Equilar Institute

Reflections on the Evolution of Board Governance

An interview with Joann Lublin, Careers Columnist and former Management News Editor, The Wall Street Journal

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Joann S. Lublin recently retired as Management News Editor at The Wall Street Journal. She still writes a career advice column for the Journal. In 2018, she won the Lifetime Achievement Award from the Gerald Loeb Awards, the Pulitzer of business journalism. In 2003, she shared the Journal’s Pulitzer Prize for stories about corporate scandals. Ms. Lublin is the author of the popular leadership book, “Earning It: Hard-Won Lessons from Trailblazing Women at the Top of the Business World.” It offers insights from 52 high-level female executives, based on career obstacles they overcame. Nearly two-thirds of women interviewed are experienced public company CEOs.

C-Suite had the opportunity to speak with Joann Lublin, the former Management News Editor at The Wall Street Journal and author of the book, “Earning It: Hard-Won Lessons From Trailblazing Women at the Top of the Business World.” Lublin discussed how boards have adapted to the changing governance landscape over the years, as well as her thoughts on the progress of diversity in corporate boardrooms across America.

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C-Suite: Since you began covering corporate governance in 1991, what is the biggest change you’ve seen in how corporate boards do their jobs?

Joann Lublin: I started covering corporate governance in the spring of 1991. One of the fist stories I covered was about overboarded directors. We ran a graphic with that story that showed how some independent directors were making more money on their director fees than they were in their daytime jobs because they were academics. I still think we’re struggling with that issue today. Another one of my first stories about corporate governance was a very fruitless effort on the part of a shareholder activist named Bob Monks. He argued that shareholders ought to separate the chairmanship from the CEO at what was then called Sears-Roebuck. To promote his own campaign at that company, he took out full-page ads in both The New York Times and The Wall Street Journal under the headline, “Under-Performing Assets,” and he ran a photograph of all the members of the board. He didn’t win in his campaign, but it certainly highlighted for many people who saw the ad or read my story that there’s actually a board of directors that seems to be overseeing management.

Frankly, at the point when I started writing about corporate governance, the standard joke that a lot of critics made about boards was that management looked at boards like they were mushrooms. They kept them in the dark and they fed them manure and they kind of grew. Now, if you fast forward to 2018, the scope of what corporate boards are responsible for, both from a shareholder litigation standpoint as well as from a reputational standpoint, has greatly broadened. It certainly is very much a consequence of increased shareholder activism, but I think equally so, it’s a reflection of the changing worries in our workplace. We’re not willing to tolerate a bunch of white males sitting around running our corporate boards, particularly if that does not mirror the customer base. There is greater pressure on boards to have more diversity in the boardroom.

More than ever, the general public and media are eager for insight into how companies are operating, particularly with the various corporate scandals over recent years. When dissecting corporate scandals, can you share your perspective from a journalistic standpoint with respect to the information the media collects and how they report it now compared to when you first began your career as a journalist?

Lublin: I shared The Wall Street Journal’s Pulitzer Prize in 2003 for our coverage of corporate scandals. There were several stories that were honored, because they were all part of our coverage of what was a wave of corporate scandals. The story I wrote was a piece about companies that had decided to give their CEOs huge loans that they were essentially guaranteeing to repay by using their company’s stocks as collateral. When their share prices collapsed, they had margin calls. They essentially couldn’t pay back these big loans that they had taken from these companies, and in some cases the CEO had other issues. There have been corporate scandals that journalists have been unearthing for a long time. There were corporate scandals in the ’20s and the ’30s, long before any of us were even on this planet. Today, many big news organizations have their own in-house staff of people who are doing nothing but data crunching, data analysis or data mining, and they are training journalists to do the same thing. It’s a lot harder to sort of keep things swept under the rug.

Recently, the former CEO of Fiat Chrysler died following his resignation, with virtually nothing in any of the stories reporting it mentioning either when he resigned or when he died and what caused his death. They simply said he went into the hospital for shoulder surgery, and then there were complications and he died. I read this and said, “This is lazy journalism. Why didn’t the journalists try and understand what happened here?” At the end of the day, there’s this fine line between how much privacy a CEO of a public company deserves versus how much readers and entering shareholders need to know. This issue has come up again and again in my journalistic career in dealing with CEOs, who are in some cases fatally ill, with the Steve Jobs situation being a great example. A colleague and I broke the story about the fact that he had a liver transplant. The board had never given shareholders any inkling as to why he was on sick leave, and after we broke the story several weeks later, they confirmed it.

Is there a story (or stories) or topic that you covered over the years that you believe was integral in shaping corporate/board governance policies today? If so, what was it and can you describe its long-term impact?

Lublin: I think the topic, and this is a topic I’ve written about many times that had the most profound influence in shaping how corporate governance works today, was a requirement from Sarbanes-Oxley: the corporate governance reform law of 2002 that states public company boards must meet in an executive session. This meant that independent directors had to, on a regular basis, meet without anyone from management present. It was up to the lead director and/or independent chairman to inform the CEO what the independent directors had done afterwards. Some boards have these executive sessions both before and after board meetings. I think this opens the floodgates to changing the balance of power in corporate boards, to shift from the CEO to the independent directors. Now they have a formal structure in which they have to meet and they have to talk about what is really troubling them. I think other countries have gone a lot further in terms of empowering the role of the independent chairman, but I’ve seen a huge amount of difference in how boards work and how they flex their power where there isn’t a truly independent board chairman.

As this issue of C-Suite centers on the theme of board performance, what are some risks that board members must address in the near future that they may not have had to worry about in the past, and how does that affect performance?

Lublin: I think the biggest issue when it comes to how well boards perform or don’t perform is the shortcomings in the board evaluation process. Many boards now go to outsiders to do their board evaluation, but not very many boards focus heavily on how well individual directors are performing or act on the results, because they are simply conducting individual evaluations. I think that has led to a certain amount of cynicism on the part of journalists, and maybe to a certain extent institutional investors, as to which boards really are committed to self-evaluation and performance and improving that performance. To that point, I think refreshment is indeed an issue that the mainstream institutional investors are increasingly holding boards accountable for.

If you don’t act on the results of evaluating the board’s performance as a whole and individual directors, or if you’re not constantly looking five years out at what your company is going to be doing or how the industry is going to be changing, then you’re going to be subject to a fair amount of criticism from the mainstream institutional investors of the world, such as BlackRock and State Street. That of course relates to diversity, whether it’s ethnic or gender diversity. All of this wraps together into the board performance issue. Another corollary to that is, I don’t think institutional investors are going be tolerant of a board that implements mandatory retirement ages and then doesn’t enforce them much longer. In recent years, boards have been lifting the mandatory retirement age, and then when a director gets to be 75 or 80 they say, “Well, we really need you to hang around because we haven’t done our job in terms of getting new blood on the board fast enough.” That’s not going to sit well with institutional investors who want to see regular refreshment.

I think the other risks that board members are increasingly going to have to struggle with is their personal reputation and liability for how well they’re anticipating cybersecurity breaches and dealing with them once they happen. Every major American company knows now it’s not a matter of if, it’s a matter of when. Does that mean that we put a cybersecurity expert on the board, or do we just beef up management?

It’s really a different strokes for different folks concept, but whatever approach you take you have to be holding management accountable for what it’s supposed to be doing. That requires a certain level of knowledge and sophistication from everybody on the board, not just your token cybersecurity experts.

Can you comment on the inspiration behind your recently published book, “Earning It: Hard-Won Lessons from Trailblazing Women at the Top of the Business World,” and any overarching lessons or tips you can provide to women in business, particularly at the executive and board levels?

Lublin: The book reflects interviews I did with 52 high-level women of whom nearly two-thirds are experienced as public company chief executives. The focus of the book looks at how overcoming career obstacles made them better leaders. These are women who in many cases never aspired to become a CEO or senior executive.

In some cases, they were music majors or renaissance art majors who then changed focus, and for one reason or another fell in love with the business career. I think when you look back at what some of the overarching lessons were that I took away from meeting and interviewing these women, it was that for many of them they not only understood the importance of having sponsors throughout their career, but they also understood the importance of having sponsors inside and outside of a company where they worked, and at different stages of their career. That’s especially important for women who are trying to get on their first corporate board seat, and I have an entire chapter in the book called, “Beating Board Bias,” which talks about how a number of these women had a very hard time getting on their first corporate board seat. When many of these women got on corporate boards, they in turn became advocates for other women. The other issue here is that for some women who are trying to get on their first corporate seat, their best advocate can be their current CEO. These CEOs think it would be really great for their own professional development as well as for the company advantage for these women to get on a corporate board. They are playing the role of sponsor, advocate and door opener.

Has anything surprised you regarding the efforts to increase board diversity? What do you think needs to happen to further drive progress as the numbers for women and minority representation in corporate boardrooms moves upward at a glacial pace year-over-year?

Lublin: Given the amount of attention to this subject and the number of mainstream investors like State Street who are making this a high priority, why is it taking such a long time to move the needle? A recent article I wrote for the Journal titled, “Why Breaking Into the Boardroom Is Harder for Women,” pointed out that the percentage of women on S&P 500 boards grew by just one percentage point in 2017 over 2016.

What’s going on here? For one, boards are still afraid of putting a woman on a board who has never served on a public company board before, even though they’re not afraid to do that for a man. It’s because boards are primarily made up of men, and they tend to go with the person that they’re comfortable with. On the other hand, if you want women on the board who have some of these critical skills, such as cybersecurity or digital commerce, you’re going to have to reach below the CEO and CFO to find those women. They’re more likely going to be women who have never been on a board before. This requires out-of-the- box thinking by predominantly white male boards who tend to rely on other white males that they already know.

Is there anything else that you’d like to comment on further that we did not get a chance to cover with regard to corporate governance, boardroom diversity or gender equality?

Lublin: I think at the end of the day, and this is a big theme of my book, nothing is going to change in terms of gender equality, whether it’s in the boardroom or in management, if the CEO is not walking the talk. The percentage of boards that have a significant number of women is much, much higher where the CEO is a woman. I do think that boards at the end of the day are dictated by CEOs. If the CEO thinks something is important, then the rest of the board is going to think it’s important as well.