Wharton@Work

April 2014 | 

Leveraging the Power of the Board: Leadership that Creates Value

Leveraging the Power of the Board: Leadership that Creates Value

“There is nothing like learning from three world-leading practitioners on advancing board capabilities to get the company to raise its game.” — Fred Hassan, former Chairman and CEO of Schering-Plough

In their new book Boards that Lead, Ram Charan, Dennis Carey, and Michael Useem chronicle a fundamental shift in the role of the board of directors. No longer ceremonial, and no longer strictly monitors, many of today’s boards play a far more active leadership role in the organization.

“We are entering a fundamental new paradigm in the way boards should operate with management,” explains co-author Dennis Carey, vice chairman of Korn/Ferry International. Carey says that today’s boards are “under pressure to perform both as leader and partners.” Carey, Charan, and Useem will examine this shift and provide practical steps for directors and executives to make their collaborative leadership most effective in the new program Boards that Lead: Corporate Governance that Builds Value.

“The program was designed for people who are in a boardroom or around a boardroom and want to get the most from it,” says Michael Useem, Wharton management professor and director of Wharton’s Leadership Center. “We will provide guidance on strategy, insights on the market, and an appreciation for where value can be created and where it is being destroyed. In the more than ten years since the collapse of Enron, boards have been pushed by new laws and standards to be more vigilant, and they are doing much better than they were a decade ago. But equally valuable are company initiatives to move the board well beyond that role to better leverage the extensive experience and knowledge of its directors. Boards as a result are becoming far more actively engaged with top management in addressing the big questions, setting strategy, and reaching critical decisions.”

One of those big questions, says Carey, is talent management. “Boards need to know how to develop a succession pipeline for the company and also how to identify a failing CEO. It is clear from best practice companies such as GlaxoSmithKline and 3M that the board’s role in selecting a new leader is critical. You can have the best strategy, but if you don’t have the best talent, it doesn’t matter. The board must take the lead in creating a talent pool.”

Prominent management consultant Ram Charan, also teaching the program, adds, “For the great majority of companies, talent management remains hit-or-miss, governed by superficial criteria and outdated concepts, depending as much on luck as on skill. Leveraging the knowledge and experience of the board is imperative. In the fast-changing global marketplace, talent will be the big difference between companies that succeed and those that don’t.”

Charan, Carey, and Useem will be joined by David Nadler, a principal and co-founder of Nadler Advisory Services, which consults with boards of directors, CEOs, and executive teams on issues of leadership, governance, and team effectiveness. Nadler, who served as vice chairman of Marsh & McLennan Companies and as CEO of Mercer Delta Consulting, will teach a session on “Designing Effective Boards.”

“It’s a very interesting time to be having this discussion,” adds Carey. “The word ‘leading’ is coming in to the board environment. CEOs used to pick directors, and they were the only architects of strategy and risk management. Competition, strategy, talent appointment, management of the succession process — for the first time these are being recognized as key, non-negotiable roles that the board must play.”

Boards that Lead is geared for executives, directors, and investors, and also those who aspire to join a governing board. Current and would-be directors, says Useem, need to think of what they are doing both as a defender of shareholder value and as a leader of the company. Investors need to look at directors: are they able not only to monitor for shareholder value but also to lead strategically? Executives need to work with directors who can do both. “As managers move up through their company ranks, increasingly they will need to master an ability to work in partnership with the board, drawing the best from their directors,” he says. “The program has a very pragmatic agenda for those in the executive ranks, serving on boards, or managing equity funds. We’re focused on how all can best work together to set company directions and build value in an era of great uncertainty and change.”

Boards that Lead will include working lunches and a dinner with prominent directors who will provide inside perspectives on leading in the boardroom. Participants will get an unvarnished, off-the-record look at what it’s like to be in the best of those rooms. Useem adds, “Our experience suggests that there is great potential in many boardrooms for directors to take a far more active leadership role. Doing so can be a vital source of competitive advantage and value creation, and this program is intended to strengthen that leadership.”