Directors: be 'in the room'.

• Author: Zell, Sam
• Position: ENDNOTE - Column

What constitutes great governance for a company?

I think great governance starts with recognition of the stakeholders. The board sets standards of ethics and performance that apply to the whole company. Ethics is not a list but, rather, creating and perpetuating an ethical environment.

Great governance is much more focused on 48 months from now than next week. Boards can't do much about next week. Boards can do great things for four to five years from now. Recognize what is within the realm of the possible and focus on the distant tomorrow.

What are common director weaknesses?

iPhones in the laps. It's a sign of inattention. Lack of focus. It doesn't happen much in our meetings because of the way they are run. Also, failure to interface with management, be prepared, be in the room."

What are danger signals that you watch for on the board?

Politicization, faction development. Also, situations develop that require change. Sometimes a director has to leave--unprepared, inattentive, becomes antagonistic. I'm all in favor of people speaking up, but you need a group that has assembled for the purpose of working on behalf of the company, not playing gotcha, etc.

What advice do you have for young directors?

First, don't sit on the board unless you truly understand the business. Learn it. Spend time in the company and with senior people. How do they make money? Understand the customers and what they want.

Second, find ways to interface with management. Have lunch or a drink. Not just the CEO. Over three or four years, find a way to interface with the top six or eight people in the company.

Third, listen. Listening is one of the most important skills in the world and not widely enough practiced. A good board member listens carefully to everything going on, which leads to better understanding.

Ed. Note: On pages 32-34 of this issue Of DIRECTORS & BOARDS B. Joseph White offers recommendations for board self-renewal that are drawn from his new book, Boards That Excel. In another chapter of his book, White presents Q&A interviews he conducted with prominent board chairs, CEOs, and directors of public and private companies. "Because these are people I know personally, I was confident they would be candid," he states. The following is an excerpt from his interview with Sam Zell, chairman of Equity Residential, the publicly traded real estate company, where White serves on the board and is chair of the board's governance committee.

What is...