January 12, 2017
An increasingly common mantra in corporate governance implores directors to “think like an activist.” While the message is clear, the steps to take action are less obvious, and they vary from company to company.
Equilar had the opportunity to speak with Ira Millstein, a renowned corporate lawyer and founding chair of his namesake Center for Global Markets and Corporate Ownership at Columbia Law School. His new book, The Activist Director, provides pragmatic suggestions for directors on building boards that can, and will, put the welfare of the corporation first.
[EDITOR’S NOTE: A complete version of this interview will appear in the forthcoming issue of C-Suite magazine, publishing February 1. Learn more or subscribe at http://www.equilar.com/c-suite/downloads.html.]
Equilar: What was the impetus to write The Activist Director, and more specifically, the impetus to do so now?
Ira Millstein: The impetus started with my desire to tell the story of how corporate governance originated. I think some people are under the impression it was invented one day and came from a single mind that said “ah, we need to have corporate governance and here it is.” Of course, no such thing happened, and it took 30 or 40 years to gestate.
In addition, we are at a point where a short-term mentality has permeated our whole system, and corporations and boards are more responsive to outside pressures than they have ever been before.
Equilar: Though the book was published just a couple of months ago, a lot has already changed since then—sort of proving your thesis about the constantly evolving market.
Millstein: Exactly right. During the presidential election, it occurred to me that life was changing all around us, and not just inside the corporation. The election made clear that there is a wave of populism in the U.S., in particular marked by a sweeping discontent among those who have been displaced or dispossessed through no fault of their own by things like global competition, the need to become more efficient and outsourcing. Mr. Trump seemed to sense that and saw something that the so-called elite did not see—namely the bankers, lawyers and boards. Very few people in Corporate America saw this happening when it was happening, or if they did see it happening they weren’t recognizing its significance. Now boards have to pay attention to it and ask what the private sector can do to meet this growing discontent—because it’s in our best interest to do that.
Equilar: Do you think directors will be uncomfortable with this notion of becoming an activist director?
Millstein: Some. There will be some directors that feel this new role is not for them, and would rather just go along with the proxy advisors and stay out of trouble, rather than do the hard work. That’s one of the things I attack. Boards today need someone who is not a traditional director bound by “nose in, fingers out,” but who is going to take an active role and partner with management to devise a strategy for the corporation.
Equilar: As we are talking about changes in the landscape, what lessons can we take away from the last few decades?
Millstein: The lesson we learned, and it’s in every one of the stories I tell from GM to Drexel to Con Ed and on, is that part of oversight is knowing what’s going on around you. The necessity is for directors to have a broad horizon of the corporation—what’s it trying to accomplish, who are the shareholders, what’s the public and the changing media’s perception. It’s a big job—it’s very different than when I started, it’s very different than it was 10 years ago, and it keeps getting more complicated. Directors have to be renaissance type people in addition to knowing the company. We’re in an unprecedented era because of the pace change is occurring all around them.
The ultimate goal of this book is for every corporate director to read it and see if there is anything in there that tells him or her to activate. Yes, I’d like the public to read the book, and I think it’s useful for them, but I hope to move the needle in terms of getting boards to think about the real implications of their job as a director.
About the Interviewee
Ira M. Millstein is a senior partner in the international law firm Weil, Gotshal & Manges LLP, where in addition to practicing in the areas of government regulation and antitrust law, he has counseled numerous boards on issues of corporate governance. He is an adjunct professor and founding chair of the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School. His many books include The Activist Director: Lessons from the Boardroom and the Future of the Corporation (2016) and The Recurrent Crisis in Corporate Governance (2003).
A graduate of Columbia Law School, Mr. Millstein is a Life Trustee and former Chairman of the Board of the Central Park Conservancy and is currently Chairman of the Central Park Conservancy Institute for Urban Parks. He also is a dedicated member of the board of directors of the National September 11 Memorial & Museum, where he is the Co-Chair of the Nominating, Governance & Compensation Committee.
Dan Marcec, Equilar Director of Content and Editor-in-Chief of C-Suite magazine, conducted this interview and edited the Q&A. To inquire about contributing editorial content, please contact him at email@example.com.