Interview with Christie Hefner, Chairman and CEO of Playboy Enterprises

PLAYBOY ENTERPRISES CHAIRMAN AND CEO Christie Hefner knows boards. She has served as a director at MarketWatch, Sealy and Telocity, as well as numerous private organizations, and is a founding member of the Director's Council and the Committee of 200. Hefner will speak about board effectiveness at the Directorship Boardroom Forum in New York next month. Meanwhile, here are excerpts from a recent interview at Playboy headquarters in Chicago:

Directorship: From where you sit, do you think the tighter regulatory environment has changed the director's job?
Christie Hefner: In all probability, there are more good boards, and more good directors on boards, than there used to be, because of both the perception of the need for change and the requirements of Sarbanes-Oxley for change. I do think the role of directors on audit committees, no matter how good the board, is different than it was, because of the changing requirements vis-a-vis directing the outside auditors.

Playboy Enterprises itself gets fairly high governance ratings. What works well on your own board?
One thing we've benefited from is that we've always had a small working board. A large board by definition winds up being the recipient of presentations, instead of a group of people sitting around a table actually engaged in a collaborative discussion about issues, trends, plans, challenges, etc. I think if you get above, say, a dozen people on a board, it's too many.

The second is that it's always been all independent directors, except for myself and the man who's kind of the representative of my father. Everyone else who has served on the board since I've been CEO has been independent of the company, not from our law firm or our investment bank or our commercial bank or our business partners. My view there is pretty simple—you've already paid those people for their best thinking.

We've also benefited greatly from having people who represent a diversity of points of view. Someone might have a strong background in retailing, someone else might have a strong background in M&A and public financing, or entertainment law, or new media, or cable television. I've always tried to have a mix of types of expertise, obviously trying to match our own portfolio of businesses. And the last thing that historically we've done that I think has been really helpful is to let the directors interact with and have access to key executives, not just to the CEO -- not to have everything filtered through me. Almost at every meeting we deliver a showcase of part of the company. Over time, both the people of the company and the businesses of the company get to be familiar to and known to the directors.

More and more, sitting CEOs are constrained from serving on more than one outside board. What is that doing to board composition?
I always thought CEOs should sit on no more than one outside board. I just think it's too big a commitment, unless you do nothing else in your life. And I actually think it can be a good thing for boards, because I think that the pool of sitting CEOs was an overfished pool. There are a lot of other pools to fish in.

I know you're committed to improving board diversity. Where do you find qualified candidates?
I helped found this group called the Directors Council, which exists solely to try and help boards who want to increase the diversity they have and need to meet the standards of independence, and to match that with the dramatically increasing number of outstanding women and people of color for board service. Some of those will be people who are not in the Fortune 500 but in fact are more entrepreneurial. Some of those will be people who are from large companies but not the CEOs. So, for example, I placed the head of global marketing and strategy for Kraft onto a New York Stock Exchange-based company called Danaher last year. I'm working on a search right now, and if I'm right, again it will be a woman who is the top marketing executive at a well regarded company. So CMOs, CTOs, CFOs, divisional presidents of large companies -- those I think are all very appropriate and underfished pools. Historically, a lot of searches were done just based on the CEO knowing a candidate.

I've heard the number of hours it takes per year to be a director has quadrupled. Is that true?
It's entirely a function of specific circumstances. There can be times that can be heavily intensive if there's an opportunity or problem. But at a well run company, in the normal course of things—again, with the exception of the audit committee—I don't see a quadrupling of the time.