Richard J. Stegemeier, Unocal Corp.

• Position: The Chairman of the Board

Richard J. Stegemeier, Unocal Corp.

"At Unocal we think of ourselves as a high technology, earth resources company. Although we're headquartered in Los Angeles, the company's operations virtually span the globe. We find and develop crude oil and natural gas. We're the world's largest producer of geothermal energy, and our shale oil project in western Colorado is the first, and only, commercial-scale oil shale venture in the nation. We also manufacture and market a wide range of petroleum products, chemicals, fertilizers, and specialty metals. Just last October, we celebrated our 100th year in business - a record few American companies in any line of business can claim.

We operate in a business environment that's increasingly diverse, complex, and fast-changing. A typical board meeting at Unocal these days might review a joint venture proposal in our chemicals and metals group; or a natural gas exploration play in Louisiana; or a major construction project in Thailand; or political events in the Middle East; or cost implications of the Clean Air Act; or a new gasoline marketing strategy for California; or the company's code of ethics.

To be effective, board members cannot be champions of a special interest or cause. We look for generalists, not specialists; versatility, not virtuosity. Naturally, we look for broad professional experience and decisionmaking responsibility, but most of all we look for wisdom, independence, and integrity. We do this because the director's responsibility is to monitor performance, not manage the company.

Sometimes I like to compare our company to an orchestra. The CEO is the conductor, the managers are the musicians, the shareholders are the ticket buyers, and the board is a vigilant and demanding critic.

Our corporate charter, simply stated, is to take the funds provided by shareholders and invest them wisely to increase their value. This doesn't mean we're out to make a profit at any cost. We cannot afford blind devotion to the bottom line.

A corporation like Unocal really has five key constituencies. First and foremost, we have our shareholders, but we also depend on our employees, customers, creditors, and the local communities in which we live and work. Together, these five constituencies make it possible for Unocal to exist. We try to maintain an appropriate balance among them.

If we emphasize one constituency at the expense of another, the long-run profitability of the company will suffer. As a simplistic example, we could make our employees very happy tomorrow by doubling their salaries, but that wouldn't do much for profits. On the other hand, we could make our customers very happy by cutting our prices in half, but that wouldn't do much for profits, either. Shortly after I became Unocal's CEO in 1988, we began to restructure the company's board of directors. We knew that four directors would soon reach the mandatory retirement age of 71 and leave the board.

I worked closely with the other inside directors to anticipate the fields of expertise the board would need as we entered the decade of the '90s. To complement the board's existing strengths, we decided to seek one...