today. Boards need to be sensitive to it, and for every GC in this room it has to be top of mind. Whether people admit it or not, it’s a topic in every boardroom. You want to drive the right return, but you don’t want to transfer the value from the long-term to the short-term shareholders, which is happening in too many cases today. The obligation of the board is to understand short-term pressures and know what is right for their own companies. It doesn’t mean you won’t have an activist show up at your door, but you have to be able to manage that, and even be open to it—sometimes there are really good ideas there. If you’re concerned about an activist, go find your own. Bring one on!
There has to be some sort of meeting of the minds in terms of goals and timeframes. As a CEO I found myself very frustrated—and I’m sure others are likewise frustrated—with short-termism. I was the only person thinking about forever as the leader. I had shareholders on my board. They are buying in at different times looking at exiting at a certain time. You can set a five-year goal, but they want it in five months. A lot of conflict that I’ve seen between shareholders, boards and management is a lack of consensus on a timeframe.
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