anderson in dialogue with bennett (the director's chair) without cover - listed (dec 2012)

7/30/2019 Anderson in Dialogue With Bennett (the Director's Chair) Without Cover - Listed (Dec 2012)

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The Directors Chair


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The Directors Chair

Master classIn The Directors Chair with David W. Anderson: Jalynn Bennett, veteranexecutive, chair and director, has an array of insights and advice forboards grappling with risk, driving growth or boosting their effectiveness

Photography by Jeff Kirk

Teres deep, and then theres Jalynn Bennett deep. A senior executive, director andchair multiple times over; a veteran of private boards, public boards, crowns,nonprofits, panels and committees; and a champion for women in business andboardroom diversity, Bennett approaches every challenge with the been-there,still-doing-that assurance of an expert. Here, in conversation with governanceand leadership adviser David W. Anderson, she compares private board servicewith her public company work, discusses how boards can effectively challengeand help refine managements take on strategy, business opportunities andacceptable risk, and shares some lessons learned from her years as a pioneeringfemale executive and board member.

Jalynn BennettPrimary role

Independent Director

Current organizations

Director: Teck Resources, Cadillac Fairview, SickKids Foundation, several private companies; External Member,

Departmental Audit Advisory Committee, Human Resources & Social Development, CanadaFormer executive roles

President, Jalynn Bennett and Associates; Commissioner, Ontario Securities Exchange; Vice-president, Corporate

Development, Manulife Financial

Former chair

Corporate Governance Committee, CIBC; Trent University Board of Governors; Investment Committee and Audit

Committee, Ontario Teachers Pension Plan; Pension Committee, Bombardier; Audit Committee, Sears Canada; Vice-

chair, Westburne Inc.; Vice-chair, The Public Accountancy Council of Ontario

Former director

CIBC, Nortel Networks, Sears Canada, Bombardier, Rexel Canada Electrical, CanWest Global, Bank of Canada,

Ontario Power Generation, Ontario Teachers Pension Plan, Public Accountants Council (Ontario), Trent University,

United Way of Greater Toronto, The Wellesley Central Hospital

Education

BA (Economics), University of Toronto

Honours

kHonorary Doctor of Sacred Letters, Trinity College, University of Toronto (2004)

kMember of the Order of Canada (2000)

kFellow of the Institute of Corporate Directors (1999)

Current age

69

Age when first became a director

42

Years of board service

27


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background o CEOand succession candidates, and integrity ofinancial statements. Boards must be equipped to understand theseelements. More basically, a board must judge whether management itselknows where the opportunities and downsides lie, and thus whethermanagement is looking at the right issues. Board debates are much moreproductive when directors know clearly what managements inclinationsare on the issues. Otherwise, all you have is an academic discussiondisconnected rom the reality o the business. In todays world, this isparticularly important in enterprise risk management. Te board needsto know what management thinks the risks are and assess them orcomprehensiveness, appropriate weighting and efficacy o mitigation.For both strategy and risk, the board should ensure an iterative dialoguewith management to have the best chance at ocusing the debate whereit needs to be.

David W. Anderson Coming out of the financial crisis, boards and their

audit committees are spending a lot of time on financial risk. Does

the focus on this risk become a risk itself?

Jalynn BennettIn the midst o pressure and distraction, directors mustremain aware o why they are thereto ensure accuracy in thefinancial statements and related public disclosures. Te board joins

management, the internal auditor and the external auditor as one o theour pillars to ensure investors in the companys equity and debt canrely on such disclosures to make their own assessments o corporatehealth. But the job o the board doesnt stop with the integrity o financialstatements. In Canada, the duty o care means directors are there toensure and promote the welare o the overall organization. o do so,the board must assess the leadership and employee capacity to deliverupon the mission o the organization, ensure that how managementplans or the uture is linked to the risks in the current business, andunderstand what management thinks could happen in the uture andhow those uture risks may evolve. Good strategic and risk processesare responsive to uture threats and opportunities.

David W. Anderson Troughout your decades of governance service,youve emphasized the quality of leadership both on the board and in

management. Whats the link between leadership and business success?

Jalynn BennettIts simple: i you dont have the right leader and teamin place, the organization is more likely to stumble. Good leadersand good support or leaders rom above and beloware crucial tocreating value and managing risk. From a board perspective, talentmanagement and CEOsuccession are vital processes. Boards have aresponsibility to ensure management and employees are appropri-ately compensated with incentives linked to long-term value and notto excess risk-taking that could hurt the organization.

David W. Anderson Boards themselves have been more risk-averse in

light of the financial crisis, prioritizing value preservation over valuecreation. Is it time for boards to re-weight from risk to opportunity?

Jalynn BennettTis is an ongoing tension between making sure badthings dont happen versus creating value. Tere is no doubt 2008and 2009 were very traumatic collectively in the Western world, as wealmost all went over the cliff. Now is the time or the ocus to shif backto value creation. Having learned some painul lessons, we can posi-tion ourselves or the uture.

David W. Anderson What are the lessons for boards arising from the

financial crisis?

Jalynn BennettTe last five years have taught us just how tough it is togovern and manage complex companies and underline the need or

David W. Anderson Te first boards you served on were private-equity

investments. Youve also served on boards of some of Canadas best-

known public companies. How does private versus public ownership

affect directors work and experience?

Jalynn BennettDirectors o private companies, particularly those heldas private-equity investments, have an obvious identification withthe owner and thus are inclined to think and act with that owner inmind. Knowing the owners or owners interests means directors under-stand the intent o the investment and the direction o the business.Consequently, we can delve into our work with a clear purpose.

David W. Anderson Private company directors seem to work from a

more fluid definition of what it means to be a director, moving along

the spectrum toward operations more readily than public company

directors. On a practical level, how do you see the roles differ?

Jalynn BennettPrivate company directors want to dive into the business.Teir mandate rom the outset eels different. On public company boards,theres a greater restraint, as the division between governance andmanagement is more definitive by tradition. As a result, discussion onpublic boards tends to be at a higher level o abstraction. Although publiccompany boards are ar more engaged today, private-equity directors still

tend to be more finely attuned to the detail o the business and willing tobe more directive with management. Coming onto public companyboards in the early 1990s, I was surprised by the dearth o inormationcompared to what I was used to as a private-equity director. Certainly,public company boards today receive much more inormation than inthe past, but they struggle with how to cope and what to do with it.

David W. Anderson So how do directors resolve the tension between

needing more information to do their job but finding it harder to do

their job with all that information?

Jalynn BennettTe problem with inormation overload is twoold: itmakes it hard to know whats essential and its hard to know how deepto go. Tese are constant struggles. How inormation is presented ofenadds to the difficulty, making it a challenge to filter and discuss theseminal issues. On some boards, directors take the initiative, instructingmanagement to provide inormation summaries, greater context and

tighter content in their reports. I see executives now being better atacilitating board-level discussions and decision-making, with CEOsgetting to the point on strategic concerns, CFOs summarizing key datapoints and interpretations on audit issues, and HR offering salient pointsor board input on compensation philosophy. Te question boards mustanswer is, Where should the debate ocus?

David W. Anderson How do boards get to the right answer?

Jalynn BennettA board needs to know where the business opportunitiesand vulnerabilities lie in terms o value creation and it must have arobust decision ramework governing how the liabilities are understoodand mitigated. Understanding the business at this level is necessary orthe board to orm a view on appropriateness o the strategic plan, the

A board needs to know where opportuni-ties and vulnerabilities lie in terms of valuecreation and it must have a robust

decision framework governing howliabilities are understood and mitigated


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ewer directors. CIBC had 36 people on its board when I joined about 20 yearsago as the sixth woman. It now has 15 directors, our o whom are women.

David W. Anderson Given the greater competition for board seats, how

should governance committees approach director nomination?

Jalynn BennettGovernance committees need to be absolutely clear whatthey are looking or in terms o skills and experience their boards needto add value to the business. Tis process o finding the right candidateshould be gender-neutral. Just picking the best woman identified is notdoing the board or women a avour. Where governance committees oughtto be proactive is in making a diligent effort to have women represent30-40% o the candidate pool. A air process will recognize that womenare well-suited to board service.

David W. Anderson Te European Union is considering following the

path of some European countries in mandating a proportion of the

board be held for women. What methods for achieving better represen-

tation of women do you favour?

Jalynn BennettTe solution is to ensure diversity is built into thenominating process. Encouraging chairs o boards and governancecommittees to act on the research and use robust processes, bias-ree,will go a long way. Forcing numerical outcomes would be inconsistentwith our tradition and culture. In any case, rules can backfire; there areexamples in Europe o boards appointing wives and widows o current

or ormer chairs and directors to make up the numbers. I there hasto be a rule, it should not dictate an outcome, but what the process hasto include.

David W. Anderson You were the first or only woman on several boards.

What advice might you have for women considering board service?

Jalynn BennettSpend time getting to understand the culture o theorganization and the board and express yoursel in a way that willbe heard and effective. Tis is true or women and men.

David W. Anderson From your vantage point, how would you character-

ize the state of Canadian leadership vis--vis women?

Jalynn BennettWomen in business leadership are strong and getting

stronger. A hopeul sign: it seems that recruiters or UK boards arelooking or Canadian women, as they have a wide range o skillsand a personal style that fits on UK boards. Canadian companiestake notice. Its a small leap or business leaders here to show apprecia-tion or Canadian womens strength.

David W. Anderson,MBA, PhD, ICD.Dis president ofThe Anderson Governance Group in Toronto, anindependent advisory firm dedicated to assisting boardsand management teams enhance leadership performance.He advises directors, executives, investors and regulatorsbased on his international research and practice. E-mail:[email protected]. Web: www.taggra.com.

business basics: a strong balance sheet and a good handle on cash flow.Te fiscal crisis also gave us a reality check; i things start to go bad, youcant predict how bad theyll get. So it behooves the board and manage-ment to ace the worst-case scenarios and know what options exist topreserve what they can. Te reality is, i things are catastrophic, the boardcant save a company. All it can do is try to position the company tosurvive. I survival isnt possible, the board has to manage it down withleast damage to stakeholders. Group ear can be very hard to resist.But when things look blackest, the board should also orce itsel andmanagement to ask, I things do get better, how can we be positionedto take advantage o a more constructive environment?

David W. Anderson What steps do you suggest boards take to be better

prepared for the unexpected?

Jalynn BennettDirectors must push themselves to think outside the box,becoming better at lateral thinking. Its customary or a board to holdan annual strategic offsite and then check in throughout the year onmanagements progress. Many boards now take time to revisit thatstrategy and course-correct in the year. I think boards need to go urtherand carve out blue sky and stormy sky time to imagine what couldhappengood and bad. Boards cant take their business model or

granted. Directors need to ask basic business questions o managementto discover what could threaten their economic ability or social licenseto operate. Management still needs to provide the strategic plan but, inaddition, tell the board how the company will respond under both posi-tive and negative conditions or each major initiative.

David W. Anderson Dealing with such unpredictable circumstances

can impose considerable burden on a board and its leadership. How

can board chairs tap the best of their boards?

Jalynn BennettBoard chairs play a critical role realizing the value odirectors varied perspectives and experience. Good board chairsencourage every director to express views, stimulate debate and then ocusboard discussion toward a constructive conclusion. I think the value o

diversity on a board is best shown when times are tough. An effectiveboard chair is like an orchestra conductor who makes sure each instrumentis heard at the right time to deliver a harmonious perormance. I there wasever a time or creating diverse boards to govern companies, now is it.

David W. Anderson You are a thoughtful and determined advocate of

women serving on boards. How is gender helpful in directorship?

Jalynn BennettResearch shows that boards benefit rom diversity. Women,like men, have a perspective that is based in their lived experiencean experience and a way o being that is relevant to business decisionsand the means by which those decisions are made. Having only one orpredominantly one such perspective is not productive. A balance on theboard would makes it as strong as it can be, which is in the interest o

the board and the organization. Women are well-suited to board serviceas they generally preer a collegial environmentprecisely the type oenvironment that high-perorming boards strive to create.

David W. Anderson Is the solution to getting more women on boards pro-

moting more women in managementto create a larger pool of talent?

Jalynn BennettYes, as we have more women in management, well havemore ready or directorship. But we have many women now who arevisible exercising leadership roles and are ready or board service. Oneo the big obstacles to getting these women on boardsand this istrue or men, toois that there is less opportunity. We have been trendingtoward ewer public boards o large companies, as businesses mergeand head offices hollow out, and those remaining boards are comprised o

When things look blackest, the boardshould also force itself and managementto ask, If things do get better, how canwe be positioned to take advantage of a

more constructive environment?

anderson in dialogue with bennett (the director's chair) without cover - listed (dec 2012)

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