2008 NACD Corporate Governance Conference: Opening Day October 19, 2008

Admiral William J. Fallon

As I was driving over, I thought, "What are you doing here? What do you know about corporate boards?" The answer is: Little about the latter-I'm the greenest of greenhorns in that business. But there are a few things I might share with you from my experience.

It's pretty clear that there's some serious business afoot. As you who guide corporations throughout the world consider the current environment, you'll find that people are pretty nervous. They're in acute anxiety-not knowing what went on, and wondering "What next?" Of course, some things will have to be known before we figure out "What next?"

It reminds me of when I received a phone call from Robert Gates, saying "I'd like you to take control of U.S. Central Command." - with two wars, and a few things going on in Somalia and central Asia.

As I contemplated what I was getting into, what I thought about was the challenge-not unlike what you're trying to deal with now. You've got economic uncertainty. Strong feelings on the regulatory environment. Strong feeling about corporations, and their roles in the world. What do you do when you're facing these challenges-and a significant loss of confidence?

What do you do?
First, recognize that you've got to have leadership: People who are willing to stand up and do things. People with the courage to stand by their convictions.

What else goes through your mind?
You wonder about the environment. As an aviator, I never wanted to go on the flight deck unless I understood the weather and conditions. You can never predict the future. But, if you know things are good, you can have some confidence. If you know things are not good, you need to make some plans.

You need to know your people.
Whether you're looking at half a million troops or a small office, the same rules apply. You have to know what they're doing and what they need. At the end of the day, it's your people who will fix your problems and get thing done.

I've been in situations where I've said-"I'm a little nervous about this, but I know my people and have confidence in them." How do you have confidence in your people? You have to know your business. You really have to know the detail end.

There's another piece that always goes with the business of leadership that causes us the most challenge-the idea of risk. It's something we deal with every day.

What do we really know about how to deal with risk?
In the military, we're entrusted with human lives. There's a well-placed sense of risk-adversity regarding what situations we put people into. But I've also found that people are often averse to things that make a lot of sense from a business and financial standpoint.

Everything we do, there's some risk involved. Every decision. But being able to analyze the risks is very important. For every board member, it's a high priority.

We are all blessed to be in positions where we are guiding organizations. We are given certain authorities-which carry certain responsibilities. These are ours to execute and command as we make decisions.

Right now, there is a lot of anxiety and fear-but there is also a lot of opportunity. If you want to get the job done-if you want to achieve results-you need to start at the top with strong leaders. But you also need a lot of help down at the bottom. We're really in the micro now-we're doing things with smaller groups of people that have a huge effect on ourselves, our country, and the world. We need to work from both the top and from the bottom in order to get things going in the right direction.

We have a lot of people who are counting on us-shareholders, workers. With all these folks counting on us, it's about time to consider and fix the situation that we find ourselves in. I'm not a guy who sits quietly. But I'm forcing myself to sit still, take a breath, think, then act. It's not easy, but I'm optimistic that we can find solutions.

Q: What will be the duration of the current economic crisis?

9 months	8%
1 year	26%
2 years	42%
More than 2 years	25%
Total Responses: 159

While no one can predict the final ramifications of the market meltdown, virtually everyone present agreed that significant new rules and regulations impacting director responsibilities are "very" or "somewhat" likely to be coming down the pike.

As Daly noted, "Legislation and rulemaking are coming. No doubt it will affect us." As the Hill looks for ways to improve corporate governance, directors need to find their voice, and make sure they are part of the dialogue.

For NACD members looking for other ways to share their opinions -check out NACD's new comment forum on the Emergency Economic Stabilization Act: What It Means for Boards.

What information should directors request? How can the board avoid information overload?

Pre-Conference Seminar

Lesson learned: The board should ensure management is transparent in the information they present. All directors-serving on public, private, or nonprofit boards-need to make sure they receive "information" instead of "data," whether the topic under consideration is compensation, corporate performance, or risk oversight. "It's not our job as board members to analyze data," said one panelist, "It's our job to have a discussion."

On the other side of the communication spectrum, the board needs to be transparent in what information it sends out to stakeholders. As one participant noted, "In an age when the most critical problems we face are 'look back' problems, we all need to make sure that, going forward, any decision-making process will be able to pass the tests of reasonableness and fairness." Will you be able to explain your decisions in a year?...In three years?

As the conference progresses, tomorrow's sessions will take an in-depth look at how to get the right information-and how to make sure the board and management are communicating on the same frequency.

NACD 2008 Corporate Governance Conference

Stay tuned to this site for breaking news, special announcements, and initial releases of all the publications, information, and survey data that drives the world of governance. We'll take you inside the keynote sessions, the Director of the Year awards banquet, and give you all of the on-site audience reaction to the news and information.

Plus, act now at an exclusive Early Bird offer of registration for the 2009 NACD Corporate Governance Conference. at the 2008 registration rate! Register before the conference offer ends along with the Conference - this Tuesday!

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