MANAGEMENT 3 QUESTIONS EVERY DIRECTOR SHOULD ASK (AND BE ABLE TO ANSWER) ABOUT TALENT THANKS TO THE FREQUENT FRONT-PAGE appearances of well-known activist investors like Carl Icahn, Nelson Peltz, and Bill Ackman, how companies are run—and by whom—is headline news. Along with a rise in activism, there has been increasing interest by traditional asset managers to engage directly with board members and hold them accountable. Take Blackrock CEO Larry Fink’s latest letter to CEOs where he states: “Boards have an obligation to review, understand, discuss, and challenge a company’s strategy.” It is therefore critical that directors embrace the “new normal” for 2016 and beyond. This means deep, meaningful involvement at both a strategic operations and governance level. It also means engaging more broadly across— and likely deeper within—an organization’s leadership to understand how corporate strategy is being formed, how well it’s been pressured tested, and whether the assets are in place to execute against it. Too often boards are steered and coached nearly exclusively by the CEO who—while well equipped to articulate the “why” and “why now” behind the vision—may not be best suited to help directors understand the “how.” While the CEO will remain the primary conduit to the board, directors should build relationships with a range of senior leaders who can arm them with data and business insight at a new level of depth and who can prep them 56 CO R P O R AT E B OA R D M E M B E R S E CO N D Q UA RT E R 2 0 1 6 in advance of any direct dialogue with shareholders. So where should directors start, and what precisely should they be asking to ensure they can successfully steer, govern, and ultimately protect their organizations? Given that no strategy can be effective without the right people in place and since people are the most critical corporate asset, a logical place to begin is with the chief human resources officer (CHRO). The individual in this role often guides annual compensation and succession discussions and may frequently brief the board on key talent dependencies, but here are deeper questions every director should ask to gain a better understanding of talent issues outside the executive leadership team. ONE What role does talent play in our ability to deliver long-term value creation for our shareholders? The best boards work back from strategic priorities to pinpoint talent areas that will have the greatest impact on the company’s ability to execute its strategy. For example, if a core element of the long-term strategy is cost and efficiency, it’s important to know how successfully the organization is managing margin sensitivity to labor costs. This isn’t as simple as it sounds. Furthermore, if you’re looking for talent who can help transform