York University Professor Richard Leblanc (right) gained unprecedented access to the boardrooms of North America’s most powerful companies through research that has significantly influenced rules surrounding corporate governance and has landed him on The Globe and Mail’s “Top 40 Under 40″ list.
Leblanc’s groundbreaking five-year study, also the subject of his newly-released book, draws from his first-hand observation of the inner workings of 21 boards of directors, and his interviews with nearly 200 directors.
A professor of corporate governance, law and ethics in York’s Atkinson Faculty of Liberal & Professional Studies, Leblanc’s findings caused the Ontario Securities Commission to sit up and take notice. In April, it amended sections of its policy governing board selection based in part on his recommendations.
“Most of the recent prescriptions for improving corporate governance focus on the structure of boards – their size, composition and independence,” Leblanc says. “TSX companies should now recruit directors based on their competencies and skills, paying attention to personality, and have position descriptions and assessments done in light of the competencies and skills that directors actually bring to the board.”
The Chair of the Ontario Securities Commission, David Brown, was among those who recommended Leblanc for the Top 40 distinction. “Professor Leblanc’s detailed advice helped shape the governance guidelines that are soon to be mandated for all Canadian public companies,” he said.
Says Leblanc, “It’s important to do research that has real impact. York nurtures that link between theory and practice – they welcome and embrace it.”
Atkinson Dean Rhonda Lenton says Leblanc’s work is an outstanding example of these principles. “The impact of Professor Leblanc’s research is already evident. His work is actually used by regulatory bodies and in the public and private sectors to affect change where corporate governance practices are concerned,” Lenton says.
Leblanc’s research has introduced a new classification scheme for identifying and selecting types of directors – the “10 Cs” of director behaviour. “When you have decision-making failure, the odds are you have directors who didn’t have the best competencies and behaviours,” says Leblanc. “Of the 10 Cs, the worst kind is the ‘controller-director,’ be it a significant shareholder, a CEO or both.”
Leblanc cites current experiences, such as the NYSE Grasso pay decision, involving former CEO Richard Grasso’s $140-million pay package, and the alleged operations of Conrad Black and the Hollinger board, which illustrate that structural independence may not necessarily result in effective corporate governance.
Leblanc’s 10 Cs of director behaviour
Functional director types:
1. “Conductor Chairs” are superior Chairs who relate very well to directors and management, have a keen interest in effective governance, possess remarkable leadership skills and serve at the hub of all important board activity.
2. “Change Agents” act as catalysts for bringing about fundamental change (e.g. replacing the CEO, fighting a takeover, developing a new strategy). Retired CEOs of successful enterprises make excellent change agents.
3. “Consensus Builders” act as conciliators, disarming and resolving conflict through interpersonal and communication skills. Former senior politicians make exceptional consensus builders.
4. “Counsellors” have strong persuasive skills, high credibility and the ability to work one-on-one with a variety of people. They are coaches, connectors, mentors and negotiators.
5. “Challengers” ask the tough questions – they know when to speak, what to say and how to say it, and their questions cause managers to re-think key decisions. Lawyers, accountants, consultants and academics often make effective challengers.
Dysfunctional director types:
6. “Caretaker Chairs” are unable to run board meetings effectively, do not manage interpersonal conflict and dissent, and do not have effective working relationships with other directors, the CEO or the management team. They should be replaced if they cannot improve.
7. “Controllers” dominate board process through skill, tact, humour or anger. They are very dangerous, particularly when the board contains other dysfunctional director types who cannot neutralize them.
8. “Conformists” are non-performing, cooperating directors who support the status quo and seldom prepare for, or take part in, any serious discussion. They are well-liked due to past success or relationships, and may be former CEOs, regulators or politicians who now have limited credibility.
9. “Cheerleaders” are enthusiastic amateurs who constantly praise other directors, the CEO and the management team but are unprepared for meetings, unaware of strategic issues facing the company, and often ask inane questions. At worst they are regarded with contempt and at best are referred to as “sleepers,” “non-performers” or “ineffective.”
10. “Critics” constantly criticize and complain, with an abrasive tone and ill-chosen words. They are referred to as “manipulative” and “sneaky” by fellow directors and lack the ability for “constructive dissent” possessed by challengers or change agents.
Leblanc’s book, Inside the Boardroom: How Boards Really Work and the Coming Revolution in Corporate Governance is co-authored with James Gillies, professor emeritus of policy and founding dean of York’s Schulich School of Business. Published in May, 2005 it has received advance praise from both private and public sectors, including Harvard Business School and the Yale School of Management. Jay W. Lorsch, of Harvard Business School’s Corporate Governance Initiative, called Inside the Boardroom a “‘must read’ for all concerned with corporate governance.”
A certified management consultant and member of the Law Society of Upper Canada (Ont.) and the Law Society (UK), Leblanc is also a York alumnus (LLM ’97/PhD ’03) and teaches in a number of areas including business law, business ethics and policy, as well as general management. He has assessed the effectiveness of boards of directors; audit, compensation, risk management and nominating/governance committees; Chairs of boards; Chairs of board committees and chief executive officers, together with offering recommendations for improvement.