While it is safe to assume that no executive or director seeks out bankruptcy experience voluntarily, having seasoned financial hands on deck when facing such an event can be invaluable. As Lehman Brothers Holdings reconstitutes its board, and American Airlines and its parent company, AMR, rework executive teams to turn the company around, both require a different level of expertise.
Lehman’s new board has been tasked with overseeing the planned distribution of $65 billion to creditors over the next three years. Korn/Ferry International advised Lehman on assembling its newly constituted board of seven, which is heavy on restructuring, real estate and derivatives expertise.
When facing an asset distribution, directors must have extensive knowledge of technical finance, legal literacy and a comfort in highly regulated environments, says veteran director Michael Pocalyko, who writes and consults on corporate turnarounds. “It’s easy to get caught up in ‘I’ll do what the lawyers tell me to,’ but directors cannot rely solely on that,” he says. “We are directors because we are expected to exercise our judgment.”
In contrast to Lehman’s asset distribution situation, which requires independent leadership, American Airlines and AMR opted to promote from within as AMR entered Chapter 11 reorganization. CEO Gerard Arpey retired, and AMR and American Airlines President Thomas W. Horton added the CEO and chairman roles. Horton was CFO at AT&T Corp., where he managed strategic alternative evaluations, leading to the 2005 merger with SBC Communications. Horton currently serves on the Qualcomm board, and also recently succeeded Arpey as chairman of oneworld, the global airline alliance.