MILLSTEIN: An effective board in those days would have been a board that said, “How did we get into this fix? Are we ever going to get out of it? If so, what do we have to do — as tough as that may be?” It didn’t happen that way.
S+B: What would an effective board do now with a similar set of sectoral problems?
MILLSTEIN: An effective board today will get to the issue a lot quicker. A lot quicker. The issue is, is the CEO leveling with the board? In the earlier era I am talking about, the answer was no. In the era we’re talking about today, the answer is yes.
Let me be perfectly blunt. Very few of the CEOs I knew at that time would walk into the boardroom and say, “We have a major problem; we are in very big trouble.” They would prefer to solve it on their own, and then report success. And where there was no success, it was often too late.
S+B: And today when a CEO walks in and says that, what’s the board’s reaction?
MILLSTEIN: The board’s reaction is, “Let’s work together and see how to solve this, if there’s any way to solve it.”
S+B: Does this approach work better?
MILLSTEIN: Yes, I think so. The legal and regulatory emphasis on shared responsibility and shared accountability makes it work better and faster.
S+B: Do you think directors should seek consensus? Or are we happy with open disagreement over board-level decisions?
MILLSTEIN: Disagreement is fine, but it should remain in the boardroom. Consensus for the sake of consensus is no longer acceptable. Alfred Sloan once said something like this about a management meeting: “If, gentlemen, we’ve reached complete agreement, let’s start over.”
S+B: Would it be healthier for boards if directors — inside and independent — chose to resign over issues of strategy and direction?
MILLSTEIN: No, I really don’t think so. Nobody is smart enough to be sure their answer is the only one. When do you resign? If something criminal is happening, if something immoral is happening that you can’t live with, then yes. Otherwise, I don’t think so.
S+B: How about, “I don’t believe in this multibillion-dollar acquisition, so I’m resigning from the board”?
MILLSTEIN: If you felt that strongly about it, fine, you should resign. But I can’t believe that people often feel that strongly about it. What they do is say, “I don’t think it’s a good idea. I don’t think this is what we ought to do.” You have your argument in the boardroom, and you lose. If you have a good board and people that you feel that you can rely on, you don’t quit. You say, “I don’t agree. I’ve had my chance. We had a shot at it. We discussed it thoroughly. I understand you, you understand me. We don’t agree. But I understand that it’s 15 to one,” or six to one, or seven to one.
As a director, you also have your loyalty to the company. Fight in the boardroom, but don’t get to the point where you publicly throw the company over just because you don’t like a decision.
S+B: Couldn’t that be construed as advocating an absence of openness and honesty and disclosure about how the board made its decision?
MILLSTEIN: No, but dissent and healthy discussion is impeded if it has to take place in Macy’s window. The point is, as much as I didn’t like the typical boards in those days, I did respect what some were doing in the boardroom. Some of them pushed hard enough to make things happen. Eventually. It took a while. Directors cared and they argued but stuck it out, promoted their positions for change, and that was a good thing. I admired that.