Anderson in Dialogue With Cook-Bennett (the Director's Chair) - Listed (Dec 2014)

8/10/2019 Anderson in Dialogue With Cook-Bennett (the Director's Chair) - Listed (Dec 2014)

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37Winter 2014 | Listed

The Directors ChairGail Cook-Bennett

David W. Anderson You became a director on the boards ofManulife and Consumers Gas at 37far younger than the menon those boards. How did that come about?Gail Cook-Bennett I started my career as a professor of economicsat the University of Toronto, teaching and conducting research.On moving to the C.D. Howe Institute in Montreal I worked withCanadian and U.S. CEOs, labour leaders, academics and seniorpublic servants to understand their respective perspectives onpublic policy issues. Two board chairsSyd Jackson of Manulifeand Doug Gibson of Consumers Gaswere participants in ourround tables and subsequently invited me to join their respectiveboards in 1978. Ahead of their time, they sought the perspective ofa woman director, encouraged by senior women executives. Witha nudge from a colleague, I accepted an extraordinary opportu-nity to learn and contribute.

David W. Anderson How would you compare your experience onboards starting in the 1970s to today?Gail Cook-Bennett The most important change is that directorsnow are more likely to have a deeper knowledge of the businessand the determinants of performance. Directors are expectedto get their arms around complex businesses and contribute todecision-making. An indication of this change is that directorsare now able to speak intelligently about the business to investorgroups and regulators without the assistance of management.A second notable change has been in education. In the last de-cade, formal director education has fast-tracked learning andhelped accelerate the sharing of experience. When I started as adirector, opportunities for formal director education inside andoutside the boardroom were hard to come by and, truth be told,they werent much sought after or welcome. I had to learn onthe job.

David W. Anderson What lessons did you pick up by observingother directors that shaped your own work?Gail Cook-Bennett I learned a few things by watching others,seeing rsthand what worked and what didnt. First, asking aquestion or a series of questions is better than making an as-sertion when youve got a point to make. Second, how you for-mulate questions determines the quality of information you get.Its best to stick to fundamental questions that probe the biggerpicture. For example, a series of detailed questions on a pre-sentation are not as powerful as a contextual question on howsubject matter relates to other parts of business or to strategicdirection. Third, style matters. A whisper inside the boardroomis like a shout outside the boardroom. Effective directors use arespectful style that is likely to elicit the best contribution frommanagement and from each other. Being heavy-handed is notnecessary, as most executives want to engage the board and pro-vide what it requires.

David W. Anderson Youve chaired boards continuously for 16 years and are known for being rm, focused and fair. How do you approach your role as chair?Gail Cook-Bennett I believe in the wisdom of the group, so the mostimportant thing is to get the right people around the table. Peoplemake or break a board; we choose directors for their business-relevant

experience and ability to contribute as part of a team. The second re-quirement is to harness that knowledge and insight represented at thetable. Its a challenge to steer the board to a common view and fostercohesion in the face of disagreement. A chair has to listen carefullyto people with different perspectives. Of course, directors are not al-ways right; individual directors can be dead wrong in a disagreementwith management or fellow directors. Yet contrary views respectfullystated can illuminate bigger truths. The value of a board is found in itscollective judgment. The third important ingredient is agenda setting,which is used as a tool to manage the boards scarce time. To set theagenda requires knowledge of the critical issues in order to frame andfoster debates and maintain focus.

David W. Anderson Chairs work hard to nd a balance betweenshowing enough support to the CEO without degrading theboards oversight interests. How do you manage that tension?Gail Cook-Bennett The chair navigates carefully between the boardand the CEO. You have to look after the legitimate needs of both with-out losing objectivity. Just as you need candid, respectful dialoguewith directors, so too with the CEO. Its vital to have that constructiverelationship so that you both are able to say what you think and hearthe others view. Particularly in times of stress, theres a risk that the di-rectors and CEO each sees you taking the others side. That may meanyoure doing just ne, but one must continuously check with both tomake sure you remain fair and open to critique.

David W. Anderson As founding chair of the Canada PensionPlan Investment Board, you faced initial skepticism that sucha prized entity could remain insulated from political pressure.How did you succeed in building credibility?Gail Cook-Bennett A crown corporation competing for invest-ments in the private sector, with what was anticipated to be alarge asset base, presented obvious risks. The federal and provin-cial nance ministers had the courage to set up an arms lengthgovernance framework that t the mandate of CPPIB. This wouldbe essential to the success of the organization. The boards uniquechallenge was to operationalize this framework and ensure itwasnt compromised. In our rst year, without staff or investmenttrack record, we had to create a reputation in the market. Weknew that the key to success would be ensuring our investmentprofessionals were free to make their judgments without any gov-ernment pressure. As a board we established a foundational codeof values to guide us and our investment professionals. We had tomake it clear to Canadians and the intermediaries who commu-nicated to them that we were committed to those values. To drivethis home, we championed the establishment of an external con-

A whisper inside the boardroom is likea shout outside the boardroom. Effectivedirectors use a respectful style that islikely to elicit the best contribution frommanagement and from each other.Being heavy-handed is not necessary.


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39Winter 2014 | Listed

The Directors ChairGail Cook-Bennett

duct review adviser and developed a strong transparency policyto build trust externally. The board paid close attention and en-gaged in real problem-solving to be sure our values would becomea differentiator. It wouldnt have worked if management hadntbought in. The late John MacNaughton and David Denison, ourCEOs in the early days, were fully committed to living this valueset in the operations.

David W. Anderson CEOs want their boards to provide value asmuch as investors do. What must boards do to demonstrate the value of governance?Gail Cook-Bennett The hallmark of a deep understanding of gov-ernance is the boards ability to organize itself and deal with itssubject matter in a thoughtful, responsible way. This goes beyondwhether you have policy and process; you can pull those off a shelf.Really good directors do innovative thingsand sometimes canttalk about them. When youre dealing with the performance of theorganization, you have to recognize the context and have the cour-age to try novel things. Good board process gives safe harbour, butmy preference is for directors to think about whats really needed.For example, when I became chair of the board at Manulife nearthe beginning of the global nancial crisis, we were facing highdirector turnover due to age limits. We needed new people andwanted to get them up to speed before losing the knowledge andwisdom of those retiring. We chose to signicantly increase thesize of the board for a period to create overlap. Although we knewthe larger board size wasnt optimal, and we would be markeddown for it in external rankings, there was a clear rationale. Whilewe could have remained onside with the rankings by keeping theboard complement low, we would have lost out on the generationaltransfer. The right decision trumps slavish adherence to so-calledbest practice and ranking criteria.

David W. Anderson Youre intellectually curious and practicallymindeda problem solver by nature. How does your boardleadership reect this?Gail Cook-Bennett Im an advocate for innovating, looking at whatwe can do better. Im energized by the very problems for which thereare not pre-packaged solutions. Why? Because its there that we canadd the most value. Ive been a part of experimentation with novelapproaches to in camera sessions in an audit committee, committeestructure and succession planning. In each case we t a solution to theproblem in our context. Sometimes the best answer for one board isntgeneralizable to others.

The complexity increases, moreover, when you factor in the peo-ple on those boards. Each board has its own social dynamicwhichevolves over time and can change markedly as board compositionchanges. The particular combination of corporate circumstances andpeople dynamics makes every boards options and outlook unique.Indeed, some approaches that I found productive used by one boardwould almost certainly not be suitable for others.

David W. Anderson How do you square innovation with best practice?Gail Cook-Bennett Each board has a set of corporate circumstanc-es that distinguishes it from others. Should we not then expectboards to take different paths, if in fact they try to make the bestdecision specic to their organization? Directors ought to tailor

their governance practices to their companys needs; governanceis not following a rulebook of processes. Best practice is usefulfor bringing lagging boards up to standard, but becomes trouble-some when its denition interferes with a board applying its own judgment in context. For those boards that have the potential tobe innovators, lets not crush them with a solution t for anothercircumstance. I think we ought to guard against the tyranny ofbest practices.

David W. Anderson Pressure to perform in published board rank-ings doesnt generally encourage innovation, but does it pro-duce better governance?Gail Cook-Bennett Board rankings have focused attention on someimportant issues. People are more aware of constituent parts of gov-ernance, but its not the whole story. Youre right to say rankings dontencourage innovation, but they may move some organizations morequickly to what Ive called standard practice in basic areas. However,you have to look at more than one dimension to appreciate the com-plexity of governance and the effectiveness of a board. What really mat-ters is what goes on around the board table.

David W. Anderson Do we need to update our view on governancefor the future?Gail Cook-Bennett Yes. Ill offer three related suggestions. First, weneed to avoid becoming too prescriptive, telling others what to do anddiminishing innovation. Governance should be about how we do thingsin context to get to the right outcome. Directors should have the free-dom to experiment, applying their judgment within context, once thebasic standards are met. Second, directors focus ought to skew to thestrategic and the longer term. Boards really have to ght for time to lookup from the weeds and forward to the future. Time is the scare resource;if a matter doesnt have high materiality, the board shouldnt talk aboutit. Third, and more fundamentally, I think we need to think about thegrowing mismatch between expectations for boards and their ability todeliverno matter who you put around the table. Its not clear to mehow far we can push the current system. Having directors spend moretime and beeng up external resources available to boards are not theanswers. This growing mismatch doesnt absolve directors of their re-sponsibility; we still need directors with deep knowledge.

David W. Anderson After close to four decades of service onboards, you exude excitement for your work. What is the sourceof this wellspring?Gail Cook-Bennett I nd the work of a director fascinating! It com-bines business issues that are complex and always changing, arsthand view of signicant domestic and international decisions af-fecting the machinery of our global economy, and collaboration withsmart, knowledgeable people who are committed to learning andmaking a contribution.

David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independentadvisory rm dedicated to assisting boards and manage-ment teams enhance leadership performance. He advisesdirectors, executives, investors and regulators basedon his international research and practice. E-mail:[email protected]. Web: www.taggra.com

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Anderson in Dialogue With Cook-Bennett (the Director's Chair) - Listed (Dec 2014)