Born in south Georgia more than 70 years ago, Dr. Reatha Clark King has overcome many obstacles in compiling stunning achievements in the fields of science, education, philanthropy and corporate governance. In this interview with NACD Directorship’s Jeffrey M. Cunningham, King describes how she got started toward long tenures on five public company boards. Prior to her retirement last year, she served on the ExxonMobil board for 13 years. She also served for many years on the boards of Wells Fargo, HB Fuller, Minnesota Life and Lenox Group. She earned master’s and doctoral degrees in chemistry from the University of Chicago before securing an MBA at Columbia in 1977, and has since been awarded 14 honorary degrees. She ran the General Mills Foundation for 14 years. She is a life trustee at the University of Chicago, and a member of the Allina Health System and NACD boards of directors.

Dr. Reatha Clark King

How did your background contribute to your career and achievements?
I grew up in rural south Georgia and was taught in a one-room schoolhouse in Moultrie. Like everyone in my family, I picked cotton and worked on tobacco farms for a living until age 17—and I am proud to say I was good at it, too. That upbringing taught me that to keep your sanity, you must be a student of change. The second thing was that helping to improve circumstances for people and organizations is what really motivates me.

Did you ever imagine you would become a college president and then a renowned corporate board director? Not even in my dreams.

What was the turning point?
It was 1954, the same year as the Brown v. Topeka Supreme Court decision, which desegregated schools. Although my father was illiterate and my mother had only finished third grade, they both believed strongly in education. So when I finished high school, I entered Clark College in Atlanta, a Methodist institution that was started to help children descended from black slaves. I graduated in 1958 with degrees in chemistry and math.

How did you pay for college?
My scholarship plus a summer job as a live-in maid in upstate New York each summer allowed me to earn the money to pay the tuition. Unlike the movie The Help, I worked for a wonderful and truly enlightened woman, Mrs. Dann, who led me to see myself with dignity and introduced me to the public library, Rockefeller Center, Yankee Stadium, the opera house and Riverside Church.

Then came your academic career?
After graduating with my PhD in chemistry from the University of Chicago—as one of only two women—my first job was as a research chemist at the National Bureau of Standards in D.C. Then I moved to York College, where I rose through the ranks to became a professor of chemistry and academic dean. In 1977, I took a sabbatical and enrolled in Columbia’s MBA program, as I wanted to be sure that I had some background in business. Finally, I was nominated for the presidency of Metropolitan State University in the Twin Cities in Minnesota.

How did your corporate career begin?
Two phone calls in particular marked my ascendance into corporate life. The first was from H. Brewster Atwater, CEO of General Mills, who asked me to consider the role of president of the General Mills Foundation. Ultimately, I spent 14 years leading the company’s efforts to promote positive social changes in communities.

What was the second call?
That would be from Lee Raymond, CEO of Exxon, in 1997 (the merger with Mobil came later, in 1999), asking me via an executive recruiter to meet him to discuss joining the Exxon board.

Was diversity a factor?
As with everything Exxon did, the process was methodical and thorough. My guess is that diversity was one of several attributes. Exxon had already appointed a black man to the board and they had a woman, Marilyn Carlson Nelson, although I would be the first black woman. More important was the fact that I had several advanced degrees in chemistry. Few people realize an oil company is like the academic department of a major university. Lee Raymond has a doctorate degree and Rex Tillerson, currently ExxonMobil’s CEO, has an advanced degree, so we were very simpatico.

Board searches are usually confidential, so when did you become aware this was for the Exxon board?
Along the way, the executive recruiter told me he wanted to discuss my joining the board of one of the world’s three largest companies. He may have thought that would make my head spin, but frankly it didn’t. I already sat on three boards and I was afraid of becoming overloaded.

What were some of the most significant experiences you had while serving on the Exxon board?
My first ExxonMobil board meeting, which took place in Malaysia, was so memorable. After being elected, I was welcomed into the meeting and immediately participated in the business. Through my comments and questions, and my comfort level with the topics, I knew immediately that the fit with the board culture was excellent. All of my board experiences have taught me that effective and exemplary board members bring all their intellectual capacity, emotional toughness and societal concerns to bear to help their companies be top-performing. I have observed this to be true for world-scale petroleum companies like ExxonMobil and also much smaller retail companies like Lenox Group.

Who impressed you most in your board career?
A range of wonderful people—many fellow board members and several CEOs I have worked with. I would name Exxon CEOs Lee Raymond and later Rex Tillerson, Wells Fargo CEOs and others. I find that the best CEOs have to be tough-minded and focused without wavering on enhancing shareholder values and decision making for sustainable success. And do you know what? Effective board members must have the same kind of focus.

What were the most impressive developments you encountered?
Certainly, the key mergers stand out such as Exxon and Mobil and Norwest and Wells Fargo. Industry-changing practices like online banking are another high point. Then there is the personal aspect. Little things like employees meeting you at community events and saying, “I saw your picture in the company’s annual report and that really made me feel so good.” All of my many site visits to company plants and facilities were more meaningful to me in my board work than anyone could ever realize.

What concerns you about boards these days?
I am a very strong proponent of self-regulation. Too many boards nowadays must spend an inordinate amount of time having to deal with government regulation and enforcements that hinder rather than help the company’s progress. To be successful, companies must focus their time on innovations and improvements that contribute to long-term and sustainable success, rather than use resources to deal with unnecessary bureaucracy.

What about NACD’s role in educating and advocating for directors?
NACD supports boards developing best practices, and it represents boards of directors in policy discussions where our voice needs to be heard. How often does regulation take into account the views of the one who must oversee the implementation? NACD plays a crucial role in ensuring that regulation is reviewed carefully, and that directors are given the tools to understand it. NACD is at the center of the ecosystem we call corporate governance.

After all of your accomplishments, what motivates you these days?
My ambition these days is only to show my grandchildren that in this country even a black girl who grew up in the fields of south Georgia can make a difference in the lives of people and organizations. You have to believe in yourself and show that you want to serve. Others will help you.

What would you say to your parents if they were here?
First, I would thank them for their sacrifice, of which I can never adequately repay. Literacy may have skipped their generation, but intelligence, courage and determination had no better clients. My parents loved to hear compliments about their three daughters. They would love to hear the qualities people cite to characterize my corporate board work. My success in corporate and educational life represented the change my parents wanted to see happen, not just in our family, but in America.

William B. Chandler III

The process of choosing Chandler’s successor got underway in May when the Delaware Judicial Nominating Commission, chaired by Andre G. Bouchard, managing partner at Bouchard Margules & Friedlander, issued a public notice soliciting candidates. The court is required by the state constitution to be bipartisan, and all candidates must be Delaware residents. Following interviews, the JNC would refer any finalists to Gov. Jack Markell, who would then recommend one candidate to the state Senate for approval.

The 60-year-old Chandler, the subject of a cover story in NACD Directorship (December 2010/January 2011), notified the Delaware governor in April he planned to resign to seek opportunities in the private sector. His last day on the court was expected to be June 17.

Franklin, Hockaday to Co-Chair BRC on Lead Directors
A group of more than 20 corporate directors and governance thought leaders convened this spring to initiate the 2011 Report of the NACD Blue Ribbon Commission on the Lead Director. Hosted by the NACD, the commissioners will leverage their years of experience to develop recommendations that will define and clarify the role of the lead director in the boardroom. The commission is co-chaired by Barbara Hackman Franklin, former U.S. Secretary of Commerce, and currently a director for Aetna and the Dow Chemical Company and chairman of the board for NACD; and Irvine Hockaday, director for Ford Motor Company, Estée Lauder and Crown Media Holdings. Holly Gregory, corporate partner at Weil, Gotshal & Manges, will serve as governance counsel to the commission.

“As boards rise in accountability and visibility, the role of the lead director has become increasingly important. Lead directors play a critical role in ensuring independence of thought and oversight, and help build consensus in the decision-making process,” said Ken Daly, president and CEO of NACD. “The diversity and depth of experience represented on this year’s commission provide a unique opportunity to study leading practices for the lead director position.”

The new commissioners will meet once more in June as they continue to collaborate on their recommendations. The report is scheduled for release at the NACD Annual Board Leadership Conference on October 2-4 in Washington, D.C.

Delaware VC Cuts Plaintiff Lawyer Fee
What did shareholder plaintiffs lawyers achieve in their litigation over an abandoned tender offer for shares of Sauer-Danfoss? Not much, according to a recent decision by Delaware Vice Chancellor J. Travis Laster. In fact, Laster found that the plaintiffs lawyers did so little of value that he slashed their fee request by 95 percent and awarded them just $75,000 of the $790,000 they asked for, according to Morris James’ Delaware Business Litigation Report. Wrote Laster: “Plaintiffs never engaged in meaningful litigation activity.”

Heidrick Study Finds Number of Directorships in Decline
New director appointments decreased 22 percent from 2009 to 2010, according to the new Heidrick & Struggles Board Monitor Fortune 500 quarterly trend report, with 279 new directors at the studied companies in 2010, down from 356 in 2009. In addition, only one-third of these appointees had non-CEO or –CFO backgrounds, reflecting the growing post-Dodd-Frank disclosure requirements. “The ongoing economic uncertainty is causing companies to lean towards those with top-job experience when they do make an appointment,” said Bonnie Gwin, the leadership advisory firm’s vice chairman and head of the North American Board Practice. Average director age remained at 57, and female placements increased slightly from 17.9 percent to 19.3 percent.

Outside CEOs Cost More, Perform Worse
CEOs promoted from within are more cost-effective and outperform their external counterparts, according to a study conducted by The Kelley School of Business at Indiana University in conjunction with A.T. Kearney, that examined 36 companies that had promoted internally between 1988 and 2007. It compared their performance with other S&P 500 companies that had chosen external candidates. The study found that none of the external CEOs’ companies performed better than the 36 identified companies, and the external CEOs commanded salaries that were 65 percent higher than those of CEOs recruited from within.

Transocean Execs Donate Safety Bonuses to Victims’ Families
After sparking public ire by rewarding executives with safety bonuses, five Transocean senior executives will donate $250,000 collectively to a fund for the families of victims of last year’s Deepwater Horizon explosion in the Gulf of Mexico. Transocean had given safety bonuses because the company had reached two-thirds of its safety target, despite the deaths of 11 workers in the explosion and the subsequent massive oil spill. Overall, the five executives received about $900,000 in incentive bonuses; 25 percent of the bonus equation is determined by safety performance. Transocean reported that 2010 was its “best year in safety performance.”

Judge Orders Borders Bonus Plan Changes
Bankrupt bookseller Borders Group was ordered by U.S. Bankruptcy Judge Martin Glenn to revise its executive bonus plan after the lawyer representing unsecured creditors, Bruce Buechler, notified the judge that the plan rewarded executives for staying with the company though its bankruptcy. The plan had proposed giving the top five executives $4.9 million if unsecured creditors were paid at least $95 million, and a $1.8 million bonus if creditors received $73 million. Glenn instructed the retailer to include a provision that would apply if less than $73 million were returned to creditors.

Basel Establishes Criteria for Globally Essential Banks
The Basel Committee on Banking has established criteria designating banks that must maintain extra capital reserves because they are essential to global financial stability. The international regulatory committee did not compile a list of firms that these rules would affect. Banks will be evaluated based on “size, interconnectedness, substitutability, global activity and complexity,” said the committee’s secretary general, Stefan Walter, who noted that the Basel committee would monitor hedge funds, money market mutual funds and other securitization structures to help prevent another financial crisis.

Class Actions Lose, Arbitrators Win in Supreme Court Ruling
In a ruling expected to provide businesses with significant protections against class-action lawsuits, the Supreme Court ruled that state laws couldn’t override contract clauses that require customers to present complaints to private arbitrators individually. The case in question, AT&T Mobility v. Concepcion, fought over a $30.22 sales tax charge on phones that AT&T had advertised as “free.” The ruling makes arbitration clauses more attractive to companies in consumer contracts, and is expected to apply to employers in employee contracts under the Federal Arbitration Act of 2001.

Geronzi Resigns, Faces Ruling
Cesare Geronzi resigned as chairman of Italian insurer Assicurazioni Generali after the board threatened a vote of no confidence. He was awarded a payoff of 16.6 million euros ($24.3 million) upon leaving Europe’s No.3 insurer, according to Reuters. The controversial Italian financier has in succession chaired three of the country’s most important financial institutions: Capitalia; Mediobanca, which is Generali’s top shareholder; and Generali itself. Separately, a Rome court is due to rule on whether Geronzi contributed to the 2003 bankruptcy of Italian food group Cirio. Prosecutors are seeking an eight-year sentence for Geronzi, who has denied any wrongdoing.

Wall Street Banker Pay Falling
An unnamed Wall Street paymaster told The Wall Street Journal recently that the median banker pretax salary is currently $1.6 million, down from $2.2 million before the financial crisis hit. The pre-crisis pay was approximately 60 percent cash payments, with bankers taking home about $700,000 a year after taxes. Now, however, more bankers receive deferred compensation rewards, which brings their median aftertax take-home pay to about $380,000.

Director Shortage
Despite median director compensation increasing from $45,000 in 2001 to $119,500 in 2010, Canadian companies are having increasing difficulty finding directors to fill their boards. Spencer Stuart found “a definite increase in the number of first-timers joining boards,” said Andrew MacDougall, president of Spencer Stuart Canada. Over the past three years, almost 25 percent of all directors appointed were joining their first board. One-third of the newly appointed directors in 2010 were from the United States—the highest proportion since Spencer Stuart began tracking Canadian directorship trends. In addition, female board members increased to 20 percent in 2010, from 13 percent in 2009.

Top Paid CEOs in 2010
1. Philippe P. Dauman – Viacom
2. Lawrence J. Ellison – Oracle
3. Leslie Moonves – CBS
4. Martin E. Franklin – Jarden
5. Michael White – DirecTV
6. John F. Lundgren – Stanley Black & Decker
7. Richard C. Adkerson – Freeport-McMoRan Copper & Gold
8. Robert A. Iger – Disney
9. Donald J. Stebbins – Visteon
10. Jeffrey L. Bewkes – Time Warner
11. Alan Mulally – Ford Motor
12. Brian L. Roberts – Comcast
13. John H. Hammergren – McKesson
14. Samuel J. Palmisano – IBM
15. David M. Cote – Honeywell
16. Laurence D. Fink – BlackRock
17. James Dimon – JPMorgan Chase
18. David N. Farr – Emerson Electric
19. Thomas M. Ryan – CVS Caremark
20. Rex W. Tillerson – ExxonMobil
Source: The Wall Street Journal Survey of CEO Compensation

Corporate Reputations
Best:
1. Google
2. Johnson & Johnson
3. 3M Company
4. Berkshire Hathaway
5. Apple
6. Intel Corporation
7. Kraft Foods
8. Amazon.com
9. General Mills
10. The Walt Disney Company

Worst:
11. AIG
12. BP
13. Goldman Sachs
14. Citigroup
15. Chrysler
16. Bank of America
17. General Motors
18. ExxonMobil
19. JPMorgan Chase
20. Delta Airlines
Source: 2011 Harris Interactive

Hence, the Nifty Fifty of our era—Directorship’s “Best Performing, Best Governed Companies in the Fortune 500.” We took on the challenge of identifying those spectacular companies whose leadership both in the market and the boardroom is worthy of emulation. We then listed them based on raw data and weighted them for various disparities in size, sector, and circumstance, including overall economic stress factors that have prevailed, board director qualifications, and a new factor, limited outside board memberships by the CEO. We feel that CEO time is the most valuable commodity for the shareholder.

Of the total, we recognized one company in the 50 that managed to succeed against challeges beyond anyone’s expectations—that company is Goldman Sachs, and its chief executive, Lloyd Blankfein, is our CEO of the Year for 2009. The top 50 were chosen from the Fortune 500 based on measures of size, shareholder return, admiration, and corporate governance. Private companies, foreign companies, and companies that have a CEO appointed after the end of 2008 were not considered.

The top 50 were then reranked based on the above criteria. (Since return to shareholders is such a critical measure, it was weighted at 2X the other measures). Because we believe both performance and corporate governance are more difficult to achieve in the large-company setting, we felt a special premium should be placed on the largest. Finally, we brought the entire list to our Advisory Council for review and comment and noted the additional qualitative factors aforementioned.

What we came up with was a list—the only list that has attempted to place performance and governance together in one calculation —of great companies by anyone’s measure. In future years, with even more data and more measures, we hope to refine, if not improve, the methodology. Our conclusion: governance and performance are merely two sides of the same coin.

SOURCE: 1 Fortune 500 2009 rank based on revenue 2 Three-year average annual return to shareholders (June 30, 2006 to June 30, 2009) 3 Based on Fortune’s 2009 ranking of World’s Most Admired Companies 4 Based on RiskMetric’s Corporate Governance Quotient plus a bonus for ranking on CRO’s Corporate Citizenship rankings