How the Best Boards are Built: Q&A With Maggie Wilderotter
Maggie Wilderotter, the former Chair and CEO of Frontier Communications, began an illustrious boardroom career at the age of 28. She currently chairs the board of DocuSign and is a director of Costco Wholesale, Hewlett Packard Enterprise, Sana Biotechnology and Lyft. Here, she joins Boardspan founder and CEO Abby Adlerman for a conversation on how the best boards are built.
Abby Adlerman: Maggie, it’s a pleasure to be talking with you about building great boards. Let’s dive right in with board composition—do you believe it really matters? Or can a few strong people carry the rest?
Maggie Wilderotter: Composition is one of the most important things for the right dynamic—for a board to perform its duties well, including to protect shareholder value and make sure the company has the right strategy and leadership. Having just a couple strong people can sometimes carry the day when there are no serious issues facing a company, but all companies go through cycles of ups and downs. Long-term successful boards require different capabilities, experience, thought processes and participation based upon what’s going on with a company, so a continuous review and refresh process is necessary.
AA: When you think about composition, are there any tenets that you’ve found high-functioning boards use?
MW: The structure of a company and how it operates can dictate who’s on the board. Composition in a public-company setting requires enough independent directors to do the work of the board—specifically of the Nominating & Governance Committee, Compensation Committee and Audit Committee. You can have special committees in addition, but you really need to have expertise to populate those three committees.
You also want to have a very strong chairman. In many public companies, that’s the CEO, and in those cases, you want a really strong lead independent director. I always recommend that the lead director or chair not sit on any of the standard committees but attend all of those committee meetings as chairman, so they can stay up on all of the issues of the work of the board and observe the dynamics of how board members interact.
Then, the other part of composition is the longevity of board members. Refreshment has to take place when company needs dictate. That’s an opportunity to look at diversity of experience, race, gender–to make sure you are getting insights and input that are representative of your shareholders, customers, and employees.
Composition is a complicated matter because the umbrella above all that is the culture of the board. You want people who can fit into a team-oriented and collegial decision-making environment, but who also have enough self-confidence, courage, tenacity, and grit to speak their mind and to go against the majority if there is a different point of view that has to be thought of.
Your board culture has to morph and change as the company culture morphs and changes.
AA: I love that you refer to the umbrella of culture. I hear from others that when some legacy organizations push themselves on diversity, the biggest fear is, “Are we going to lose our culture?”
MW: My position is that diversification strengthens culture. But culture adapts to what is important to a company at any point in time. As a board you have to recognize that your board culture has to morph and change as the company culture morphs and changes.
AA: You mentioned that the majority of public companies haven’t separated the role of chair and CEO. Do you have a point of view on when it helps versus hurts?
MW: It’s situational. Take a new CEO: In addition to their responsibilities to meet with shareholders and customers, drive strategy, and set the tone at the top and the culture, they have three new constituents they have to work with and for. They are reporting to a board of directors, so they have a new set of bosses; they have a new employee base that they need to lead and embrace; and they have a new set of direct reports. I don’t think a fourth job of running a board is something a board should burden a new CEO with. Let that CEO get their sea legs doing the priority job of pure CEO for the first couple of years.
On the flipside, at a lot of traditional companies, those CEOs have been in place a long time and for them to be chairman–many of them are very good at that. It depends on the person, the company, and also what priorities that CEO has, both professionally and personally.
AA: How important do you think it is to have outside CEO experience on a board versus other C-suite executives or non-C-suite experience?
MW: Every board is different, and the makeup of the board should support what the company needs at that moment and where the company is headed over a three-to-five-year window.
I do think CEOs matter in the boardroom, but I don’t think boards should be all ex-CEOs. First of all, there aren’t enough CEOs and ex-CEOs to go around. Second, having broader experience and sometimes deep knowledge in an industry, a skill, or a profession is really important to that composition.
Exactly what experience is needed depends on the company and the stage. It also depends on the culture of that board to be able to embrace different talent at different levels that have different expertise and not judge people on their titles but on their contributions. Sometimes that’s hard for boards to do.
AA: I want to pick up on your point about a three-to-five-year time frame. How does a board balance near-term expectations–the pressure of quarterly numbers–with longer-term objectives? Does board composition have anything to do with keeping that balance?
MW: Board composition does have something to do with it. You have to do both. But part of the way you get to the long term is by being transparent with your shareholders on what investments, pivots, or strategic decisions you’re making in a shorter-term window to support that long-term strategy.
In the past, boards were pretty close to the vest about what they were doing and why. Today we’ve become a lot more transparent, predominantly through the voice of our CEOs and CFOs.
Once a year, board members should also interact with the investor base and not wait until there’s an issue–to reinforce what they’re doing and why, and to give investors exposure to the caliber of people who sit around the board table making decisions on their behalf. I’ve sat on the boards of a number of companies that do that as a best practice. It’s very much appreciated by our investor base, to know there are people who understand the businesses of the boards they sit on and are thoughtful about the risks, the opportunities, the mitigations, the obligations, and shareholder value creation, and can communicate that to the shareholder base.
I have always used a guideline that 10 to 12 years would be the maximum on a board to make sure you stay fresh and independent.
AA: Also on the topic of timeframes, what are your views on term limits and mandatory retirement or voluntarily terming out?
MW: Every board is a little different, depending on the cycle a company is in, but I have always used a guideline that 10 to 12 years would be the maximum on a board to make sure you stay fresh and independent. Not to say you can’t be on a board for 14 years or leave at eight years if you think that’s appropriate.
I do think that each director should have a horizon in their mind and it’s not, “I’m just going to stay as long as nobody throws me off.” Lately, some CEOs and boards are setting an expectation when a board member joins, that in that 10-15-year horizon they should think about it being time to leave. Some boards have a rule that at, say, 12 years, you hand in your resignation and the board decides whether to accept it or not.
By having something in place that’s loose enough that the board still gets to decide if it’s the right time or not for that person to stay or leave–there’s flexibility and also the right expectation about the outside length that a person should think of being on that board.
AA: Like with so many relationships, setting expectations and looking at what’s in the interest of the institution you are serving can avoid hurt feelings or the appearance of special treatment. But a lot of people currently sitting in board seats haven’t had their expectations managed. What’s the best way for a chair or a head of Nom & Gov to move someone off a board when they are not taking the initiative?
MW: You have to have people in those roles who are courageous and willing to respectfully have a conversation with a board member who needs to move on. It’s the whole reason you’re in those roles. It’s part of your responsibility–not to make believe it’s not happening or that it’s tough to do, so “I don’t really want to do it.” It is something that has to be done in certain situations and if you do it respectfully, there can be common ground and a dignified exit for that board member.
When someone has been on a board a long time, there’s also the challenge that you may have a lot of respect for that person and what they have done for the company over the years, which makes it all the more difficult to have a tough conversation.
On several boards I’ve been on, we’ve made a long-term member a special advisor to the board for a 12-month window. They are no longer an active member of the board, but they come to the board dinner and can sit in on the company update at the board meetings. They don’t stay for executive session discussions, and they don’t vote on anything. But there’s a transition that allows them to more gracefully exit the board. And many of them have sat on different committees, so as you bring on new talent, there’s some historical transfer of knowledge that’s very helpful.
If we give the best hours of our day as a professional board member, we should be picking the right spots to add value.
AA: Maggie, you get asked to be on lots of boards, how do you decide which of those opportunities are right for you?
MW: It’s a great question and again is situational. What I pick today is different from when I was running a big company. But I have several criteria: I like tough problems, so I don’t join boards to be ceremonial. I join boards to do the work and to help companies be better. In evaluating a board opportunity, I spend a lot of time with the CEOs of those companies; with members of their board; with the CFOs; with the operating leaders. I am a lean-in board member–and that style is not for everybody. But that’s a criterion for me, that this type of advice and counsel will be respected and actually welcomed.
I also look at the values and the culture of the company and whether they align with my values and the type of cultural environments I think are healthy. I also look at the dynamics of the industry that company is in, from a challenge and opportunity perspective. And I try to ensure that the skills and capabilities I have match the company needs over the next several years. Last but certainly not least, I look at where companies are located, the amount of travel required, and meeting frequency.
It's a lot of factors that you put together, like a puzzle. I suggest being very strategic about this. I believe it’s not a serendipity decision. If we give the best hours of our day as a professional board member, we should be picking the right spots to add value.
AA: Great advice. Let’s close on the issue of gender. You have been the first woman director on many boards, and certainly as a CEO in Silicon Valley and in telecom. How has that influenced your perspective on board diversity?
MW: I think gender diversity matters in the boardroom. I don’t come from the school of thought, though, that you need to have three to make it matter. I think one matters. Two is better. Three is even better. Sometimes four and five is the best.
From the beginning, I would go on boards and lean into the work. I made sure I was prepared and was an active participant. I asked a lot of questions, and I did so in respectful ways. What happens when you are sitting around the table with a group of men and you are the only woman and that only voice, they start to build respect for what you bring to the table and what your capabilities are and what your advice and counsel is, and it gives them confidence that having more of that in the boardroom is better than having less.
In the early days, I always got on the Nominating and Governance committee and made sure we considered other women for further board seats. If I was leaving that board, I would definitely make sure the replacement would be a woman.
I started early on in my career taking one hand to move myself forward and the other to yank another woman right behind me. I think more women who are on boards today should do that. It has helped the companies I have sat on the boards of to be open to gender diversity, to see that it doesn’t disrupt, that there’s value added, and that there are a lot of really great women out there that frankly aren‘t CEOs but can add a huge amount of value to what that company is trying to accomplish.
AA: Agreed! We’ve seen evidence of that countless times ourselves. Well, Maggie, it’s been an absolute delight–thank you so much for taking the time.
MW: Thank you. It’s been good to have the conversation with you.
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