Board Governance Plays Out on ESPN

After noting what an oddity that was last night, let me begin this Blog by saying that as a father and a grandfather, my heart aches for those who were (at least to this point, allegedly) victimized by a former Penn State assistant football coach.  The ignorance of and/or lack of knowledge re: how to monitor/eradicate pedophilia in our country is totally unacceptable.  Maybe Penn State’s situation will bring the additional impetus to make needed progress against that atrocity.

Allow me also to say that as someone who was born in Altoona, PA, and who lived in that area until graduation from high school, I have been a lifelong Penn State fan, although I did not go to college there.  The issues that have surfaced are troubling to many, like me, who follow Penn State – our following fueled by a belief that this was a school that could excel and follow the rules.

So what, if anything, have we learned from how this situation has played out up to now?

First, the Board acted quickly, decisively and publicly yesterday on the debilitating issues that are currently facing the university.  While we may or may not agree with some or all of their decisions, the Board became accountable and did what it felt it had to do with the information it had at this point in time.  And quick action was required as Penn State had already lost the PR battle.

Second, there are basically three types of corporate governance – proactive/engaged (very good), reactive/not as engaged (average at best) and no governance (unacceptable).  Last night was an example of a combination of proactive and reactive governance, proactive in the sense the Board was committed, from a business perspective, to stabilizing the Penn State brand and, from a societal perspective, to improving the University’s ethics policies going forward. Unfortunately, it was also reactive in that the controls (monitoring systems) and risk management processes that should have been put in place years ago were either not activated or utilized.

Third, this situation is NOT about Penn State’s football program, per se (although some have zeroed in on that as the root cause of the situation).  Rather it’s about a fundamental lack of leadership of the type I have written about in past Blogs.

In my opinion (based on decades of both senior management experience and public/private/NFP Board service), what happened at Penn State has happened and will happen to any corporation or university where one individual, on an incremental basis, is allowed to become bigger than the organization he or she works for.  It’s simply a recipe for disaster, as that individual, a mortal human, has been turned into a being that is ultimately unable to live up to the lofty status they have been accorded.  For example, when someone asks you what is the first thing you think of when a university’s name is mentioned, it’s probably a negative indicator if you respond with the name of the football or basketball coach.  Coaches are not products of a university.  Successful academic programs and successful (and ethical) athletic programs are the university’s products.

A more astute, more proactive/engaged Board of Trustees would have years ago seen the potential for something like this to happen, and would have put safeguards in place with the University’s President in an attempt to minimize the effects of wrongdoing or, in a best case scenario, make sure the bad things don’t happen.  Present day comfort is an insidious disease as it allows little things to become very big problems that others have to deal with in the future.

So while there was a failure of operational leadership at Penn State, there was also a governance failure.  Let’s hope that all organizations that have Boards will now require their Boards to take a hard look at what I call the “gradual sainthood” syndrome and begin to deal with it before their Black Swan event brings the organization to its knees, as it has at Penn State.

How Many Boards Should I Serve On?

This is an important business leadership question, and one for which there is no “one size fits all” answer. Why is leadership a component of the answer to this question? Simply because everything the leader does serves as a cue (always – either positively or negatively) for those who will use the leader’s actions/practices to guide their own future business related activities.

Below I’ll offer some observations from my own Board experiences that may be helpful to those who are pondering the question of the optimal number of Boards to serve on.

Let’s first talk about the retired executive or business owner. Merriam-Webster defines retirement as “withdrawal ….. from active working life”. Some people take that literally and are truly gone when they retire. Others feel they want to “stay in the game”. However, I’ve seen that what some retirees mean is they are staying in the game under a new set of conditions – which they set the parameters for and which often means their governance involvement is a secondary or tertiary priority (usually for very legitimate and stage of life reasons) and not necessarily a vocation. However, a secondary or tertiary priority level that is placed on a company’s governance process is not advantageous for the shareholders on whose Board that type of retiree serves. Additionally, with technology changing every 18 months, a corporate “rolodex” being of little use after about 24 months after retirement and the fairly new ways we do business today (LinkedIn, Twitter, Blogs, Facebook, etc – tools that were either not available or not widely used even five years ago), the reality is that few retirees are “in the game” after about 2 years post retirement.

Another point on retirement is this. A business career is not like a career in a professional sport. In a business career, there is no “off season”. Athletes talk about the regular season being a “grind” and, because of that, they can’t “get up” for every game of the season. I’d like to see those athletes in a career with a 45 year season!! It’s a season in which the grind never stops – even if you are a high profile owner/executive who gets four to six weeks a year vacations and who has several minions at his/her disposal. Even if you love your career, as I love mine, when you retire, retire. After 40+ years, you’ve earned an off season!! So for retirees, I recommend advisory Boards or local community based Boards (which are vitally important because they directly affect your quality of life). Re: the for-profit and especially a public company Board, I would recommend declining those offers if you are two or more post retirement.

Ok, you are still working. So what about you? Well if you’re in the type of leadership position that makes you an attractive Board candidate, the most important thing to remember is that you already have a full time job – a job the shareholders of the company (a group you are likely a member of) are depending on you to discharge in a fashion that adds to shareholder value.

So my recommendation is not more than one external for profit Board assignment, as you are likely also on the board of the company that employs you. The governance equation today is too complicated and demanding (especially public company Boards), and the risks/personal liability are too high to participate on an external Board without sufficient time and effort being placed on that assignment. And all the sufficient time and effort that is required will do nothing but detract from the time and effort you need to put into your full time job (one that likely requires 50+ hours/week, every week) as you grind through your 40+ year season.

As I noted earlier, there is no one answer, as a lot of factors (ego, mental capacity, experience, energy level, personal situation, etc.) go into making a decision to serve on an external Board. What I can say from experience is that a currently employed executive who serves on 3 or more Boards probably isn’t doing justice to any of those assignments because of factors noted above.