While this is not intended as a list of the very best boards—we agree with Ira Millstein, that unless you are in the boardroom, it's nearly impossible to decide which is the best—governance experts and board advisers do have their favorites. What follows is a sampling of boards that reflect some of the qualities that go into boardroom excellence, and some of the companies most often mentioned in our conversations about great boards. Each, in their own way, has demonstrated leadership that is required of boards if they are to be an adviser to and monitor of management and an advocate of shareholder value.
Boeing defines the board that has survived adversity and is stronger for it. In 2005, the Boeing board opted to remove CEO Harry Stonecipher after his relationship with a female employee was discovered, in violation of the company's recently adopted code of conduct. "That took a lot of guts and they are better off for it," says Elson. Such "courageous terminations" are a sign of a great board. The Boeing board installed James McNerney as CEO, who has done a good job of putting the aircraft company's problems in the past. Last year Boeing beat analysts estimates, delivered a record number of planes, and built a healthy backlog of orders for more.
James McNerney Jr., chairman and CEO; John H. Biggs, former chairman and CEO, TIAA-CREF; John E. Bryson, chairman and CEO, Edison International; Arthur D. Collins Jr., chairman and CEO of Medtronic; Linda Z. Cook, managing director, Royal Dutch Petroleum; William M. Daly, chairman of the Midwest region for JPMorgan Chase and former U.S. Secretary of Commerce.; Kenneth M. Duberstein, chairman and CEO, The Duberstein Group; General James L. Jones, retired Supreme Allied Commander, Europe; Edward M. Liddy, chairman of Allstate; John F. McDonnell, retired chairman of McDonnell Douglas; Rozanne L. Ridgway, former assistant secretary of state for Europe and Canada; Mike Zafirovski, CEO, Nortel
2. Colgate Palmolive
In September 2007, Colgate received the highest rating of 10 from Governance-Metrics International. It scores a 97 Corporate Governance Quotient on ISS's 100 point scale. On three separate occasions, it has been ranked among the top 10 boards in the United States by Business Week. But perhaps it is its record of longterm performance that is so compelling. The share price has appreciated by an average of 17 percent in the last two years, and more than 11 percent for the last 5. Add in the roughly two-percent annual dividend, and the results are stellar. Nearly all of our governance experts named Colgate a great board. Without a ton of name recognition, Colgate defines the work-horse board.
Ian M. Cook, president and CEO; John T. Cahill, former chairman and CEO, The Pepsi Bottling Group; Jill K. Conway, professor, Massachusetts Institute of Technology; Ellen M. Hancock , former president of Jazz Technologies; David W. Johnson, chairman emeritus of Campbell Soup Co.; Richard J. Kogan, former president and CEO of Schering-Plough Corp.; Delano E. Lewis, senior fellow, New Mexico State University; J. Pedro Reinhard, former executive vice president and CFO of Dow Chemical; Howard B. Wentz, Jr., former chairman of Tambrands; Stephen I. Sadove, chairman and CEO, Saks Inc.
3. Goldman Sachs
The board of Goldman proved itself perhaps more than any other company in the past year by helping the Wall Street giant avoid the subprime trap that many of its competitors fell into. Allstate Chairman Edward Liddy, who sits on the board of Goldman, says the board demonstrated great leadership. "They stayed away from some of the more exotic financial instruments that have caused others such losses," he says. Of course you are only as good as your last success, but right now Goldman is the envy of Wall Street and its board—one of just two major banks along with JPMorgan to have a separate risk committee—is at least partially to thank.
Lloyd C. Blankfein, chairman and CEO; Jon Winkelried, president and co-COO; Gary D. Cohn, president and co-COO; John H. Bryan, retired chairman and CEO of Sara Lee; Claes Dahlbäck, senior adviser, Investor AB; Stephen Friedman, chairman of Stone Point Capital; William W. George, professor at Harvard Business School and former CEO of Medtronic; Rajat Gupta, former managing director of McKinsey & Co. ; James A. Johnson, vice chairman of Perseus, LLC; Lois D. Juliber, vice chairman ofColgate-Palmolive; Edward M. Liddy, chairman, Allstate; Ruth Simmons, president, Brown University
4. Tyco International
If you had a clean slate to build a board from scratch, it might look a little like Tyco's. After the Dennis Kozlowski nightmare ended, Ed Breen took over as CEO and his first order of duty was to ask all the board members to resign. Breen brought in a new board full of individuals with high qualifications and reputations for integrity. The board, which upped Tyco's GMI score from a dismal 1.5 in 2002 to a near perfect 9.5 in 2006, oversaw a successful breakup of the company in an attempt to unlock value that finalized in July of 2007. (Another turnaround story that could be on this list is Waste Management.)
Edward D. Breen, chairman and CEO; John A. Krol, lead director, former chairman and CEO of DuPont; Dennis C. Blair, retired Commander in Chief of the U.S. Pacific Command; Brian Duperreault, former chairman of ACE Limited; Bruce S. Gordon, former CEO of the NAACP, and former president of retail markets at Verizon; Rajiv Gupta, former chairman and CEO of Rohm and Haas; H. Carl McCall, former comptroller of the State of New York; Brendan R. O'Neill, former CEO of Imperial Chemical Industries; William S. Stavropoulos, former chairman and CEO of Dow Chemical; Sandra S. Wijnberg, former CFO of Marsh & McLennan; Jerome B. York, former chairman of Micro Warehouse
Another example of a successful turnaround, Schering-Plough's board brought in Fred Hassan in 2003 and began a long process to transform the company. The board is stocked with current and former CEOs of Fortune 100 companies. Says Moodys: "The board's commitment to new leadership and a long-term turnaround plan has paid off." Recent investigations into the company's Vytorin product will certainly test the board again.
Fred Hassan, chairman and CEO; Hans Becherer, former chairman and CEO of Deere & Co.; Thomas Colligan, former vice chairman of client services at PwC.; C. Robert Kidder, former chairman and CEO of Borden Inc.; Philip Leder, Harvard Medical School; Eugene McGrath, former chairman and CEO of Consolidated Edison; Carl Mundy, retired General, Commandant of the U.S. Marine Corps; Antonio Perez, chairman and CEO of Eastman Kodak; Patricia Russo, chairman and CEO of Lucent; Jack Stahl, former president and CEO of Revlon; Kathryn Turner, chairman and CEO Standard Technology; Robert van Oordt, former CEO, Rodamco N.V. ; Arthur Weinbach, chairman and CEO of ADP