Lead Director Network

The vanguard of independent board leadership

Prompted by changes in stock exchange listing standards, most US public companies have appointed an independent, non-executive director to lead the independent board members. Whether called lead or presiding director or non-executive chairman, these independent board leaders play a vital role in strengthening corporate governance.

The Lead Director Network (LDN) is a group of leading independent directors from America’s most successful companies who share a commitment to improving corporate performance and earning shareholder trust through more effective board leadership. LDN members gather several times each year to candidly and thoughtfully address critical issues confronting their boards and their companies. The network is supported by King & Spalding.

Recent network topics:

The board’s role in overseeing innovation

Lead directors discussed how boards can help management navigate the opportunities and risks of innovation. They agreed that boards can encourage and guide innovations of strategic importance. Boards can also weigh in on the culture of innovation and the processes that produce incremental progress as well as transformative change. To play these roles effectively, the wisdom of directors with broad business experience remains important, even as boards seek expert insight from within and outside the company.

Incorporating share buybacks in board-driven strategy

Lead directors discussed current pressures to buy back shares but underscored their determination to avoid buybacks that might jeopardize long-term growth.  To manage pressures for buybacks, companies must broaden the search for investment opportunities, communicate the company strategy effectively, and adjust compensation programs to avoid a bias for buybacks.  

Leading the board toward superior performance

Lead directors discussed how they manage CEO and director performance and leadership transitions. They reviewed some warning signs of CEO performance issues and shared approaches for improving performance while maintaining trust between the board and the CEO. Regarding individual directors, they noted the value of peer evaluations and touched on approaches to recruiting new directors. Finally, they discussed the challenges of CEO and lead director transitions, focusing on whether the outgoing CEO should serve as the board’s executive chair.

Dialogue with Glenn Booraem of Vanguard

Glenn Booraem, fund treasurer and head of corporate governance at Vanguard, joined lead directors to discuss Vanguard’s investment philosophy, its engagement with boards, and several specific issues for engagement, such as proxy access, board composition, and activist investors. Mr. Booraem explained that Vanguard does not aim to be confrontational and rigid in its demands on companies and boards. Even as the firm seeks more rights for shareholders through tools such as proxy access, it also seeks to build a collaborative relationship with companies based on shared, long-term goals.

A dialogue with Andrew Ceresney, director of the SEC’s Division of Enforcement

Andrew Ceresney, director of the Division of Enforcement at the SEC, met with lead directors and general counsel to discuss the ways that the Commission and public companies can work together to protect investors. The group discussed high priority areas for the SEC, the SEC’s enforcement policies, and the benefits and implications of self-reporting. In addition, lead directors and GCs held a separate discussion about dealing with whistleblowers.

Board and management oversight of corporate culture

Leaders at global enterprises recognize the opportunities to improve corporate performance by ensuring a positive corporate culture. Lead directors and GCs discussed what traits are critical to the success of an organization and how they can ensure those traits manifest themselves across sprawling enterprises. They also recognized that macroeconomic factors are forcing even the best, most established cultures to adapt.

The board’s role in corporate strategy

A successful strategy requires a group of stakeholders, including the board, working together to identify ways for a company to create both immediate and lasting value. Lead directors said that it is important for boards to prioritize strategy development and ensure that they consider the right information to make well-informed decisions. Boards also play a critical role in assessing the strategy as it is being implemented and making difficult decisions if a strategy does not meet expectations. 

Refreshing the board

In response to pressure to think like owners, boards are taking steps to ensure that they are composed of non-executive directors who can guide the company and its strategy into the future. Lead Director Network members highlighted the benefits of adding new members who can bring fresh perspectives to boardroom discussions. As boards consider the skills and experience they need for the future, they must also question whether existing directors still provide enough value to remain on the board in an era in which average board tenure will increasingly come under the microscope of investors. 

Board leadership in crisis management

While board directors would prefer to avoid corporate crises, it is imperative that their companies have response plans in place that empower leaders to act decisively during a crisis. Lead directors discussed approaches to crisis management and preparation with a communications expert. In a separate session, they reviewed the Target cybersecurity breach as a case study. 

Participant Profile

Ed Kangas 122

Ed Kangas
Lead Director Network

Non-Executive Chairman, Tenet Healthcare

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