Fred Amoroso and Carol Bartz on Director Accountability and the Value of Annual Board Assessment

SpencerStuart recently published the 2007 Silicon Valley Board Index, which updates useful statistics on Silicon Valley public boards, ranging from average annual board retainers for directors ($35,600 in 2007 up from $25,000 in 2003) to the continuing lagging percentage of female directors serving on Silicon Valley public boards (48% in 2007, up from 44% in 2003 but well below 91% for the S&P 500).

This year’s report also includes a Roundtable Discussion featuring Carol Bartz, Executive Chairman of the board of Autodesk (formerly also President and CEO) and a Cisco director; and Fred Amoroso, President and Chief Executive Officer of Macrovision and Chairman of the board of Foundry Networks.

Co-authors Nayla Rizk and John Ware of SpencerStuart pose the following question, which is of particular relevance to VC-backed private company boards:

"Clearly, the way boards see their role has changed.  One way more boards are using to continually define their role and hold themselves accountable is the annual board assessment.  How do your boards handle evaluations?  Do you conduct individual evaluations?"

AMOROSOWe’ve actually spoken a lot about whether we should do formal evaluations and, to be honest, it’s a sensitive topic.  Not everyone likes to go through that level of scrutiny.  We’ve offered a kind of self- awareness approach.  A few of our board members have actually gone out and participated in director training in different areas, so they are more aware of some of these things. . . . Board training is going to be one of the things we’ll see more of over time.

BARTZ: We do have board evaluations. . . . We’ve actually found it quite useful to collect information from each member and then tally it.  Then we can talk about it– such as, "We’ve all given ourselves a low score here, what do we want to do about it?" . . . It’s very important to be self-aware.  Even though we don’t evaluate directors person by person, the board evaluation process makes everyone self-aware.  We include questions such as "Does everybody participate?"  "Is everyone adequately prepared?"  And if you are sitting around the room and we collectively got a low score on "Is eveyone prepared?", then you have to do a little self-evaluation.  You know, "Gee, maybe they are talking about me."  I think it is very effective.

As I read through these answers, I was struck by the fact that these observations are equally true for private companies.  As we have written in "A Simple Guide to the Basic Responsibilities of VC-Backed Company Directors", avoiding scrutiny of their own actions is a natural inclination for company directors because the CEO reports to the board. 

But shouldn’t the board be held accountable to an absolute minimum standard of acceptable performance? Yes!  It is a critical legal requirement, through the exercise of the director’s duty of oversight, to scrutinize company management.  At the same time, directors cannot be exempt from scrutiny themselves–  lest we forget what has occurred at the Adelphia’s, Tyco’s, and Enrons of the world…

As Bartz, points out, generating self-awareness is the key– to the extent that asking questions about elements of the board’s collective performance generates a "Gee, maybe I…" moment, that is a positive accomplishment.  These are basic best practices for large and small companies, whether they are public or private. 

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