Governance experts, lawyers, accountants, and consultants debate the definition of board prudence. The line between supervision and micromanagement, and between adversarial and cooperative behavior, can be fine. However, the board's obligation to provide guidance when a new CEO takes over is uncontroversial. The challenge lies in how to navigate succession issues without burdening the new CEO.
Recently, I hosted legendary former Xerox CEO Anne Mulcahy and spoke to 100 MBA students in a leadership class at Yale University. And soon Nick Nicholas, former Time Warner CEO and Xerox board member, ambushed her with a surprise visit. She plays a key role in her appointment and in her post-announcement guidance.
They detailed the predicament Xerox faced in 2001, when the company lost 70 percent of its market share in the office technology space it had spent a decade cultivating, and its shrinking product line brought it to the brink of bankruptcy. The SEC is investigating its accounting policies, the company's two previous CEOs resigned over the scandal, and several prominent outside CEO candidates have called for their resignations.
series of crises
Mulcahy had held top sales, human resources, administrative and operations positions but had never been CEO of a major corporation. Nicholas said, “As a board, we recognized that Anne Mulcahy was a strong candidate from within Xerox, but we would have preferred if she had had a little more experience, particularly in corporate finance. In retrospect, I understand why some board members were reluctant to work with Anne. But ultimately, the board decided to select Anne, even if she did not immediately bring enough firepower to the job.”
Indeed, when Mr. Mulcahy was selected, two directors resigned. To many observers, the situation was not good for Mr. Mulcahy, and for Xerox more broadly. When Mr. Mulcahy asked the recently retired Jack Welch for help, Welch refused, saying, “I don't think you can do it.”
Given Mulcahy's learning challenges and the existential challenges facing Xerox, board members led by Nicholas, particularly J&J's Ralph Larsen and P&G's John Pepper, actively partnered with Mulcahy. “One of the things that I haven't seen in other boards, and which was very valuable to us, is that the board meets privately one-on-one with Ann after each executive meeting of the board. That’s what they asked me to do,” Nicholas said. What is his mission? “We want to be open and transparent with her about the decisions made by independent members of the board, and to share as much as we can with her about what we have learned and any views that may not have been openly expressed.” to give her feedback,” he recalls. . “As a result, she no longer has to say, 'I wonder what Ann thinks about x, y, and z.'” She doesn't have to wonder about us either. was. Anne welcomed this, and so did we. It was an open dialogue from day one. ”
Lessons from leaders
The board-CEO mentorship partnership worked. Xerox's stock price, which fell 90 percent during his existential crisis, soared 40 percent under Mr. Mulcahy. “Nobody wants to be in a company that survives. They want to be in a company that succeeds,” Mulcahy recalls. “We were in a crisis and knew we had to turn things around. Quick decision-making is really important in a crisis, and we couldn't do it without the cooperation of our board. Nick and his colleagues are people with great business acumen, so it was a big part of it for me to try some things out with them and see what resonated.”
With the blessing and encouragement of the entire board, Nicholas served as teacher, guide, sponsor, role model and coach, while Mulcahy served as a fast-learning and non-defensive disciple. Experience is the best teacher, but only for good learners.