Finding the right Chief Investment Officer (CIO) for a family office has become more complex over the past several years. From our experience working with a wide range of well-established to newly developed family offices, we have found an interesting trend emerging among the most effective CIOs in the marketplace. While undoubtably investment acumen and intelligence are paramount, there are three leadership behaviors and characteristics we have found that ultimately determine the fit and success of a CIO within a family office.
Selecting the right CIO for a family office requires a careful balance of technical ability and personal qualities. The ideal candidate will align with the family’s vision and values, fit well within the unique culture of the family office, possess a mix of broad business skills and specialized expertise, and demonstrate strong leadership, strategic vision, and empathy. These characteristics will help ensure that the new CIO can successfully manage the family’s wealth and contribute positively to the family office’s long-term financial and non-financial goals.
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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services and Maryann Bovich and Ed Fowler are co-heads of the Asset Management practice.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity-backed, and family-owned businesses. The firm’s Asset Management Practice, which builds upon the legacy of Higdon Partners and its 30-plus years of experience, has become a premier asset management search and advisory team uniquely positioned to address the changing leadership needs of the $100 trillion asset management industry.
‘Tis the season for public companies to approach prospective director candidates about joining their boards at next year’s annual meetings. Over the past several years, companies have done a good job at identifying what board member capabilities they need to address the challenges they foresee ahead. The constructive tension and pressure from stakeholder capitalism has made sure boards prioritize diversifying their composition and expertise. But like sports teams that try to build a team around a collection of star talent, boards are only as strong as their culture.
From our 30 years of working with Fortune 10 to pre-IPO boards, their effectiveness is predicated on how—and how well—their board leaders lead. The best can harness the individual talents of their fellow directors to create the necessary decision-making aperture and constructive tension that allows for the best possible decisions. While admittedly there are individuals who have the unique and innate ability to lead other leaders, many of the most impactful board and committee chairs have developed their approach through hard work, agility, accessibility, courage, humility, and integrity.
As corporate boards continue to evaluate and add new directors, it is important for nominating committees to prioritize how candidates learn, adapt, and overcome as much as focusing on their past accomplishments. From our recent survey of public company directors, we highlight the best practices of great board leaders. We hope this will serve as a guidepost to build and enhance your own boardroom culture.
1. Establishing a Culture of Trust and Embracing Diversity of Viewpoints: The most impactful and revered board members can foster a board culture where trust and constructive discourse are paramount. This involves creating an environment where diverse opinions are valued and where challenging discussions can occur without fear of retribution. It’s about harnessing the collective wisdom of the board to make the best decisions possible. In today’s globalized business environment, embracing diversity of thought is not just a moral imperative but a strategic one.
2. Engaging Deeply in Strategy and Providing an ‘Outside View’: Successful boards are deeply engaged in various aspects such as strategy, digital integration, M&A, risk management, talent development, IT, and marketing. They contribute significantly by providing an ‘outside view’ to strategy and challenging the strategic alternatives presented by management. This requires directors to offer guidance and constructive feedback, ensuring that the company’s strategic direction benefits from diverse perspectives. This is only possible if board members are avid and continuous learners who can connect the lessons of the past with the current trends and issues facing companies today.
3. Objectivity and Big-Picture Mindset: A director must be objective and possess a big-picture mindset. It’s essential for board members to be future-ready and have the courage and decisiveness to make high-quality decisions on pressing strategic issues. A great director steers the board’s attention to these critical strategic issues and potential risks, balancing short-term and long-term perspectives.
The role of a director as a leader on the board is multi-dimensional and requires a blend of strategic insight, objective decision-making, courage, and the ability to foster a culture of trust and inclusivity. By embodying these qualities, directors can significantly contribute to the success and resilience of their organizations, steering them towards a sustainable and prosperous future. Boards looking to enhance their effectiveness would do well to cultivate these traits or prioritize them during the selection process, ensuring their directors are equipped to navigate the complex and ever-changing landscape of our business world.
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Brett Stephens is the CEO of RSR Partners and helps lead the firm’s Board & CEO Services.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1993 by industry icon Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity-backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
Whether you call the role Chief Supply Chain Officer (CSCO), Chief Operations Officer (COO), or some variation, someone needs to be responsible for leading all extended supply chain processes for any enterprise producing physical goods. Moreover, this person must be a full strategic partner with the CEO, CFO, and other members of the C-suite. They are responsible for the lion’s share of enterprise cost and capital spending. Historically, many organizations failed to recognize the need for a “strategic-minded” CSCO.
For the last several decades, manufacturing businesses and their supply chain leaders focused relentlessly on driving cost out of the system. This led to a massive shift in manufacturing and sourcing to lower cost regions, particularly China, in pursuit of lower production cost. It also led to consolidating vendor bases, including increased sole sourcing, in return for lower prices from suppliers and just-in-time production which drove down inventory investment requirements.
This drive for lower cost worked well when conditions were relatively stable. Customers received lower prices, shareholders owned a more profitable business with higher returns for their investment, and employees worked in a growing business with more career opportunities. What was not well recognized was the added risk the enterprise assumed. Sourcing and manufacturing in Asia lengthened supply chains and made them more vulnerable to transportation disruptions. Consolidating vendors increased exposure to supplier outages. Reliance on China increased political risk. Just-in-time manufacturing eliminated inventory which could serve as a buffer to absorb mismatches between supply and demand. Occasional disruptions in one or another of these dimensions occurred and companies scrambled to address them. Few had risk mitigation plans in place ready to deploy, and most were treated as one-off events. Then the covid pandemic hit, which clearly exposed the inherent risks companies had assumed in adopting the low-cost supply chain strategies of the last 40 years. While the drive to low cost was a “strategy” many pursued, companies did not think strategically about the potential unintended consequences.
Companies should not think of the pandemic as a once-in-a-century event and revert to business as usual. Disruptions have been, and will continue to be, a fact of life for manufacturers. The McKinsey Global Institute has studied the history of supply chain disruptions and their effect on business results. They estimate companies lose 45% of one year’s EBITDA to supply chain disruptions over the course of a decade. Historically, corporate responses to supply chain disruptions have been reactive. Recent disruptions have clearly illuminated the imperative for creating and maintaining operational resilience. What does this mean for the next generation of CSCOs?
Apart from the leadership and strategic skills required of any C-suite executive, perhaps the most important skill required of today’s CSCO is that of an underwriter. Underwriters, be they insurance, investment banking, commercial banking, or other, evaluate the risk involved in a particular activity, asset, or person and set a “price” appropriate to the risk. As we saw during the pandemic and its aftermath, most CSCOs failed as underwriters. They did not appreciate the risks they were bearing and had not taken necessary steps to “insure” against those risks. As a result, supply chains broke for extended periods—inventory did not arrive when needed, factories closed, customers did not receive their orders, and consumers saw bare shelves and empty lots.
As we have seen over the last three or four years, most companies were unprepared for pandemic risk, geopolitical risk, weather risk, et cetera, much less having the compounding effects of these risk occurring simultaneously. Insurance underwriters tend to think of risk along two dimensions: frequency (how often a loss is likely to occur) and severity (how expensive a loss is likely to be). Low frequency, high severity risks are the most difficult to predict and insure. To protect against these catastrophic events, insurers often purchase catastrophe coverage to protect themselves from existential losses. Manufacturers had not understood the extent of their exposure to “catastrophes.” Consequently, they did not have risk mitigation measures (insurance) in place and suffered greatly for it as suppliers in global markets shut down and transportation infrastructure became clogged.
To mitigate these very real but previously poorly perceived risks, many are now rethinking their global supply chain strategies with an emphasis on creating supply chain resilience. This has included reshoring and near shoring critical manufacturing infrastructure; deploying digital supply chain solutions to speed information flow and decision making; diversifying sourcing partnerships; and investing in critical inventory. Manufacturers are now actively assessing the broad range of integrated supply chain risks they face, quantifying the exposure they have to disruption, and making the necessary investments and other actions to mitigate these risks. This requires new skills on the part of the CSCO and full partnership in strategic decision making with the rest of the C-suite.
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Don McMurchy is a senior member of the Industrial practice, driving execution across a broad range of senior leadership roles for clients ranging from start-ups to Fortune 50 enterprises. Based in Cleveland, his engagements are typically continental in scope with additional experience in Asia and Europe.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
Greenwich, Conn., October 26, 2023 – RSR Partners, a leading board and executive search firm, presented the inaugural Russell S. Reynolds, Jr. Chair of the Year Award to Sarah E. Nash, Chair of the board of Bath & Body Works. The award was presented to Sarah at the firm’s annual Directors Dinner in New York City on October 25, 2023.
The Chair of the Year Award was established to celebrate the legacy of one of the search industry’s greatest leaders and icons, Russ Reynolds, who has spent more than 50 years advising boards and CEOs on leadership. The award recognizes a Chair who successfully led a public company Board of Directors through significant business or governance challenges. The winner of this year’s award was chosen from more than 30 nominations by an independent selection committee comprised of renowned experts in their fields, including Mikaela Boyd, Nik Deogun, Ed Kangas, Kim Lew, Christie Smith, and Brett Stephens.
“Sarah led the Bath & Body Works board through an incredible governance and business transformation,” said Kim Lew, a member of the selection committee. “Her accomplishments include leading the spin-off of Victoria’s Secret; collaborating with the nominating and governance committee on the recruitment of exceptional and highly diverse talent to the board of Bath & Body Works and the new board of Victoria’s Secret; navigating a successful CEO transition and selection process; and building a constructive path forward after an activist campaign. The leadership and integrity exhibited by Sarah is an example of how important board leadership is during times of turbulence. She is very worthy of this award.”
“This award recognizes Sarah’s extraordinary leadership, dedication and service to Bath & Body Works over the past few years,” said Steve Steinour, Chair of the Bath & Body Works Audit Committee. “Sarah served as Bath & Body Works’ Interim CEO with very short notice, where she played a pivotal role in the company’s transformation with its spin-off of Victoria’s Secret. During her tenure, Sarah has exemplified strong business acumen including leading a successful shareholder derivative settlement and navigating a complex supply chain reset with partners. She has exemplary people management skills such as overseeing multiple chief executive officer transitions, recruitment efforts for eight board members, and leading the company during the onset of COVID. We are grateful for her contributions and leadership since her assumption of the role of chair in May 2020.”
“I’m incredibly proud of my fellow directors and the leadership team at Bath & Body Works,” stated Sarah. “They have shown irrefutable dedication to the vision we all share for this company. Their input and support throughout this past year was invaluable, and we have much to look forward to. I am also grateful to be recognized by an award that pays tribute to Russ, his legacy, and his impact on how board leadership is viewed and valued.”
“Sarah’s terrific,” commented Russ. “She possesses the characteristics of a great leader. She is objective, open to advice, decisive, and a good communicator. She operates with integrity and puts the company’s and others’ needs ahead of her own. I also started my career at JP Morgan, so I was particularly thrilled to see we share a fondness for finance and banking. I look forward to seeing how Sarah develops as a board leader and continuing to celebrate her achievements.”
About Russell S. Reynolds, Jr.
Russell S. Reynolds, Jr. (“Russ”) is an American business executive, author, and founder of two of the search industry’s most prominent firms. Considered one of the pioneers of the executive search and board recruiting profession, Russ has counseled the boards and CEOs of many of the world’s leading companies over the past 50 years. In 1969, he founded Russell Reynolds Associates, which soon became one of the world’s foremost international executive recruiting firms. Russ sold his interest in the firm in 1993. In 1994, Russ founded the Directorship Group, later named RSR Partners, where he served as Founder and Chairman until 2022.
About Sarah E. Nash
Sarah E. Nash has served as Chair of the board of Bath & Body Works, Inc. since January 28, 2023. She served as Executive Chair of Bath & Body Works, Inc. from February 2022 to January 2023 and as the Interim Chief Executive Officer from May to November 2022. Prior to being appointed Executive Chair, she served as Chair of the board between May 2020 and February 2022 after having joined the board as an independent director in May 2019. Sarah is also Chief Executive Officer and owner of privately held Novagard Solutions, an innovator and manufacturer of silicone sealants and coatings and hybrid and foam solutions for the Building Systems, Electronics, EV and Battery and Industrial and Transportation markets.
Sarah spent nearly 30 years in investment banking at JPMorgan Chase & Co. (and predecessor companies), a financial services firm, retiring as Vice Chairman of Global Investment Banking in July 2005. She served on the board of directors of Knoll, Inc., a designer and manufacturer of lifestyle and workplace furnishing, textiles and fine leathers, from 2006 through its acquisition by Herman Miller, Inc. in 2021 and privately held Irving Oil Company through March 2022.
Sarah currently serves on the boards of directors of Blackbaud, Inc., a software company providing technology solutions for the not-for-profit industry, and privately held HBD Industries, Inc., a manufacturer and supplier of general purpose and application-engineered industrial products. Sarah is Trustee of the New York-Presbyterian Hospital, a member of the Smithsonian Tropical Research Institute (STRI), Panama and the Chair of the International Advisory Board of the Montreal Museum of Fine Arts. She also served as a member of the National Board of the Smithsonian Institution through 2022. Sarah holds a BA in political science from Vassar College.
About the Chair of the Year Award
RSR Partners announced the establishment of the Russell S. Reynolds, Jr. Chair of the Year Award in October of 2022. The award will annually recognize the Chair of a public company’s Board of Directors that has successfully led the board through significant business or governance challenges. The award celebrates the legacy of Russell S. Reynolds, Jr. (“Russ”), who has spent more than 50 years advising boards and CEOs on leadership and governance.
To be eligible for the award, a nominee must serve as a Chair of a board of directors at a U.S. public company with revenue or market cap greater than $1 billion. The nomination period takes place from August through September. The winner of the award will be chosen by an independent committee comprised of renowned experts in the areas of strategy, finance, strategic communications, shareholder activism defense, investment management, human capital consulting, and corporate governance. This year’s committee included:
More information about the award can be found at: www.chairoftheyearaward.com.
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Contacts
Lindsay Griesmeyer
+1 (203) 618-7076
media@rsrpartners.com
Peter Drucker was a wise sage. Many companies and even some industries have evolved to greatness thanks to his contributions to management thought. Despite his gifted prescience, Drucker could never have imagined the current environment, nor the unexpected journey through which Covid has taken each and every business. Still, a quote from Drucker rings true: “The greatest danger in times of turbulence is not the turbulence. It is to act with yesterday’s logic.”
Every business leader seeks to understand the current environmental factors and the future of the marketplace. To that point, operating plans consistently open with a view of the present market conditions and a prediction of those to come. It took a pandemic to teach us that our clairvoyant skills are lacking. Even now, we have no idea if our economy is heading into hyper-inflation, recession, or a soft landing. In a time that Drucker refers to as “yesterday,” the conventional wisdom among the wise CEOs would have been to move to a phase of business preparation, anticipating the challenges of the market situation to come. Let’s call this “managing according to maintenance objectives:” optimizing the chances for retention of current state with plenty of emphasis on contingent planning.
In essence, lifeboat management.
I offer here my thoughts on a different prescription. Keeping with the nautical metaphor, I appreciate the words of Union Naval Admiral Farragut when he said, “Damn the torpedoes!” Are there any lessons to be applied from the fog of war to the current fog of business? I speculate that today’s CEO Farragut would state unequivocally that success is not about survival or maintenance management. Rather, he’d call it seizing greater initiative while expecting inevitable risk.
Having the good fortune to know many great CEOs who would emulate Farragut, I perceive a common denominator among them. It is an insatiable, often unassailable drive to achieve breakout growth for their business, environmental factors notwithstanding. Their passion is palpable, sometimes in visible relief and sometimes not, but always motivating them to find seams and ingredients and synergies for sustainable surges of growth. To many casual witnesses, the business aspirations are almost unimaginable. However, it’s precisely the CEO’s imaginings that seem to prompt the urge to break through the fog, to lead with abandon.
When was the last time you witnessed someone whom you’d describe as an executive who leads with abandon?
In observing these CEOs and their teams, I have come to recognize some common elements that I’ll call the “formula.” These include some leader qualities and some new items of process thinking. These include: a spirit of adventure; a fresh way of expressing vision; a continuous attitude of nimbleness; an approach to embedding strategy as “water cooler” conversation; and a more flexible way to think about organization structure to meet market needs and opportunities.
The Courage to Pioneer
Serving as a business leader in today’s environment is tricky. The most effective CEOs seem to exhibit a pioneering spirit, like Paul Bunyan’s courage to wield a mighty axe for cutting new paths ahead. And it isn’t just a market share strategy in the minds of these few, but a desire to drive demand, to expand markets, to capture much more than their fair share of growth in categories, markets, and channels. Despite the reality of tightening/high-interest money, markets full of ambiguity, and the sequential pressure of business targets that keep approaching at high speed, conservatism does not rule among the best in breed, often called “pacesetters” in today’s lingo.
I see new shoots of growth among many companies, largely because their CEOs are continuously acting in a contrarian fashion compared to competitors. This behavior often includes rapid refinements in market and channel strategies to secure fresh growth in adjacencies, digital initiative to reach new customers and find new supply chain efficiencies, a redirecting of investments from over-mined markets into new product and new market innovation, rethinking the diversity of the business model to capture new opportunities through added services and e-commerce, and even nimbly and rapidly partnering with other companies to gain resources needed to tackle previously inaccessible customer needs, or to create new needs that haven’t yet been articulated. Budgets in some of these progressive businesses are also being shifted from process improvements to commercial innovation.
These pioneer CEOs are taking advantage of market pressures that slow some competitors. As such, their enterprises can leapfrog to future state.
Destiny and Destinational Planning
To many of these great executives, the most significant current question is not “how?” but “what?” That’s to say they often refine and sharpen their view of “what” the future looks like. They have full conviction in the capabilities of their teams and companies in determining their own destiny. Forget about incremental growth plans. Their thinking is not grounded in a cement mentality reflecting the business position of today. They formulate a vision of their business’s destination for tomorrow, more specifically, the overall objectives for two or four or even more years down the road. And they are not afraid to refine along the way or to think bigger if so inspired. Their process for planning and action is based on the “destinational” vision: a longer-term deliverable and a working backwards to define intermediate milestones as well as the related hurdles of consequence along the way.
Once that rock-strewn path is determined, then the focus of attention becomes about resourcing, i.e., what resources do we need to eliminate the obstacles? The tactics of execution spill out from there, and always with precision in mind.
Agility and Flexibility
I’ve alluded to the need for many businesses to undertake occasional refinement/continuous improvement. That’s probably a euphemism; most companies these days need much more than refinement, they need overhaul. Just ask a banker how their industry is prepared for challenges in 2023 and 2024. You may see some uneasy stares. Corporations and even small companies mired in entrenched systems, conventions, and processes rather than market foresight for the future, will likely begin to feel rapid decay over time.
Recently, I spoke at some length with two very senior operating partners at a successful and prominent middle market private equity shop in New York City. Their stature and growth suggest they are big thinkers and unusually thoughtful. That was quickly borne out in the conversation which was a by-exception dialogue, meaning we only discussed bold thinking for an hour. As we traded perspectives on the distinctions between today’s good CEOs and those who are truly great, we continued to circle back to their overriding hypothesis. The best CEOs at this moment in time are those who demonstrate “clear ability to pivot.” This needn’t be expanded upon at this juncture, as it is the fodder for another post, but ponder the point and consider how it applies to the strategy discussions around most of today’s boardroom tables which appear sleepy in contrast.
One last point on pivoting. I have a fervent view that companies today must have something called “organizational elasticity.” During the intensity of Covid, we all heard how business cultures need “resilience.” But I see resilience as an ingredient of foundation, namely, an ability to withstand unusual and extreme pressures.
“Elasticity,” on the other hand, is more about flexibility and the rubber-band stretch that a leadership contingent and their teams can withstand, bend with, and rebound as new space is explored and tested. The pioneering I have highlighted cannot be undertaken unless the organization has the mental preparedness and curiosity to peruse new forks in the road, to make some probes of reconnaissance, and to recover to a stable track if the diversions prove unproductive. Organizational elasticity requires all in a company to understand and agree to the attendant nimbleness of the journey. Change that finds a more open and faster-lane approach should be embraced. Rigidity should be institutionalized in mission-commitment, core values, and collaborative interest, not in growth initiatives, organizational dynamics, or processes.
The Compression of Strategy
The best CEOs are redefining strategy. In a classic sense, strategy has normally meant an articulation of direction for the long term, indicating dimensions of both azimuth and time. I’ve already addressed direction in the pioneering sense. But we now find highly successful CEOs and leadership teams who have compressed the strategic timeline into more tactical timelines. They ask questions like, why should this initiative take 3 years? Why can’t we achieve the same course correction in 3 months?
Incidentally, when was the last time the company reported upon the achievement of the long-term objectives that it set forth 5 years earlier? What’s the purpose of a long-range plan anyway, other than some vague hopes of where we seek to be in a few years? There’s nothing wrong with that, except it’s fictional when companies apply the metrics and objectives that they really don’t expect to discuss at the end of the journey. I’ve already addressed that topic in the explanation of destinational planning.
Organizational Implications
We all have seen a variety of corporate org charts that generally depict conventional details like seniority, pecking order, and lines of responsibility. Such mappings are not unimportant. “Org Charts” in my humble opinion are soon to be artifacts of past companies and cultures. Those leaders who are maneuvering through the fog these days are doing so with gusto, and most are thinking of their organizations as competitive teams, not silos and compartmentalized ownership and reporting lines. Great teams think about overall team objectives first, recognizing they have a variety of star players to carry the ball, and the teams make the distinction between who’s on the field (or the “floor”) and who’s on the bench, and sometimes the substituting happens at a moment’s notice depending upon the tenor and sway of the game’s score and the intuition and judgment of the coach.
Which makes you question: how do such companies keep straight their HR design and structure?
The future-leaning answer is they don’t, primarily because their teams are organized in a fluid fashion around the strategic growth issues of their company, not around units, functions, and roles. Think project and program management, for example, with constant asset deployment and redeployment. There’s a necessary fluidity required to stay ahead of market circumstances to achieve aspirational objectives. More to come on this very critical org piece in an upcoming post. Drucker was not only clairvoyant in realizing the danger of “yesterday’s logic,” but he was giving a clear warning to the hidebound CEOs who think that lifeboat or playbook management is the key to success. The very best of the pacesetters are making up some things as they go about the business of working to achieve the unimaginable. Managing a company in a dynamic foggy market is the “Wheaties” of today’s most athletic and most organizationally ambitious CEOs.
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Alan Renne leads the firm’s Industrial practice and is a key member of the firm’s Board and CEO Services team. Alan specializes in helping companies build competence and effectiveness within their leadership teams and at the board level. He has advised numerous organizations and C-Suite executives on leadership development, succession planning, and organizational design and development.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
Annual Award Named After Russell S. Reynolds, Jr.
Greenwich, CT, June 8, 2023 – RSR Partners, a leading board and executive search firm, announced today that it has established the Russell S. Reynolds, Jr. Chair of the Year Award. The award will annually recognize the Chair of a public company’s Board of Directors that has successfully led the board through significant business or governance challenges. The award celebrates the legacy of Russell S. Reynolds, Jr. (“Russ”), who has spent more than 50 years advising boards and CEOs on leadership and governance.
“I am honored that this award will become an annual way of recognizing exceptional board leadership,” said Russ. “The real trick in selecting great board leaders is not only focusing on their experience and specific skill sets, but on whether they have the foresight, curiosity, character, and courage to lead.”
The winner of the award will be chosen by an independent committee comprised of renowned experts in the areas of strategy, finance, strategic communications, shareholder activism defense, investment management, human capital consulting, and corporate governance. The committee includes:
“Russ has observed how highly effective boards and CEOs operate during their most seminal moments,” stated Brett Stephens, Chief Executive Officer of RSR Partners. “There is no better way to honor Russ’ innate talent for identifying and evaluating leaders than with an award in his name that recognizes the incredible impact a Chair can have on an organization’s leadership and long-term success.”
Public company directors will be invited to submit their recommendations beginning June 8th. Any Chair of a board of directors at a U.S. public company with revenue or market cap greater than $1 billion may be nominated. The award winner will have successfully led the board and executive team through a significant business or corporate governance challenge. The inaugural winner will be announced in October at RSR Partners’ Annual Directors Dinner in New York City. Information about the award can be found at: www.chairoftheyearaward.com.
About Russell S. Reynolds, Jr.
Russell S. Reynolds, Jr. (“Russ”) is an American business executive, author, and founder of two of the search industry’s most prominent firms. Considered one of the pioneers of today’s executive search and board recruiting profession, Russ has counseled the boards and CEOs of many of the world’s leading companies over the past 50 years. In 1969, he founded Russell Reynolds Associates, which soon became one of the world’s leading international executive recruiting firms. Russ sold his interest in the firm in 1993. In 1994, Russ founded the Directorship Group (later named RSR Partners) where he served as Founder and Chairman until 2022.
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Contacts
Lindsay Griesmeyer
+1 (203) 618-7076
media@rsrpartners.com
A continual challenge we have helped our clients address over the years is how best to populate boards with diverse directors. In fact, 86% of all of our board placements over the past two years have either been gender or ethnically diverse. Data shows that diverse boards with the right combination of relevant skills and experience outperform more homogenous ones. As such, boards often overlay their diversity objectives on top of the more traditional objectives, such as requiring that the director possess the relevant skills, experiences, perspectives, and judgment needed to be successful. Achieving all these objectives simultaneously can often prove difficult and is a short-term solution that, if not managed correctly, can have a devasting impact on board performance in the long-term. Instead, identifying and cultivating relationships with potential candidates that may not be ready to join a board in the immediate term, but have the potential to serve in several years, can increase a board’s ability to achieve these objectives, ensure culture, and remain viable for many years to come. Yet, it requires discipline and a commitment to a strategic, long-term vision.
Varying Viewpoints on Diversity
As a starting place, it is helpful for directors to ascertain what they should take into account when considering how to add diversity to their ranks. A common request from boards is to find the “best candidate,” which often means the candidate that checks all the boxes at the same time – diversity and the specific skills and experiences needed – even if there is a paucity of that candidate type in their target companies and industries. Boards can broaden their definition of diversity by considering and understanding the culture and effectiveness of the current board. In addition, diversity should also reflect the board’s customers, employees, and communities. Best practice is for boards to consider what the “best candidate” is right now and also give significant thought to what the “best candidate” is in the future – for the board and the organization. Perhaps one of the criteria that seems critical right now can be postponed until another board seat becomes available. Lastly, some directors harbor concerns that they won’t have a place under a more DEI-focused paradigm, especially those with socially advantaged identities. This can create additional hurdles, however, exploring the data that demonstrates that diversity of identity leads to diversity of thought, and in turn leads to productive discussions and better outcomes, can help expand viewpoints on the importance of diversity in the boardroom.
Board Diversity and Results
According to ISS, there has been continued improvement in racial and ethnic board diversity. Approximately 86% of Russell 3000 Index companies, excluding the S&P 500, and 99% of S&P 500 companies have at least one racially/ethnically diverse board member. Additionally, nearly all industry sectors showed increased racial/ethnic board diversity year-over-year.
A new study from KPMG specifically referencing African Americans (AA) on boards states while they are still underrepresented in the boardrooms of public Fortune 1000 companies, there has been a significant increase in the proportion of these companies with at least one AA in the boardroom. Just over three-quarters (76%) of the companies studied had at least one AA director as of September 2022, compared to only 61% in 2020. However, it is still uncommon for public F1000 companies to have multiple AA directors; less than a quarter (22%) of these companies had more than one AA serving on their board. Larger companies are likely to have more AA directors than smaller companies. For the first time, all of the largest US public companies on the F100 list have at least one AA director. In fact, nearly one in ten (9%) of these companies have three or more AA on the board.
Age diversity is another factor to consider. In 2021, BoardReady released a report showing companies whose median director age was 55 or less had 10.1% YoY revenue growth compared to companies whose median director age was 65 or more which had -7.7% YoY revenue growth. That same report showed companies with over 30% of board seats held by women outperformed their less gender-diverse counterparts in 11 out of the top 15 S&P500 sectors. In addition, companies should look at geographic diversity as well as global experience.
2023 Diversity Voting Policies
ISS and Glass Lewis will generally recommend a vote against the nominating committee chair unless the following guidelines are met:
Universal Proxy Card
With the UPC, shareholders will have a greater say on the board’s composition as they can more readily compare the board’s nominees with the activist slate and focus on existing director performance, skills, experience, and diversity gaps. See this link to an RSR article on the UPC.
Succession Planning Process
There are multiple ways to address a lack of diversity in the boardroom, but all of them require continuous attention – a board should not stop seeking diversity once they have achieved their immediate “target.” Ideally, boards should seek to surpass the minimum requirement and help set the stage for the future, both within their own organization and to be a leader in the industry. Some possible approaches to improve boardroom diversity include:
How RSR Can Help with Director Searches
Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We continue to complete diversity assignments for a wide variety of companies, from small private family companies to Fortune 500s. Again, in 2021 and 2022, 86% of our board placements were either gender and/or ethnically diverse. We are proud to play a role in this important imperative, and excited for our clients who are making progress in diversity.
Our team leverages RSR Partners’ renowned experience in corporate governance with our industry and human capital consulting expertise to locate the best candidates. RSR Partners can assist your board with:
We would love to hear your perspective on the evolution of board diversity and assist you in achieving your board’s diversity goals.
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Greg Lau leads RSR’s Board Advisory practice, Carter Burgess leads the Board Recruiting practice, and Eric Douglas Keene is a Managing Director in the firm’s Board & CEO Services practice at RSR Partners.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
This article was originally published on LinkedIn here.
Over the past 30 years of working closely with public company boards and CEOs, we’ve had a front row seat on the debate of whether to keep the Chair and CEO roles separate or combine them. While shareholder proposals advocating the split are common (especially when CEO transition, underperformance, misalignment, or crisis occurs), US public companies have been allowed some freedom to choose what board leadership model works best for them. However, since 2020, we have seen a subtle but meaningful change in the power and influence of the Independent Chair that is different than the past several governance cycles.
The role of a public company CEO has become increasingly complex as societal issues now fall on management’s doorstep. In many cases, the role and responsibilities of the Independent Chair has increased to help the CEO and the board to confront the range of stakeholder concerns. However, much is predicated on the chemistry and dynamic between the CEO and Chair and whether this change is a positive and productive shift. Countless articles have been written about what makes an effective Independent Chair. But at the end of the day, the formal and nuanced definition of the Chair and CEO roles and relationship between them is at the core of success and failure.
It is not a stretch for the outside world to imagine that when a CEO is not able to also assume the role of Chair (as it is easier for them to control the agenda), they would want to have an outsized vote to help select who would become the new Chair. Depending upon how the board views the CEO, they will either amplify or minimize the CEOs voice on that decision. At the end of the day, all stakeholders should seek to have a dynamic whereby the Chair is an adviser, a coach and supporter of the CEO but also provides constructive tension and accountability that pushes the CEO and management team to deliver on their strategic plan. As a result, the Independent Chair needs strong situational awareness to understand when to use their influence vs. authority.
When digging into recent governance data on the 1000 most valuable US public companies, some statistics caught our attention this week:
During the business reset and inflection the past few years, half of the Independent Chairman positions turned over at the 1000 most valuable US public companies. As we saw firsthand with many of our clients, most of these boards had more than one potential Director who could serve as the new Chair. During previous cycles, it seemed more politically obvious who was the right person for the role. What has materially changed today is the amount of time and deliberation it takes to pick who should be Chair and the impact it will have on the CEO and its various stakeholders. ISS and Glass Lewis have recognized the value and new work requirements of the Independent Chair by counting it as 2 outside boards instead of 1 when considering over boarding. While I have more than a few differences of opinion with the proxy advisors. In this case, I feel they appropriately value their importance and responsibilities.
The impact a great Independent Chair has on the board, management, and the company is not entirely visible or understood by the viewing public. But during a company’s most challenging and seminal moments, you will get peek behind the curtain.
We anticipate in the coming months helping shine a brighter spotlight on those Independent Chairs who have helped their companies get one step closer to their aspirational goals. In the meantime, please don’t hesitate to reach out to our team if you want to share or acknowledge the impact your Chair has had on your organization.
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Brett Stephens is the CEO of RSR Partners and helps lead Board & CEO Services at RSR Partners.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
This article was originally published on LinkedIn here.
UPC Will Have Significant Impact on Boardroom Composition and Director Succession
Nelson Peltz is running for a seat on the Disney Board and Elliott Management is seeking seats on the Salesforce Board. This is just the tip of the iceberg. Both will be using the new SEC rule requiring Universal Proxy Card (UPC) for contested elections. Many observers believe the UPC will make it easier and less expensive to run an activist campaign to gain board seats. All nominees, both company and activist, are now on a single card and a shareholder can easily split their votes for the first time. Thus, shareholders can vote for one or more of the activist candidates.
However, this new rule may assist in getting better alignment on the required skills and experiences that independent directors need to execute the company’s strategy, oversee the CEO’s performance, and build effective governance structures. With the UPC, shareholders will have a greater say on the board’s composition as they can more readily compare the board’s nominees with the activist slate and focus on existing performance gaps. In addition, some commentators say that Proxy Advisers will even be more influential as they will need to compare the board’s candidates with the activist candidates.
The board’s independent chair/lead director and the Nom/Gov committee have the urgent task to address their most uncomfortable duty – asking directors to leave prior to retirement which now is often 75 years old. To avoid making an activist campaign personal to individual directors, the board needs “to avoid defaulting to renomination rather than undertaking tough decisions. (NACD: A Framework for Governing Into the Future report).”
What should nominating and governance committees do?
One immediate solution is to consider expanding proxy director biographies with more specificity on why each director should be on the board. The current skills matrix is often of no use as it does not specify the strength of the skills and experiences using a 1, 2 or 3 rating. Also, the committee should improve the board leadership, committee chairs, and individual director evaluations. These evaluations need more rigor on improving board performance. For example, look at long tenured directors and justify in the proxy their contributions and continued value serving on the board.
From recent conversations with several notable Nom/Gov Chairs about how they are viewing the situation, the feedback has been consistent that it will have an impact on how boards view director succession and board recruiting in the future. The reaction is that boards will take less risk when adding director candidates and focus more on those who have overtly relevant industry or functional expertise. While we hope this will not have an impact on the recent boardroom trend for younger, more diverse, and outside-the-box candidates, we have our concerns.
For future board searches, the candidate success profile must be more granular on the skills and experiences required, and how candidates can impact board and committee leadership succession and improved board oversight. Nom/Gov committees will need to have a strong grasp of the immediate and longer-term capability gaps that need to be addressed along with a sense of what the stakeholders expect to ensure there is no misalignment on future actions.
Activist shareholders have and always will use board composition as a trojan horse to ensure that their perspective and agenda is considered or acted upon in boardrooms. The best defense for corporate boards is to ensure company performance is meeting or exceeding its industry peers. As the stakes continue to intensify, it is paramount for boards to move quickly on any lingering issues that will affect boardroom effectiveness.
We would love to hear your perspective on the ripple effects of the UPC. Similar to the implementation of SOX, this story will be with us for the foreseeable future. As we have the past 30 years, we are here to help to boards navigate through changing tides.
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Greg Lau leads the Board Advisory Practice and Brett Stephens helps lead the Board & CEO Services at RSR Partners.
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
This article was originally published by Corporate Board Member.
What first-time candidates need to know about the board recruiting process.
Over the last year, corporations have made tremendous efforts to diversify the composition and enhance the capabilities of their boards. As board recruiting strategies evolved to identify diverse and qualified talent, an increasing number of executives were exposed to the board recruiting process for the first time. In fact, 35% of new directors in the S&P 500 and 25% of new directors in the Russell 3,000 were first-time directors.
Board search firms like ours are now often coaching executives through the recruiting process since so many are unaware of the plethora of machinations and nuances involved at each step. There are certain actions that should be taken by the candidate during each step of the board recruiting process, from the moment a prospective candidate is notified of a board’s interest, through the interview process, and when a formal invitation to join a board is extended. We have witnessed many missteps due to unfamiliarity with the process and mistaken assumptions, which can impact a candidate’s credibility.
We’ve compiled our best advice into this roadmap to help first-time candidates navigate the board recruiting process to increase chances of success. If you are an aspiring public company director and have never been recruited to a board, this roadmap is for you.
#1: The Success Profile
Companies in the Fortune 1,000 generally retain a board search firm when they need to add a new director to their board. The reasons for recruiting a new director can vary. There may be an upcoming retirement, an unforeseen departure, the need to add specific experience or expertise, or a need to increase diversity.
In our experience, the board has a clear understanding of what specific skills and experience gaps it needs to address most of the time. However, sometimes the search firm will work closely with the chairperson, CEO, lead director, and chair of the nominating and governance committee to facilitate stakeholder feedback meetings to gather input on the ideal success profile. In many instances, the CHRO and even the General Counsel can play an important role, providing input, guidance, and direction. A board typically puts together a search committee of these key stakeholders.
Once the board search committee has agreed on the ideal skill matrix and professional and personal characteristics of potential candidates, the search firm develops an initial list of potential candidate ideas. The list can be quite extensive. Over the course of several weeks, and sometimes months, the board and the search firm will narrow down and prioritize the top candidates. This initial number can range anywhere from two to fifteen individuals for each open board seat. The search firm will then be authorized to approach those select prioritized candidates regarding the specific board opportunity.
#2: Evaluating Potential Opportunities
When a search firm first reaches out to you about a specific board opportunity, you should be aware that the firm and the board have already conducted an extensive amount of research, due diligence, and third party referencing on your potential candidacy. Unlike the executive search process, the initial outreach is not a learning session about your career highlights and aspirations. Instead, the conversation is intended to provide you with as much context on the opportunity, the company, and the key constituents involved, to determine if you are interested in considering this specific opportunity.
If you are interested in the opportunity, you must first clarify whether you are allowed to sit on an outside company board. It’s critical that you know this information upfront. Unlike executive search, it is not necessary to keep a board opportunity confidential from your company. Oftentimes a company will have a policy on whether employees can serve on boards. A policy will also limit the type of company boards executives can sit on, especially if the board or if members of the board present a conflict of interest (for example, you will be barred from sitting on the board of a competitor and significant supplier). Most policies dictate that sitting executives are only allowed to sit on one board—so remember that if you agree to serve on a board, you may not be able to entertain another board opportunity until you rotate off or retire from your executive role. Many companies also have a process to have a board opportunity approved. We have also encountered situations when a company’s strategy has impeded a candidate’s ability to serve on a board. For example, if the company will be going through a restructuring or a merger, an executive who will play a significant role in the execution of the strategy may not be given approval to sit on an outside board for capacity and optical reasons.
Second, while this may seem premature, you will need to confirm whether the board meeting dates conflict with your company’s board meeting dates or other significant company meetings. While schedule conflicts are easy to determine, board candidates sometimes leave this step towards the end of the process which can lead to unexpected and unsuccessful outcomes. When evaluating any board opportunity, it is critical for you to do this step before moving forward.
If you pass these first two hurdles, you should then ask yourself the following questions:
If the answer to any of these questions is not in alignment with you pursuing this opportunity, you should let the search firm know within seven days. It is critical to be honest about these questions as early in the process as possible. We have seen candidates who are aware that the answer to one of these questions might pose a problem but continue to move forward with the process anyway. They mistakenly believe that exploring the opportunity will allow them to learn without commitment, enhance their candidacy for other opportunities, and extend their network and relationships. However, boards do not like being turned down during the final stages of the search process for any of the above reasons. Your candidacy likely has an impact on the board’s broader recruiting strategy, or they may have slowed down attempts to attract other candidates to spend time with you. Being disrespectful to the board’s time can have unintended consequences and can affect your personal brand in the marketplace.
If you decide to pursue the board opportunity and you are confident in your answers to the above questions, you should take the necessary time to review your company’s policy on serving on an outside board and perform as much due diligence as possible about the company, the CEO, and the board. This includes:
#3: Interviewing with the Board
Once you have agreed to move towards formal interviewing, and generally following an extensive discussion or interview with the search firm, you will be invited to an initial meeting with the designated board search committee lead. At this time, you should have received preliminary approval from your company to consider and potentially join this specific board. After your initial meeting, there will be immediate feedback from the board search committee to the search firm about your potential candidacy and fit.
We are often asked how boards evaluate prospective candidates. While each situation is unique, we have found there are three common themes that are addressed during the first few meetings:
Will you be able to successfully transition from being an executive to a board member? As there are many different types of leadership styles that can be effective as an executive, some can be obstacles when becoming an effective director. No matter your leadership and communication styles, you need to understand and demonstrate during your interview the skills and perspective needed to be an effective director versus an executive. As a board member, you are expected to provide guidance and advice; not to require the details that an operator of the company would need.
Will you be an effective listener? As a director, you will need to listen to the perspectives of your fellow board members and the management team, but also from all your stakeholders. The most effective directors are those who can distill complicated issues into profound brevity and can help unify others to make decisions together. You will need to be willing to learn from the diverse perspectives of others and allow them to change and reshape your thinking. We have helped boards recruit talent for more than 30 years, and we can assure you that the most ineffective directors are those whose default communication approach is to talk instead of listen.
Will you be able to ask good questions? As a director, the ability to ask questions that provide enhanced insights to make better group decisions is the key to having an impact in the boardroom. Questioning is a uniquely powerful tool for unlocking value in corporations as its fosters more-effective interactions, strengthens trust and chemistry, and better aligns the board and management team on the most critical issues. How you approach your conversations with the Board Search Committee will provide them insight on how you would interact as a director. For each open board seat, it is common practice that only 2–3 candidates will be invited to formally interview. Often, the board has a variety of skill and experience needs to be filled, and each potential candidate will bring something different and unique to the table. Future committee membership and board leadership, as well as factors such as ESG needs (Environmental/Social/Governance) and diversity can play a role in the assessment of the candidate’s fit. If you have been asked to interview, you should consider it a huge compliment and a testament to what board members know or have heard about you.
As you progress through the process, you will also meet the chair, CEO, lead director (where applicable), and most likely the rest of the nominating and governance committee. In many cases, it will be appropriate for you to also meet with a specific member of the management team, depending upon the committees on which you are potentially slotted to serve. You should prepare to meet 5–7 different individuals during the process and expect the interview stage to last 2–3 months.
Once the board has decided they would like to potentially invite you to join the board, several key next steps will take place:
#4: Receiving and Accepting an Invitation
Assuming a positive outcome to the steps above, the nominating and governance committee will recommend that you are formally offered a seat on their board. Once the full board votes on that motion, the chair or the chair of the nominating and governance committee will call you to formally confirm your selection and invite you to join the board as well as attend the next board meeting. It is routine for a candidate to immediately accept the offer unless the candidate was obligated by his or her company to reconfirm their approval before formally accepting the offer.
You should then inquire about the timing of the press release and, if not, the publication date for the annual proxy statement. It is critically important that your current company, CEO, and board are comfortable with the timing. Once the announcement of your board appointment becomes public, you should take the time to personally call everyone on the board whom you met and thank them for the help and guidance they provided to you throughout the process.
Corporate boardrooms continue to be reshaped for the new future ahead of them. It is more critical than ever to get the right board members at the right time for a company to optimize its impact on the world around them. Hopefully pulling back the curtains on the mystique of the board search process will help improve the outcomes and experience for boardrooms and candidates alike.
About Our Board & CEO Services Practice
Our Board and CEO Services team partners with CEOs and boards to understand issues, assess opportunities, and strategically advise to ensure sustainable growth strategies are optimized. We are committed to executing an action plan that addresses sensitive and complex leadership needs and ensures clients are well positioned for the future. RSR offers trusted advisement rooted in years of experience and market knowledge. We excel at optimizing board and CEO effectiveness through transformative thinking about structure and operations. This helps us to engage closely with clients to drive greater accountability and enhanced performance. Our practice group leverages RSR Partners’ renowned experience in corporate governance with the firm’s industry and human capital consulting expertise to create an integrated and seamless approach. The range of services we provide to boards and CEOs include:
Board Services
CEO Services
RSR Partners is a boutique professional services firm headquartered in Greenwich, CT, that specializes in helping Boards and CEOs with their most critical recruiting, selection, and succession needs. The firm was founded in 1994 by industry icon, Russell S. Reynolds, Jr. The firm has conducted thousands of projects for Boards and CEOs at public, private equity backed, and family-owned businesses across a range of industries including asset management, consumer goods and services, industrial, technology, and healthcare. To learn more about RSR Partners, click here.
