Creating and sustaining the strong director.

• Author: Horner, Constance
• Position: Director Education

Director education is a vital but underestimated contributor to a culture of board independence, and is worthy of systematic attention by those who care about the governance of corporations.

CREATING AND SUSTAINING the strong, independent corporate director is a relatively new imperative for companies and their boards. Gradually and in an ad hoc manner, the structures and practices which support independence have been arriving in the boardroom. Arguably, the time has come for directors, not just students of corporate governance, to think seriously and systematically about the elements which can enhance independence.

To understand the need for thoughtfulness on this subject, we need only recognize that, although the basic function of the board -- overseeing the company and mediating between investors and management -- remains unchanged over recent decades, there have been substantial changes in the makeup, structure, and culture of corporate boards. Many of these changes reflect a heightened value placed on director independence. Independence, although variably defined, has become a core value.

My own experience, which includes a dozen years in government service, foundation and academic boardwork, and several corporate directorships, has led me to the unremarkable conclusion that a successful organization thrives on independence of thought and expression within its ultimate governing body -- whether that be a White House council, a foundation board, or a corporate board. That conclusion is pretty obvious to most serious observers.

The less obvious question is, how do we create a climate for such independence of thought and expression? We do it through board structure, of course. We also do it through a number of other tangible factors: the codes for director selection, the size of the board, the operations of committees, and the like. All these tangibles are transparent -- part of the public record.

However, beyond these tangible factors, there are important intangible factors that help ensure independent thinking and action. These include the intangible aspects of individual performance and character, and the intangible dimensions of team success.

The critical commitment

I believe that one of the most critical "intangibles" is a commitment to director education -- a commitment made by both director and company. Director education, both formal and informal, is in my experience a vital but underestimated contributor to a culture of board independence.

Independent directors committed to defending shareholder interests must take seriously the common wisdom that education is a lifelong process. At the same time, companies truly committed to building a culture of board independence must provide opportunities for director education, particularly at the start of a directorship.

This is not a one-way street. Strong independent directors cherish their chances to learn more about the company and its operating environment, all the while understanding that they are overseers, not managers. Self-assured management takes on the challenge of director education, understanding that it may lead to more assertive, less docile directors. By virtue of this fact, both board members and management recognize that director education is a strong contributor to developing the board's capacity to serve shareholder interests.

Director education is also the pathway by which directors and managers build other "intangibles," those hard-to-express team dynamics that mark the workings of an effective board. A company whose board and management do the work of director education well is Pfizer Inc., on whose board I serve. It is one of the world's most valuable companies and one of the most widely held stocks in America. It has a highly visible board, whose job has been complicated over the past two years by the acquisition of Warner-Lambert Co. Although this acquisition started out as an unsolicited bid, it eventually turned friendly. The integration...