DIRECTOR LIBRARY
Leadership and Governance
from the Inside Out
Edited by Robert Gandossy and Jeffrey Sonnenfeld
Published by John Wiley & Sons, N.J., 297 pages, $34.95
REVIEWED BY PAUL D. LAPIDES
A
   to create in the last few of years. While there are “Toward Reform.” Every contributor has
and sustain world-class orga- many excellent books available, most are something important to share that will
nizations in a post-Enron/Sar- written by individual authors with a fair- make you think, provoke challenge, and
banes-Oxley world? Have you ly prescriptive perspective. What distin- enable you to have more robust discusfelt overwhelmed by SOX, the Public guishes this book is its depth and scope sions with others within and outside the
Company Accounting Oversight Board, of opinions on the topics of governance, boardroom. The result? Better decisions.
the new governance rating industry, or leadership, and decision making.
I should also note that the quality of
Leadership and Governance is a collec- the writing is excellent. While reading
the myriad experts spouting conflicting
advice about corporate governance? Are tion of writings by 27 individuals — many of the chapters, you will actually
you responsible for making decisions to CEOs, presidents, corporate directors, feel as if the author is talking directly to
maximize shareholder returns, while regulators, academics, governance you. Moreover, you may get the feeling
managing risk and building win-win re- thought leaders, and one whistleblower. that the author would like to hear what
lationships with your customers, em- Without preaching a set of rules that you have to say on the topic and engage
ployees, suppliers, and others? Do you every board should adopt, the book will in a meaningful discussion with you.
provide legal, accounting, or manage- make you feel as if you have been invitOne of my favorite chapters is written
ed to participate in a vigorous discussion by Susan Keating, a former president and
ment advice to directors and officers?
If you answered yes to any of these with some of the best and brightest cor- CEO of a bank holding company, about
questions, Leadership and Governance porate leaders and thinkers.
the company’s collapse. Appropriately tifrom the Inside Out was written for you.
The book is edited by Robert Gan- tled “If I Only Knew Then What I Know
If you are like most corporate directors dossy of Hewitt Associates and Jeffrey Now,” her seven lessons about risk, culand officers, and nearly anyone else who Sonnenfeld, associate dean for executive ture, and management should be a “must
reads the business press, you have read programs at the Yale School of Manage- read” for every director.
a lot about governance in the last few ment. Both have been studying and writ“Challenge Up: A Key to Organizayears. In fact, you have probably read and ing about leadership, management, gov- tional Integrity,” written by Marshall
heard more on this topic in the last three ernance, and corporate scandals since the Goldsmith, a highly acclaimed thought
years than you have in the last 30 years 1970s. Their selection of contributing leader on management, offers guidelines
combined. Enough already! That’s what authors and topics is brilliant.
that will change the culture of most orI thought when I was asked to review this
The book has 22 chapters, broken ganizations very quickly. Organizations
book. I was wrong.
down into four sections: “Fu- that have adopted Goldsmith’s guidelines
This volume is worth readeling the Crisis: Corporate or similar principles have generated outing and studying. Perhaps this
Scandal and Wrongdoing,” standing returns for shareholders, are
is why it received glowing
“The Role of the Leader,” sought after by workers, and have a loyal
praise from such wide-rang“The Role of the Board,” and customer base.
ing opinion leaders as GE
Enron whistleblower SherPaul D. Lapides is director of the Corporate
CEO Jeffrey Immelt and
ron Watkins, along with sevGovernance Center in the Coles College of
Goldman Sachs CEO Henry
eral other contributing auBusiness at Kennesaw State University, KenPaulson, as well as CNBC
thors, reminds directors and
nesaw, Ga., where he is a professor of mancommentator Jim Cramer
managers that most people
agement and entrepreneurship. A CPA and a
and shareholder activist Greg
do what they are rewarded
member of the National Association of Corporate Directors’ Blue RibTaxin of Glass Lewis.
for. Scandal after scandal has
Leadership and Governance bon Commission on Audit Committees, he chairs the audit committee
taught us that many compais unlike any of the dozens of of a NYSE company. He has written more than 100 articles and 12
nies and jobs could have been
governance books published books on management and directors’ responsibilities.
saved if whistleblowers had
20 DIRECTORS & BOARDS
DIRECTOR LIBRARY
not been suppressed or ignored by management and board dynamics.
In “Corporate Governance and the
Culture of Seduction,” former SEC chairman Arthur Levitt discusses his experience as a board candidate for Apple
Computer Inc. “Apple CEO Steve Jobs
invited me to join his board ... at least I
was under the impression that he invited me.... The very next day, Jobs disinvited me.” The rest of the story is fascinating and educational.
In the chapter “ ‘I See Nothing, I Hear
Nothing’: Culture, Corruption, and Apathy,” Gandossy and Sonnenfeld frame
the discussion by charting and identifying governance breakdowns in recent
years and drawing direct parallels to classic governance failures in business history. Their work reveals that the pathological, cultural, and psychological
dimensions of group dynamics are at
least as important to genuine diligent
oversight as accounting controls and
compliance with regulatory requirements. They also show that bright, informed, independent directors who are
financially literate continue to surrender
good judgment in the face of pressures
Directors and officers
of public companies
will find this book to be
a breath of fresh air.
to conform to the group. Their observations raise serious concerns about the
checklist approach to governance. Instead, directors and officers must use
judgment to make decisions that are in
best interests of the organization and its
shareholders. (See accompanying excerpt
from this chapter.)
Another superb chapter will be familiar to D & B readers:
“Seeing Around Corners” by Norman
Augustine, former chairman and CEO of
Lockheed-Martin, first published in
these pages.
If you are looking for answers, you will
find some in Leadership and Governance
from the Inside Out. You will also find
conflicting points of view on many issues. That is part of the beauty of the
book. Ultimately, you will have to decide
what is in the best interests of a company and its shareholders, based on specific circumstances.
Directors and officers of public companies will find this book to be a breath
of fresh air. While Gandossy and Sonnenfeld have provided both a clear and
pragmatic decision-making framework,
they have not churned out yet another
“list of rules” to be applied to every company without regard to industry, size,
■
stage, or circumstances.
The human side of governance
For reformers, the situation is akin to the dog
that finally caught the car it chased for years:
Now that we have it, what do we do? It’s time
to shift the debate from rules and procedures
to focus on what we really know about people and their character.
Remedies often have more to do with
human processes than simple rules and regulations alone. A critical part of corporate
diligence has to do with group process at the
top for the culture of the board.
• Dissent is not the same thing as disloyalty. One prominent director warned that “no
one wants to be seen as the skunk at the
lawn party.” The CEO and the board can set
a tone that welcomes internal feedback so
that problems can be identified and corrected before they become major integrity, financial, and public relations disasters.
• An excess of enthusiasm for the branded
names preferred by directors and search
consultants has led to a pathological fixation
on marquee names. Many of the prominent
public figures on troubled boards probably
would have been endorsed by all parties in
advance. Corrupt CEOs love to hide under the
reflected glory of star-studded boards, knowing that investors will be impressed and the
directors themselves will be too busy to roll
up their sleeves and ask the tough questions.
A great chief technology officer from another firm may be more valuable than five former
U.S. ambassadors.
• Sadly, many people seek board posts for
power and the gratification of vanity, but
have little interest in the industry or culture
of the enterprise they have joined. Sometimes directors will even admit that they do
not fully understand the acronyms on the
charts in PowerPoint presentations.
• Boards and management committees
should not resemble city council meetings.
Sometimes unrevealed conflicts become
more apparent in later actions, and sometimes the conflicts are not even financial but
rather political and personal. Board candidates who are primarily anchored in singleissue causes are not likely to be legitimate
representatives of a broader group of shareholders.
• Many of the proposals put forth go against
conventional wisdom, like headhunters who
used to screen out those who salt their food
before they taste it or those who use
handrails walking up stairways. There is a
growing witchcraft of good governance that
avoids noble directors who may have
crossed an arbitrary retirement age.
Similarly, admonitions against former
chief executives on the board should be invoked only in those prominent rare situations
where the former CEO and the current CEO
have unresolved agendas between them.
Many former CEOs, such as Andy Grove of
Intel, Bill Gates of Microsoft, Jim Kelly of
UPS, and Herb Kelleher of Southwest Airlines, have hugely helpful roles to play on the
board.
From Leadership and Governance from the
Inside Out, edited by Robert Gandossy and
Jeffrey Sonnenfeld, © 2004 by John Wiley
& Sons Inc.
SECOND QUARTER 2005 21