The making of a spinoff board.

• Author: Deavenport, Earnest W., Jr.

In the welcome absence of instruction to the contrary from Kodak, we proceeded to seek out a wholly new board.

As Eastman Chemical Co.'s spinoff from Kodak neared reality in 1993, we faced the task of creating our first board of directors. It was a task to which I brought strong convictions. I had served on the boards of Kodak and of First American Bank, read a good bit about current issues surrounding corporate boards, and talked to people who had seated a board in the wake of a spinoff. Those experiences shaped my thinking about how a board should be chosen and about how it should operate.

The usual approach following a spinoff seemed to be to seed the new board with directors from the parent company and to find other board members through their contacts. I didn't want to do that. Kodak had many fine board members who could have served us well. But I felt strongly that we should avoid even the appearance of "cronyism." We were launching our company at a time of impassioned investor criticism of boards perpetuated through a "good old boy, good old gal" system. So, in the welcome absence of instruction to the contrary from Kodak, we proceeded to seek out a wholly new board.

I found out later this was unique. Nobody could remember a spinoff occurring, certainly of this size, where all the members of the board were newcomers.

Strength in numbers... small ones

I wanted a small board. Originally, I thought eight was an ideal number. I had observed that larger boards tended to split into a two-tiered organization, with one group emerging as active leaders and another group more or less rubber stamping their actions. I believed a small board would ensure committed involvement from everyone.

Originally, I envisioned being the only insider on our board. Clogging a board with company officers can turn board meetings into super-executive teams. But I soon realized my approach might be a risky proposition. If I were incapacitated for a time, no one with knowledge of the company would be chairing the board. Further, our executives needed board experience. So I amended my thinking to include two insiders, myself as CEO and chairman, and Wiley Bourne, our executive vice president, as vice chairman. From the beginning, I believed the same person should be both CEO and chairman to avoid confusion about responsibility or accountability.

Our final membership was 10, still a very small board to run a corporation the size of Eastman which had, at that time...