Editor's Letter: The Non-Hollywood Director

When I came to Directorship from CFO magazine this past summer, I had a good feel for audit committee issues and dealmaking, but outside of that, I didn’t really understand exactly what directors did. Most of what I did know about the boardroom came from reading about the Enron and WorldCom crises, or worse, from Hollywood—Hudsucker Proxy, Trading Places, and, of course, Wall Street. In other words, I was only familiar with the cliché that persists—gray men sitting around long oak tables smoking cigars and talking about golf.

I was relieved to find that I’m not alone in my out-of-date or limited understanding of boardroom life, maybe because so much of what board members do happens behind closed doors or because the role of boards is changing so much. As Editor-at-Large Aaron Bernstein found when he set out to look at the history of corporate governance and the rise of activist shareholders, the role of boards is always evolving—probably never as fast as it is today.

Bernstein visited Ira Millstein, who has been a central figure in developing the model of good corporate governance. Millstein recounted the time in the early 1990s when he counseled the board of a large airline that had tried to oust the CEO. “You can’t fire me,” the CEO boldly protested. The board didn’t know how to proceed. “Of course you can,” Millstein told them. “You’re the board!” By comparison, boards have come a long way in a short time.

One man who did have a pretty good understanding of the importance of the board was Peter Drucker, the legendary management guru, who died in 2005, leaving behind 39 books full of management wisdom. In “Drucker in the Boardroom,” Elizabeth Haas Edersheim, author of The Definitive Drucker, gives us Drucker’s view of the role of boards and takes us through real-life cases. He said the board’s role was to be a “constructive adversary” of top management. In two words he captured that sometimes uneasy dichotomy that boards face as they advise and challenge management at the same time.

Edersheim, who is also a renowned management consultant, was invited to write a biography, not so much about the man, but about his ideas. She spent what she calls 16 “magical months” with him talking about his life’s work. At the center of her findings is that Drucker inspired a lot of people over his lifetime.

I was lucky enough to see him speak a few years back at a conference I attended. Though he was older in years and physically frail, his voice, with its distinct Viennese accent, boomed and held the room at attention. People nodded while he talked. It was almost religious. This was right after Enron, and Drucker was talking about the ethical responsibilities of executives. Like a father of a child who has gotten into trouble, you could hear the disappointment in his voice. He was angry that so many companies had run off course.

Drucker’s disappointment echoed in the halls of business and especially in boardrooms around the country. The resulting emphasis on responsible oversight is one that Hollywood’s version of board members would be blissfully unaware of, but one that real board members have been rehearsing for years.