When is A Lead Director Really Independent?
This question came up in a recent conversation with a director who has held the lead director position in a number of public companies. He said a major problem on many boards is that a director is often reluctant to raise an issue, or make a strong comment, if he/she knows the chairman will not be supportive. To address this, he, as the lead director, established a "post formal meeting session" with the outside directors only. The initial reaction of the chairman was non-supportive (nice way of saying he got angry). However, at the post meetings, significant information and thoughts were surfaced. These brought information to the board, and especially to the chairman, that otherwise would not have been presented. This milestone was accomplished by insisting that the chairman, at the end of the meeting excuse himself from the meeting while the lead director met and discussed issues with the remaining directors. The lead director then reported to the chairman in his office without stating "who said what" and fully debriefed the chairman. He was met with this evaluation: “I learned more from you in the last 30 minutes about my board than I have in the last three years!” Why is this? Because directors will tell a good lead director concerns that might not otherwise get voiced. The lead director can then brief the chairman and not mention names – just general themes, thoughts, and recommendations. We have all heard of company values. Today a focus on the board’s “behavioral values” that create true independence involves courage- courage to challenge, to listen, to do what’s right for the shareholders even when strong leaders get angry.