MILLSTEIN: Exactly. It won’t be long before it becomes clear that a true lead director is, de facto, the chairman of the board. The lead director began as a total finesse. “We’ll call it a lead director, and we’ll be home free, and nobody will pay attention.” That didn’t last very long. Now, the NACD is taking the position that if you’re going to have a lead director, you have to spell out what he or she does. Explicit delegation of power by the board. In my view, this lead director is by function, if not title, going to become the chairman of the board. If he does all the things that he’s supposed to do, he will be de facto chairman. Watch.
S+B: Won’t boards have difficulty hiring CEOs if candidates know that, whatever the title, they won’t have the authority of the chairman?
MILLSTEIN: Most boards don’t want to strip the CEO of the chairman title while he’s sitting. The reason they don’t want to do that is, given the culture of the U.S., it will look like a demotion. It isn’t. It’s simply a redistribution of the job. But, it looks bad to strip the title, and I would not recommend that.
The issue you should be asking about is when succession time comes, why don’t they just say, “We’re offering you the job of CEO but we’re going to get ourselves a new chairman.” Search firms and others are saying, “It’s going to be very tough to find a person who will take the job if he’s not the chairman and the CEO.” I don’t believe that. When succession time comes around, if the boards have the courage to do it, and say, “We are offering you the job of CEO, with great salary, bonus, and options,” the job will be taken. Being a well-compensated CEO is a pretty good position in life.
S+B: Why don’t the boards have the courage to do these things?
MILLSTEIN: That is about culture. You’re fighting 100 years of argument that there has to be one boss.
S+B: How will that culture be changed? Litigation?
MILLSTEIN: I wouldn’t want to force it down anybody’s throat. I hope and expect that boards will come to understand that it’s the right thing to do.
S+B: You’re an evolution, not revolution, kind of guy.
MILLSTEIN: Yes, generally, but on this issue maybe not.
S+B: Where do you want a revolution in governance?
MILLSTEIN: As succession time comes along, enough boards need to do the right thing: separate the CEO position from the chairman position. If that doesn’t happen — if in the next five years we don’t see a clear trend toward separation — I would then say we should, at least, mandate a “comply with it or explain why not” process.
Where do I really think the revolution has to come? I think the revolution has to come in the degree to which the directors are taking the job seriously. It’s about as serious a responsibility as exists in corporate America. The evolution of directors is essential to maintaining our system free of further intrusive regulation. That’s the revolution I want. And I would do anything to make that happen.
S+B: How about limiting the number of boards on which a director can serve?
MILLSTEIN: You bet. Yes.
S+B: What should that number be?
MILLSTEIN: If you’re not employed, and all you’re doing is being a director, you can handle up to six comfortably, I think. But if you’re employed, I don’t see how you can handle more than two or three, and even that’s a lot. The number of boards you serve on is an indication of whether or not you’re really serious. If you’re going to be on 10 boards, forget it, you’re not a serious director. When somebody comes in and tells me they are on three audit committees, I question whether that person is really serious.