Beyond the Checklist: How to Conduct Board Assessments That Drive Real Change [Stuart Levine]

Board assessments have evolved from routine, check-the-box exercises into critical tools for improving performance, strengthening culture, and identifying hidden risks. In this conversation, Stuart R. Levine shares how effective evaluations balance quantitative rigor with qualitative insight, uncovering the nuances that surveys alone often miss. He explains why confidentiality and independence are essential to building trust and eliciting honest feedback from directors.

The discussion explores emerging trends, including individual director evaluations, the role of external facilitators, and the increasing importance of board culture in a rapidly changing environment. Through real-world examples, Stuart highlights how thoughtful assessments can reveal subtle inefficiencies, improve collaboration with management, and ultimately enhance a board’s strategic impact.

What You'll Learn:

• How to move beyond superficial "check-the-box" surveys by blending quantitative data with qualitative interviews to uncover hidden board nuances.
• The strategic value of incorporating feedback from top management to identify trust blockages and align the board with executive leadership.
• Practical ways to build "governance plumbing" using dashboards that track cultural indicators like employee turnover and satisfaction.
• Why choosing an external facilitator with deep experience is essential for navigating the speed of global change and sensitive director evaluations.
• How to identify high-performing directors by looking for rigorous preparation, punctuality, and a proactive commitment to continuous learning.

To learn more & get resources:

• Podcast & episodes: www.publiccompanyseries.com
• Download the book: www.nyse.com/pcs

Subscribe now to hear insights from the most respected voices in corporate law and governance.

Transcript

[00:00:00] Doug Chia: Welcome to the Public Company Series podcast, powered by OnBoard: giving boards the clarity, security, and insights they need to make better decisions and deliver lasting value. I'm your host, Doug Chia. This podcast series is designed to give corporate directors, executives, governance professionals the insights and tools they need to build boards that are agile, resilient, and prepared for the future.

[00:00:33] Doug Chia: It's based on the book Board Structure and Composition, which is part of the Public Company Series published by the New York Stock Exchange and JP Morgan. My guest for today's episode is Stuart Levine, chairman and CEO of Stewart Levine and Associates. Stuart authored the chapter of the book entitled Board Assessments That Deliver.

[00:00:57] Doug Chia: Stuart, welcome to the show. 

[00:00:59] Stuart R. Levine: Thank you, [00:01:00] Doug, and it's a pleasure to be with you again. 

[00:01:02] Doug Chia: So let me set the context for today's discussion and then we'll get into it. After years of being done on a perfunctory basis, more or less, boards started to realize that self-assessments when they're conducted deliberately and the results are taken seriously, can noticeably enhance a board's performance on many of their most important responsibilities, as well as foster a healthy board culture,

[00:01:31] Doug Chia: without which a board cannot be effective. Self-assessments can unearth areas of dysfunction bubbling beneath the surface and identify real gaps in areas of weakness that could make the board obvious targets of activists. In his chapter, Stewart, based on his extensive experience leading board evaluations and also sitting on boards, explains how light governance itself, board [00:02:00] assessments, are a mix of art and science.

[00:02:03] Doug Chia: It takes skill and know-how to draw out candid feedback from directors and then reflected back to them with the kind of analysis that may make those same people uncomfortable, but useful for them to digest as tough medicine and then apply it in a way that adds unquantifiable value. Today I'll talk to Stewart about how he approaches board assessments in a way that's formalized, yet designed to catch the nuances of a board's culture and performance.

[00:02:38] Doug Chia: And so with that, we will dive into this. Stewart, you refer upfront in your chapter to the science and art of this type of activity board assessments. Maybe you just want to give us kind of little overview of the science, quickly, and then the art, which is really what we're gonna be talking about [00:03:00] today.

[00:03:00] Stuart R. Levine: I think there's a duality here. Uh, I think the science comes in to, let's call it the quantitative questions that we would ask, uh, directors and, and I want to really start the conversation with, uh, you, Doug, and talking about the importance of confidentiality and independence, so that when we are retained, uh, by an organization aboard, we have to get agreement from the CEO and the chair that whatever directors share with us from the, uh, quantitative or qualitative, uh, point of view, that it remains without in attribution.

[00:03:38] Stuart R. Levine: So whatever somebody says about a particular situation, uh, or one of their colleagues on the board, it is data that is sacred and when it's all put together, we present it to the board and the CEO as findings at through an independent lens. But I think it's really important that when we get [00:04:00] engaged, we actually ask, and we're very clear that it's gotta be confidential,

[00:04:05] Stuart R. Levine: and so somebody will say, invariably what? I know what Doug said. And I, I said, well, that's not the way this is gonna work. Uh, you know, supposition or trying to, uh, play that game, that's an underlier of distrust. And, and you use the important word about culture, and this is particularly important as we now enter a new generation of AI,

[00:04:27] Stuart R. Levine: well, on our way to quantum computing, that creates a tremendous sense of immediacy for boards to tighten their culture. This is the time, this is the moment, uh, to make sure that there's clear communication, and I would say trust. And it starts with a process driven where people are able to share, uh, in, in a very clear way what they feel about board charters, the committee structure and the leadership and their peers around the table.[00:05:00] 

[00:05:00] Doug Chia: So, you know, there's one line you have says about the art. On the art side of things the cliche to avoid check-the-box design is applicable yet woefully superficial. So expand on that a little bit because I think we, you know, we always talk about check the box one size fits all, that kind of stuff. But I think you, you know, you brought up something in terms of there's something deeper there that, that you have to think about.

[00:05:31] Stuart R. Levine: I think Doug, it, it comes, uh, the art comes in the qualitative conversation because if a board says, look, we know how we function and we've had those experiences where we get retained, the chair says, look, I pretty much know exactly where we are, and invariably the check the box side of the equation is everybody rates the particular board, uh, 9s and 10s.

[00:05:56] Stuart R. Levine: But then when you start to ask questions, uh, in, in [00:06:00] a, uh, qualitative way, uh, the nuances and, and so let me try to give you an example of what that looks and feels like. So in one of our conversations, my colleague Chris Clark and myself were performing the interviews, 9 people on this particular board, a global distribution, uh, company, call it, uh, $6 billion, uh, in market cap.

[00:06:21] Stuart R. Levine: Uh, basically people shared with us, by the way, uh, we don't get to see the draft of the minutes until the very next board meeting. And it was a key ingredient of, I'll call it a proform way, at looking at the very important issue of collecting people's input on what those uh, minutes look like. And so we were able to, when we reported out, say our best feeling is that within 48 hours the general counsel distributes a draft and that everybody, as opposed to just having it roll up to the chair or lead [00:07:00] director of a board and the responsibility properly so is shared with an engaged board that can say, gee, I'm not exactly sure that's what I said, or you might have missed something that was material to the conversation.

[00:07:16] Stuart R. Levine: So that came, uh, honestly, in a qualitative discussion, even though that particular director had said, everything is great, rated everything across the board. But it's those little subtleties that bespeak and engaged board that is operating with immediacy. And I think in the new world, that's what's required.

[00:07:37] Doug Chia: That's a great observation that a check the box exercise would not pick up, you know, it would say, okay, yeah, the minutes are distributed, but you're, you, you looked for a, a slight nuance that maybe the people on the board didn't even realize. If they had been on other boards or known best practices, they would, but that's where you added value.

[00:07:58] Doug Chia: So let's talk about some of the [00:08:00] recent trends. First of all, there are more and more boards that are conducting not just board evaluations, but evaluations of the individual directors. Um, now this is something that people were really afraid of not too long ago. What have you observed in terms of kind of the development of this, this practice, and how it has become more prevalent than people realize?

[00:08:31] Stuart R. Levine: I think that, um, as I look at a board, whether it was a board, Doug that I sat on, or one that we, uh, work for, if you have nine people just to take a number, uh, particularly in today's very complex world, it's tough to have two underperforming assets. So you start to think about that for a minute because those one or two people invariably will disrupt a strategic conversation for some lower level data [00:09:00] point that is not material to the future of the organization.

[00:09:03] Stuart R. Levine: And so, um, the way we do it, uh, because you're right, people feel, uh, threatened if we say, uh, by the way, we're going to now, uh, do a 360, which we can do, and, and I wanna make this point, which is actually very important: our view of this is, it's gotta be custom designed because not one size fits all for every board, because certain boards have certain, uh, nuances.

[00:09:28] Stuart R. Levine: But, but our feeling is when you start to look at committees, that's where we kind of go a little deeper and you ask about the charter of the committee and then who is participating, how are they exercising, uh, their independence? And by the way, what is the currency factor in their ability to participate in strategic conversations?

[00:09:49] Stuart R. Levine: And by asking those questions in a non-threatening way, it becomes really interesting for us to say, look. Uh, the comp committee, uh, you know, we have the chair doing [00:10:00] 95% of the work, and by the way, the other two directors that are on that committee, uh, don't come prepared. That's a way for us to get, I will call it non-confrontational, really, uh, important data out into the report, which is done in a confidential way, shared, uh, when you go further. I'll give you a really interesting example of that:

[00:10:22] Stuart R. Levine: so, in that journey with a corporation, one of the directors said, you know, it would really be helpful if we had a learning curriculum for the board because they were moving through a transition. Uh, their work was, it was a manufacturing, uh, client of ours, uh, was being driven, uh, globally, but they didn't have access to the global economics,

[00:10:45] Stuart R. Levine: and in fact, what particular polymers and other things. And so when we interviewed the chair of the nom/gov committee, which in that case had the responsibility, uh, to develop the curriculum, [00:11:00] um, she was kind of embarrassed. And what it showed us was she said, well, I read a lot of magazines and I pull articles out and I distribute 'em.

[00:11:08] Stuart R. Levine: It was a very random response and frankly, a very outdated, uh, way of looking at, uh, let's call it current realities and needs. Because if you can't learn as fast as the world is changing, Doug, your board is not gonna provide the type of support, uh, that the leadership of that company should have. And that's an example of how having intelligent conversations we were able to pick up,

[00:11:35] Stuart R. Levine: in that case, uh, the board made a decision to make a change on the next nominating cycle, not to renominate that individual because she didn't understand the need, uh, for learning. And, and so, um, you don't go into that conversation. In that case, the chair said everything is fine. Okay. Everything is fine.

[00:11:56] Stuart R. Levine: Until we're able to look at that [00:12:00] qualitative conversation of people and the individuals come up in what I'll call a pretty non-threatening way, which is I think really important. And again, the, the, there is an important part of this, which I think is unique for us. It's the focus obviously is what the board is talking about, but we believe

[00:12:20] Stuart R. Levine: that interviewing, call it the top three or four NEOs, is critical to this journey as well, I think in giving those people a voice so that they can kind of impact on the thinking of the board, because after all, we wanna be collaborative and if they need, you know, more access to your brain or your experience.

[00:12:41] Stuart R. Levine: And so as we go through our process, Doug, we found it enormously helpful for our clients to have access to a duality, the, uh, leadership, the NEOs, as well as the entire board. And you put it up and then when we put it up, it's not somebody, um, taking a [00:13:00] shot at the board or anything like that, but we're keeping in a very coherent way, subtlety, but important.

[00:13:06] Doug Chia: In recent years, there have been data out there about x number of board members feel that there's at least one person on the board who is kind of an underperformer or, or should even roll off. And then you have management teams not giving their boards good marks or not great marks, um, all the time. And so it's like, yeah, well I think we need to investigate that and, and figure that out.

[00:13:32] Doug Chia: Yeah. 

[00:13:32] Stuart R. Levine: Can I just jump on that because you said something really important actually, because it, when done properly, that energy becomes a recruiting strategic weapon for that corporation. When you get, I'll call it a strong level of trust and collaboration between the NEOs and the board. That is when people come in and they see the reputation of the board, they see the [00:14:00] reputation of the working NEOs and the board.

[00:14:03] Stuart R. Levine: And I believe, and I've seen it because recruiting the best talent today, people have options, you know that and I know it every day. And so people with optionality that we want to recruit to the corporation, draw their own conclusions about what they see and feel between, uh, the board boardroom and, and the, uh, NEOs.

[00:14:25] Stuart R. Levine: And I think that's an important, uh, I'll call it underleveraged asset in these conversations. 

[00:14:31] Doug Chia: Another relatively recent development, I is, uh, in the process of doing these assessments, going beyond surveys, written surveys, and doing one-on-one, private, confidential interviews with each director, um, which takes a lot of time.

[00:14:51] Doug Chia: Talk about the evolution of that and kind of how you see that changing the game of this type of activity. 

[00:14:58] Stuart R. Levine: What we see in practical [00:15:00] terms is, is exactly what you're talking about where, uh, the chair will say, listen, I, I really need you to coach/mentor, uh, this particular chair because that individual is new at being chair of the audit committee.

[00:15:16] Stuart R. Levine: I'm thinking about a particular client right now. Uh, she's never had, uh, the responsibility to understand the independent, uh, financial advisor and their role, uh, the auditing firm and, and then meet with the CFO on the other side of the table. And so, yes, uh, in that particular chair's case, it was a new director and he wanted, uh, by agreement for us to spend time, which we did, and again, new director in a critical pivot position for the board and the corporation, and making sure that that director understood her rights and responsibilities as it would relate to the independent [00:16:00] auditing firm and her responsibility, uh, to the CFO.

[00:16:03] Stuart R. Levine: And again, part of what goes in this conversation, as I listen to your questions, is what I'm gonna call, uh, productivity and efficiency. This is not about making the CFO crazy and you know, we can say that because you can't fire us. You know, I mean, we, we're not employees. We're trying to be helpful. And if you do it.

[00:16:23] Stuart R. Levine: In a respectful way behind, uh, closed doors or on a zoom, just one-on-one, uh, you can have a good, uh, conversation. And that's why again, character on a board in our view, becomes important. And so that I think is a graphic example of yes, that is definitely a trend, that's an evolution. And when we get to talk about policy of people rotating different leadership positions, it's not a fair assumption to think that, okay, uh, you've been chair of the nom/gov committee for 10 years, we're now gonna roll you, uh, into another chair [00:17:00] position or perhaps lead director that people have had those experiences.

[00:17:04] Stuart R. Levine: And yes, we do get involved in those. Uh, to be honest with you, I don't like the word coaching. It sounds, uh, very pedantic. I think it's mentoring, it's sharing experience because we're pretty focused on getting, uh, the right outcome for the shareholder. 

[00:17:19] Doug Chia: Yeah, I think that's a great distinction between the, the terms coaching and, and mentoring.

[00:17:24] Doug Chia: Another development where you factor in heavily is the use of external facilitators, uh, to conduct these assessments. Um, you know, in the past it was the kind of committee does an evaluation, sends out surveys, etcetera, they get it back, they don't spend a whole ton of time on it. Sometimes, uh, a chair of the nom/gov committee would take it on and do some extra work, but it almost seems strange that it took this long for people to think, well, why don't we get someone from the outside to have more of an [00:18:00] objective view?

[00:18:00] Doug Chia: Certainly we do that on so many other things. So talk about how did this evolve and then, you know, today, how common is this? 

[00:18:10] Stuart R. Levine: Number one, I think it's becoming more common, to answer your question directly, and I think the reason it is, is because of the uh, absolute warp speed of change. And so you can't afford to have underperforming assets.

[00:18:25] Stuart R. Levine: And when you talk about an external assessment as an example, uh, we are working with the board of a FinTech, global FinTech headquartered out of London. And in the course of the conversation with the board, it struck me that I asked the general counsel a question about the D&O policy and he told me what the cap was,

[00:18:47] Stuart R. Levine: and I started to have flashbacks because in one of the boards I served on, uh, I was named in five class action lawsuits, just personal experience. And I sat and listened to that, and [00:19:00] then after the meeting, I called the chairman, I said, you know, as your advisor, that is woefully too low as far as coverage for D&O based on your, uh, aspirations to the company and based on your exposure right now.

[00:19:15] Stuart R. Levine: And I think you'd be well served, and he said, well, what do you recommend? I said, I will talk to the general counsel and I'll give him four or five questions to ask, uh, the carrier vis-a-vis their recommendations. And then you and the board make a decision with the CEO as to what the cost factor is and risk.

[00:19:36] Stuart R. Levine: But I said in fairness, uh, I was named in a class action lawsuit and it actually took three years to work its way through. And honestly, it was a very, uh, difficult situation for my family, because when you go through those type of experiences, and again, as an external advisor, if you're able to bring that real life example, Doug, they [00:20:00] ended up netting out, uh, over a 50% increase in the coverage for the directors, that particular board, because the broker was not aware that they were expanding their footprint globally, uh, and, and what that would manifest as far as, uh, bad actors globally and so forth and so on.

[00:20:20] Stuart R. Levine: So, again, external advisors, not because they read it in the Wall Street Journal, but because they're, uh, listening, you know? 

[00:20:28] Doug Chia: Yeah. They bring a ton of value from collective experience built up over time. The assessment happens every year. Do you see the outside facilitator being brought in every year or is it on some other kind of periodic basis?

[00:20:45] Stuart R. Levine: I think, um, you know, if you bring in one year, if you bring in an external firm like ours, and then the next year, uh, you can use our framework to collect, uh, what you and I would call, uh, quantitative, uh, data and see if there's [00:21:00] anything abberant. And in general, uh, we end up with relationship with the board chair where periodically that, uh, man or woman will call us and say, Hey, look, we're moving forward, but we think it would be good for you to give us, uh, where we left off with you and directionally where it would be going for us.

[00:21:19] Stuart R. Levine: And part of that, Doug, and what we see now is the acuity of change, and so the vision and the core business is changing so fast. I think one external one year, the next year, uh, self-evaluation, I've done them myself, uh, you know, pro bono where I've sat on a board and people, once you get that rhythm, then it's totally not threatening and you do get a database and it's amazing, uh, how effective that can be.

[00:21:47] Doug Chia: Another recent trend, detailed proxy disclosure. Uh, you know, proxy disclosure obviously has been just kind of building up over time, um, and people complain about [00:22:00] that, but they ask for more. One thing they say is, you know, we want more information about the board and how you recruit and all these things.

[00:22:08] Doug Chia: And I think there was once upon a time where proxy statement didn't even mention whether someone, whether a board didn't, uh, a board assessment. Um, but now they do and some disclose a lot more. What are you seeing on this front? 

[00:22:22] Stuart R. Levine: What we try to do is, uh, engage with the general counsel for the reason of getting privilege.

[00:22:28] Stuart R. Levine: And I feel strongly about that actually. Yes. Again, from, uh, my experience as a board member and now doing the other side of the, uh, the table because we're picking up such, uh, sensitive information that I'm not so sure that you need to throw all of that into a proxy. I think what you have to do, uh, in a responsible way is say, look, uh, you brought out, brought in a, uh, third party independent, very important word, independent facilitated firm who's got the [00:23:00] experience, and here's where we were and here's what, here's how it impacted on our discussions on call it succession planning and how it impacted succession planning for the board, succession planning, uh, for the company.

[00:23:12] Stuart R. Levine: So you take some high level, legitimate, I'll call it strategic issues, but I am not a big fan of going, you know, so deep that you prejudice the data and you create, frankly, a very toxic environment. So I'm not a big supporter that I yes, believe that the proxy should record that there was a fulsome, uh, process.

[00:23:37] Stuart R. Levine: Uh, but, uh, I would, I'm not for, and that's why the privilege with general counsel is so important to us, I think. 

[00:23:45] Doug Chia: So you, you know, you, you think putting, laying out the process is perfectly appropriate and, and helpful for an investor. But when it comes to, uh, kind of, you know, [00:24:00] findings and conclusions and stuff, that's where it can get really dicey if you're not careful with these kind of things.

[00:24:07] Stuart R. Levine: This conversation and, and this part of it requires a lot of trust.

[00:24:11] Doug Chia: Yes. 

[00:24:12] Stuart R. Levine: And if I were to disclose exactly everything that happened in that journey to gather data, uh, you would, I'll call it pierce the common sense trust you have with the board and the leadership, and I don't think that's healthy. I think affirming that we had an intelligent process, big word, and affirming, uh, that everybody participated,

[00:24:37] Stuart R. Levine: and I, I am a believer that putting in, uh, three or four high level strategic issues, uh, you know, on one board recently, uh, affirming that we help build a, uh, curriculum that would accelerate learning on the board and help to keep the, uh, directors in the committee, uh, engaged at the right level. [00:25:00] That's all very fair and very good.

[00:25:02] Stuart R. Levine: Uh, but that's, that's the kind of the line I see. 

[00:25:06] Doug Chia: In terms of your clients, do they typically name your firm in the proxy statement or they, they kind of just, they just say we did it and we had someone come in. 

[00:25:17] Stuart R. Levine: Sometimes they do, which I'm okay with. 

[00:25:20] Doug Chia: Yeah. 

[00:25:20] Stuart R. Levine: But just again, to be clear and be transparent. 

[00:25:23] Doug Chia: Yeah.

[00:25:23] Stuart R. Levine: When we get the whole document prepared for the day that we present, uh, we take all hard copies, or if we we're on an electric, uh, portal and we give it to the general counsel so that individual holds on, uh, to all the content and there is some privilege there, which I think is again, uh, very important.

[00:25:44] Stuart R. Levine: And to be honest with you, I, I don't need to be out there, uh, call it over-leveraging our brand. That's not what we're about. Um, I think just discretion becomes really important. 

[00:25:55] Doug Chia: Let's talk about evaluating the board and you know, we talked a little bit about [00:26:00] the external facilitator, we'll come back to that, but definitely the majority of boards out there are conducting these things internally.

[00:26:09] Doug Chia: Um, and if that's the case, who do you see typically running that process and who do you think should be running that process? 

[00:26:19] Stuart R. Levine: That's a multiple warhead question, you try to answer. Look, as a director, uh, when I was chair of nom/gov at Broadridge Financial Solutions, uh, pro bono, but I ran the survey, uh, for the, uh, board and I would interview each, uh, director and so forth.

[00:26:39] Stuart R. Levine: But at a certain point, as the chair of that committee, I felt we needed an external facilitation. 'cause I wanted to make sure that people weren't trying to just be nice, okay? So I think that's why the rhythm of independent and internal and independent maintains the level of trust, [00:27:00] uh, and equilibrium that you need. Generally,

[00:27:03] Stuart R. Levine: uh, Doug, in my case, in the example I just gave you, and I've done that with other boards that I've been on, uh, I link up with the general counsel, uh, because I think, uh, it gives you a certain, uh, independence on the board if you're an inside director and you're, uh, running the process. And again, get some internal, uh, privilege there.

[00:27:27] Stuart R. Levine: And the other very important subtlety, which we shouldn't lose, is when we put the, the questions together, making sure that we interview the CEO and say, Hey, what are the four or five issues that would be really helpful for you to hear through our, uh, process so that we can connect some data? And by the way, ask the chair what are the questions we should be asking the NEOs because what we're trying to do is, is, uh, blast through the arteries to make sure there are no [00:28:00] blockages in trust.

[00:28:01] Stuart R. Levine: And I think it's a very core issue to us, I have to say. And I think that's an important conversation and it's reaffirming to the director or community that you have that type of conversation and, and everybody has a chance to participate. 

[00:28:18] Doug Chia: In terms of, you know, who runs it. I've seen, you know, different permutations here.

[00:28:24] Doug Chia: Sometimes I've heard of, you know, the independent chair or the lead director running it and doing all the interviews and all of that, and to a certain extent that makes sense. How do you look at that? Obviously there's no kind of one definitive answer here, but in terms of, uh, kind of balance of pros and cons. 

[00:28:44] Stuart R. Levine: We haven't touched on this yet,

[00:28:45] Stuart R. Levine: we've been focused on, let's call it the New York Stock Exchange model, uh, publicly traded companies, but I've been a lead director of a family owned business, very successful, uh, and there was no [00:29:00] vehicle to collect data on the same type of issues and building that on a family owned business. And in, in the world there are a lot of very successful family owned businesses, but they haven't gotten to the point of having a discussion of rotation of a lead director, independent chair.

[00:29:20] Stuart R. Levine: And so you get to that without it becoming personal. Uh, you know, somebody gets kind of what I, in my mind, they get mentally relaxed. Everything gets pretty routinized, which I don't think is very helpful on a going forward basis, doug, so just with your permission, just to expand for a second. 

[00:29:37] Doug Chia: Yeah. Please.

[00:29:38] Stuart R. Levine: That conversation is not only just about what's going on in the, uh, publicly traded corporations, but in private. And literally about a week ago, I had a conversation with the chair of a very large health system in the United States, one of the larger ones, and she was sharing with me some of the frustration [00:30:00] she has with, uh, you know, the way the board has run for the last 20 years.

[00:30:04] Stuart R. Levine: Really interesting. So I think a lot of our conversation also should be embraced by the other sectors, which we'll call it not-for-profit, family owned businesses, as well as the, you know, New York Stock Exchange and NASDAQ companies. But I think there's great application. And where you don't, uh, have a rotation at the top, uh, of a, uh, lead director or a chair,

[00:30:31] Stuart R. Levine: even if it's an independent, I would say, uh, you lose your independence and you lose your vibrancy. And so, um, talking about the principles of common sense and governance here is applicable to those different sectors, and we've had those experiences and I think in fairness, that's part of the conversation.

[00:30:50] Doug Chia: Who else would be involved in this process? 

[00:30:54] Stuart R. Levine: Well, our experience would tell me that, number one, uh, for a publicly traded company, I wanna make [00:31:00] sure that the CEO feels that they have a voice in the creation of the questions. Very important. Uh, number two, I always like to know who the client is. I, I ask that question, and it's not to be stark, but it's to understand who are we interfacing with. In general, it becomes the chair of the nom/gov committee and or working with the chair.

[00:31:21] Stuart R. Levine: Our experience would tell us that the chair defers to the chair of the nom/gov committee. So internally it would be the nom/gov committee. Uh, but, uh, part of this, uh, you raise a really interesting point, has to be strategic communication to the board where, uh, in fairness, we write the first couple of letters for the chair of the board, CEO to say, by the way, here's what the process will look like,

[00:31:48] Stuart R. Levine: so everybody understands, and we put in, in writing that, uh, all of the interviews will be, and data collected will be confidential and will be protected that [00:32:00] way too. So my point is, it starts with the leadership, then the communication is really important because directors tend to be really consumed professionally and so forth, so that everybody has a common grounding of what's going on and why it's going on and what the expectations are.

[00:32:18] Stuart R. Levine: And in general, I'd say 90 days later at that particular board meeting, we will take a chunk of time, we'll present the data and it'll be in a privileged conversation, uh, so that everybody can hear it, uh, at the same time, and, uh, opine. 

[00:32:37] Doug Chia: Do you ever see, um, outside counsel get involved? 

[00:32:41] Stuart R. Levine: I have seen it and uh, it becomes, um, what we don't want is to build up, uh, legal walls.

[00:32:50] Stuart R. Levine: You don't wanna make it so such a legal uh, process that people are afraid, uh, to participate and don't [00:33:00] share in candor. So yes, I have seen it. I've been on certain boards where it's happened and it's a different situation, I think. Uh, that's not to denigrate for a second anybody in the legal profession, but I've seen where it becomes a threatening journey.

[00:33:16] Stuart R. Levine: And that's about the last thing you want in a legitimate assessment that is designed so that people can participate. And remember, you know, we used to talk about this years ago, tone at the top. Well, tone at the top is exactly the way the board functions and then that, I'll call it value, set cascades through the organization.

[00:33:38] Stuart R. Levine: And so we don't want it to be so formalized that people are scared to death to tell you what's on their mind and are looking for consequences. So I think there's gotta be a little moderation there. 

[00:33:51] Doug Chia: Throwing no shade on lawyers, but when a lawyer's in the room, the temperature changes. Um, and um, [00:34:00] you know, you, you begin to think, okay, is this more like an investigation or is this an assessment?

[00:34:06] Doug Chia: What is the motivation here for this? As a lawyer, I totally understand why people, like, we want outside counsel involved, but I also agree with you that this can really change the, the tenor of the entire exercise. Say they go with the external facilitator, and let's just say for purposes of this discussion, Stuart Levine and Associates, you're, you're fully booked.

[00:34:29] Doug Chia: You have no bandwidth. And so they can't, they can't hire you. Um, so they go looking and what should they be looking for in a facilitator? 'cause when people ask me, you know, who should we get for this? Who's out there? You know, I tell 'em, look, there are all kinds of people out there who are doing board evaluation, some who I think they know what they're doing.

[00:34:56] Doug Chia: Some I kind of worry about whether they, you know, they [00:35:00] really have the background and expertise for this. So what would you advise, you know, a friend looking for this? 

[00:35:08] Stuart R. Levine: Everything starts with criteria. You know, it's, I, I'm going to kind of escalate from the, uh, pedantic to something strategic. If I said to you, Hey, Doug, I'm in Princeton tonight.

[00:35:20] Stuart R. Levine: What restaurant should I go to? You'd refer me into your favorite restaurant. And in a certain way, our relationship, uh, is defined by, uh, the experience I have with me or my family. That's pedantic. On a serious issue, a referral on a, uh, board assessment that has all kinds of subtleties, but importance, I think you have to talk about criteria first.

[00:35:45] Stuart R. Levine: Criteria becomes important before you get to our name or anybody else's name. And I always like to know, uh, as an example related to healthcare. We do a lot of work in healthcare. If you need, uh, heart surgery, you [00:36:00] go to somebody who does about five of them a week, not somebody who does one a week. You do it.

[00:36:05] Stuart R. Levine: The big, I'll call it criteria is experience. I wanna make sure that that physician or physician group has quite a bit of experience in the area. So it's not, uh, I'll call it some brilliant, uh, you know, somebody who just graduated Harvard, Harvard Medical. That's not the issue. The issue is what's the experience?

[00:36:24] Stuart R. Levine: Because you can really do damage with an assessment. And so criteria tells me one, experience. Two, who's referring it and what's their relationship? And third, what is the commitment, uh, to confidentiality? I, I see, and I bet you do too. Too many, uh, loose conversations where people will leave rooms and share content.

[00:36:49] Stuart R. Levine: And, uh, uh, to me, I, I wanna make sure the same way that a patient should have confidentiality with a physician, that in a professional [00:37:00] way we have that confidence and, and back kind of tying in, uh, your question about, uh, an attorney doing it. And so, on a board with sophisticated people, experienced people,

[00:37:13] Stuart R. Levine: we understand that if something comes through the governance committee about, uh, an employee whistleblower or something, the first thing you do is fundamentally get an attorney in the room to help you set that. But I'm gonna expect at that point you are trusting, uh, that, uh, council and you know that person and they know your organization and your values.

[00:37:35] Stuart R. Levine: This is a little different. This is, uh, we wanna make sure that you get the right person with or group with the right criteria. And I really think the whole thing sits on experience. And to me that's a huge differentiator. 

[00:37:51] Doug Chia: And this is experience doing these kind of things. 

[00:37:55] Stuart R. Levine: Yes. And I feel strongly that it's not somebody who read about it or [00:38:00] attended a workshop at the NACD.

[00:38:02] Stuart R. Levine: You know, we all give those, uh, different presentations, but that does not, uh, certify you, uh, to conduct, uh, I'll call it this really sensitive, uh, conversation. And so to me that becomes really important. 

[00:38:18] Doug Chia: I think most, uh, evaluators, uh, use some kind of surveys, um, some kind of written, written survey. And, you know, there are all kinds of different surveys that you can conduct.

[00:38:29] Doug Chia: What do you typically use or recommend? 

[00:38:34] Stuart R. Levine: We have, let's call it a standard 30 questions. I don't really think you need more than 30 questions. You can actually do it with 20. Um, but it goes back to also customizing based on the industry, it goes back to, uh, the, uh, what the vision and the mission of the, uh, organization is.

[00:38:56] Stuart R. Levine: And so I think that, let's call it [00:39:00] standardized 20 questions that we end up bolting up another 10 in have to be reflective of what the CEO and the chair lead director are looking to understand. And again, because of the speed of change, Doug, you asked a question very early in this conversation about a boilerplate conversation.

[00:39:20] Stuart R. Levine: Um, that's where it starts to feel like a boilerplate where people say to me periodically, well, just give us the 30 questions. And I'm saying, well, yeah, that, that's something we use for another client and a completely different, uh, industry. And by the way, in a completely different sovereign state. So, uh, to me it's gotta be, you can take a core question, but then you have to expand it.

[00:39:43] Stuart R. Levine: And then, by the way, the other subtlety, but very important issue is, uh, most boards will have, let's call it certain standard, uh, committee structures. But not every committee calls them the same. And by the way, what we [00:40:00] do is we read the charters of those committees to make sure that our questions conform to the charter, because the last thing you wanna do is create confusion by asking

[00:40:12] Stuart R. Levine: a director about a particular, uh, committee, and the charter is on the other side of the page. And that, that, I've seen that, and all that does is engender bad will and confusion. I, I think we gotta, we go in, that's what part of our, uh, raison d’être and we read those charters to make sure that our questions line up exactly on, uh, the mission of that particular committee and then the board.

[00:40:40] Doug Chia: Yeah. No, that's a great observation because, uh, I mean, charters are not all boilerplate. Um, I mean, the bad ones are, but most of 'em are supposed to be tailored to, to the individual company and board. And so yeah, if your survey does not line up with that, that can, I, I can actually [00:41:00] create a lot of problem. For the interviews

[00:41:04] Doug Chia: in terms of the people in management, who do you find, you know, is it gonna give typically most insightful comments. Um, and is there anyone else outside the company that you might want to interview or you have, uh, from time to time? 

[00:41:23] Stuart R. Levine: On the NEO side of the ledger, uh, certainly the CEO. I think certainly the, uh, CFO. I think, uh, in many cases, uh, when you're looking at the culture, the general counsel, because that individual is the repository of a lot of information, so I want to hear from them.

[00:41:43] Stuart R. Levine: And then, uh, if it's a technology company, I'm interested in talking to that CTO. Uh, I wanna make sure that they, uh, have a view to the future based on uh, some very potent trends that are ongoing. And so those, I would [00:42:00] say at a high level are the top four in my mind. And then we have had experiences post facto of the interviews where the CEO said, you know, it might be helpful if you go out and interview, uh, three or four of our clients, and we've done that as well. A similar methodology and just say, Hey, Doug, we were retained by a, b, c corporation, uh, to spend a half hour with you and ask 'em some common sense questions, uh, just to understand the strength of the relationship.

[00:42:31] Stuart R. Levine: And we've had that experience come, uh, out of the, uh, conversation as well. And then a sub-bullet to that, uh, with really smart nom/gov people. Is to, because the really smart nom/gov people are not just relying on executive recruiters. That's a really important point. They are building, call it a bench of, uh, people they know that could be additive in a year or two based on people rolling off and so forth.[00:43:00] 

[00:43:00] Stuart R. Levine: And just talk to them and see what, you know, how we come back in that conversation. And what's really interesting in those conversations is, uh, we can see if, uh, that candidate, if you will, uh, comes prepared for the conversation where, whether they've read the, uh, Q or the K, uh, and have, uh, I'll call it, uh, engaged, uh, questions for us as well.

[00:43:24] Stuart R. Levine: So we've had that experience as well. 

[00:43:27] Doug Chia: So let's get into the substance of, you know, once, once you're in the room, what are you looking for in terms of what you're trying to evaluate? Different subcategories or qualities of the board or, you know, practices, these kinds of things. Um, what, what's kind of the, the crux of, of what you look at?

[00:43:51] Stuart R. Levine: I think the crux, uh, comes, uh, in a couple of words. Number one, prepared. We wanna understand that the individual [00:44:00] director is committed to, uh, A, preparing properly for the board meeting. B understands the role, very important point, of a director versus, uh, me coming in as a CEO telling you how to run your company.

[00:44:17] Stuart R. Levine: And so preparation, understanding, call lane management, uh, really becomes, uh, integral to, uh, that and, you know, my experience, again, sitting around board tables, you know, as a director, you know, I've seen certain directors where, uh, they tried to, uh, micromanage the CEO, which frankly is not healthy. And, um, I'm thinking about a real example they had with a very large NASDAQ company.

[00:44:45] Stuart R. Levine: And the CEO came to me as lead director and he said, look, um, my predecessor has an office in the building and he's kind of undermining my leadership and my new team and so forth. [00:45:00] And, um, so, you know, I, I took that in a very trusting way, had a conversation with the entire board and executive session without the CEO in the room.

[00:45:10] Stuart R. Levine: And, uh, it was very difficult. The, uh, predecessor was a pretty, I'll call it powerful guy, uh, but I had to meet with him and say, look, I don't think this is gonna work. We, we've got a new CEO, I think you need to simmer down. He kind of wasn't happy with that and so we just didn't renominate him. A difficult situation.

[00:45:30] Stuart R. Levine: But again, experience, uh, if as long as you're doing the right thing, if you're really trying to do the right thing, and you believe in succession planning, you can have, uh, those honest, uh, conversations. 

[00:45:43] Doug Chia: How do you go about evaluating culture? You know, people always talk about, well, you know, what's the corporate culture?

[00:45:51] Doug Chia: And I say, you know, that's not easy to put your finger on. It's not like you just written down somewhere and everybody just reads in like, okay, yes, now I [00:46:00] know the corporate culture. 

[00:46:01] Stuart R. Levine: I think, um, culture, you know, is a big word, right? And so everybody gets the, the, their own definition. For me, it's one behavior at a time.

[00:46:10] Stuart R. Levine: It's just the way we, uh, work with each other in a respectful way. And, and the way you codify culture and what our experience tells us is that you build a CEO dashboard that has, let's call it the four or five components, and let me try to give you one of them. And it's would be entitled culture, uh, and in cul in that

[00:46:32] Stuart R. Levine: component part, I wanna see, uh, employee turnover numbers. I wanna see employee satisfaction numbers. 'cause that is a leading indicator of what the culture is in that organization. An example, which is penetrating, uh, for me, uh, I was a, uh, a young guy, I was on my first Fortune 500 board and at one of the meetings I said to the CEO, um, by the [00:47:00] way, can you share with me the, uh, employee turnover numbers in, in that particular sector of our business?

[00:47:07] Stuart R. Levine: And he said, I'll take it offline. After the meeting, he brought me into his office, you know, spectacular wood, marble, I mean, spectacular. And he said, look, you know, you're a young guy, you really should be very thankful that you're on this board. And it's a dumb question. I said, oh, okay, i'm so sorry. And so right there,

[00:47:29] Stuart R. Levine: I felt like the company was in trouble and six months later we became the target of, of a, a federal investigation and it was in that sector. And so the culture was toxic and we couldn't get the data. I was asking data at from a strategic level on recruiting, and it turned out post facto, uh, that we had 105% turnover in that particular business [00:48:00] unit, and that's where the toxicity came.

[00:48:02] Stuart R. Levine: Culture, I think, as a director you can get some insights with the CEO dashboard, asking those questions and having them be codified and building what I call governance plumbing. So that you can see, uh, the data as it relates to, uh, whistleblowers, uh, that, you know, people wanna have a safety valve. And, you know, even in a big corporation, you don't get that many, but you link up with the Compliance, Chief Compliance Officer and it gives a certain amount of, uh, importance to the work and comfort, frankly, throughout the large corporation that they have access to the board of directors and, and the data.

[00:48:47] Stuart R. Levine: And, and we are very pristine, obviously, uh, in those, uh, journeys, but I think that's a great way to build it too. So think governance, plumbing, 

[00:48:57] Doug Chia: And what about board culture? [00:49:00] 

[00:49:00] Stuart R. Levine: Uh, I'll give you an example and then I'll tell you how you draw it out in, in a, uh, an assessment we ask questions about, um, internal communication from the chair or the lead director.

[00:49:13] Stuart R. Levine: Uh, do you feel you're getting enough communication, not enough information? Are you getting your board books at least five or six days in advance of the, uh, board meeting? And then we mentor as an example, what I learned to be very helpful as lead director is a practical experience I'm sharing with you.

[00:49:32] Stuart R. Levine: Um, you know, everybody at kind of like 4 o'clock, they're looking at their watch, they wanna hit the, uh, the plane. I would always kind of stop the meeting at around 3:45 and I'd say, look, uh, we're going to executive session, and I would open up my, my book and I'd say, I'm gonna go around the table. I want you to give me the three things

[00:49:52] Stuart R. Levine: that struck you in the conversation today or that you want on the agenda for our next meeting. And I literally, I would speak last, I [00:50:00] go around that table, every person we get two or three minutes and then within 24 hours so that it wasn't viewed as a threatening conversation for the CEO, I would meet with the CEO,

[00:50:13] Stuart R. Levine: this is an actual example, and I'd say, Hey look, here's the situation, Ron, here's what I heard. And we would compress those, call it 20 some odd, uh, points of view into three or four issues that seemed to make sense. And the next board meeting, we had a good flow of what was on people's mind. 

[00:50:32] Doug Chia: I'm sure people say, okay, if, if we're gonna do a, an assessment here, um, can you tell me if our board is effective?

[00:50:44] Doug Chia: How are you able to pull that out? I mean, you're not on the board so you don't, you know, see the whole year in and year out type process of, of what the results are. Um, but you know, you're, you're able to give [00:51:00] them some assessment of, okay, this is an effective board, or this board is totally an effective, or some, you know, somewhere in between.

[00:51:08] Doug Chia: How are you doing that? 

[00:51:10] Stuart R. Levine: I'll give you an example of actual conversation. So in doing one of the assessment, uh, interviews, uh, I, I asked a, a director, a senior person, a director, um, how he stays current. And he, he looked like a deer that got hit by a car. And, and I said, look, he, he cashed out at a very large service organization and he said, to be honest with you, uh, I haven't attended a workshop or read a book in five years.

[00:51:41] Stuart R. Levine: I played a lot of golf. And I said, whatever you do, 'cause you appear to be a nice guy, don't ever tell anybody what you just said to me. But here's what you need to do immediately: enroll in either an NACD, uh, project of education or a local community college on, [00:52:00] uh, computer, uh, engineering. But you have to make a commitment because absent that, this board will, uh, leave you in the dust because they have some major challenges.

[00:52:10] Stuart R. Levine: And for you to participate, which is your lane in a strategic deployment of capital, you need to understand when people talk about, uh, you know, quantum computing and what it implies. For, and to go back to the conversation on customer satisfaction, Doug, um, you can't begin to understand how we can design and engineer those platforms if you don't understand the, uh, engineering that goes into it.

[00:52:39] Stuart R. Levine: And then the cost ratio. He called me a couple weeks later and said, that was a game life change of me. Thank you for your candor. And I just enrolled. It was great. Those discussions, people will open up and, and that's why I bel I'm a great believer and I know Chris and the rest of the firm is in the qualitative discussions where you engage in a [00:53:00] conversation not too dissimilar to this.

[00:53:02] Doug Chia: Yeah. 

[00:53:02] Stuart R. Levine: If you have the experience, you have the trained ear, you can kind of see it and um, you know, we pick up things, uh, in those discussions, say, you know, I'm concerned. This is not like a numeric, you know, 1 to 10. I'm concerned that, uh, somebody's always got their, uh, personal device open and, you know, it's really interesting.

[00:53:23] Stuart R. Levine: So you hear that and the way we approach that when we present it is in saying, listen, you're setting the tone for the entire corporation. So, so if, if the, uh, employees, the senior leadership who come in here, uh, to present, they're singing for their supper, this is a big deal for them, see you on your personal device.

[00:53:44] Stuart R. Levine: Guess what? When they're working with their people, they're gonna do the same thing. They will model that behavior. And that goes back to your early good question about culture. So if we believe in a stronger culture, then our actions are gonna speak with incredible [00:54:00] force, uh, to the population by the way we work together.

[00:54:05] Doug Chia: No, I think the, the, um, personal devices thing is a really good, uh, observation and definitely can impact what goes on in the room. In fact, at home we have a, you know, no, no devices at the dinner table policy. Um, but I think it was mostly instituted 'cause of me, so,

[00:54:30] Doug Chia: so, but yes, modeling bad behavior as, as they would say. 

[00:54:35] Stuart R. Levine: Well, that's right. 

[00:54:36] Doug Chia: Guilty as charged. Other things that you are trying to, uh, evaluate, you know, subcategories, when you look at the board of the whole, what, what are some of those? 

[00:54:49] Stuart R. Levine: I think, um, people will tell you the truth about how open the conversations are.

[00:54:55] Stuart R. Levine: You know, you see probably what we see, which is [00:55:00] 80% of the conversation, 80% of the board, uh, handles all the heavy work. But when you talk about something like CEO turnover, which is accelerating now, um, we have to really think hard about our responsibility to the shareholders, the employees, customers, and so forth.

[00:55:22] Stuart R. Levine: And that requires an engagement of time. I'll give you an example of what that looks and feels like. Doug. Honestly, it was the Broadridge board, and I said to Rich Daley, that time of CEO, I said, look, we see the top five or six people all the time, but I think that I'd like to see the next layer below or the layer below, because it'll tell me how well we are at recruiting, how well we're doing.

[00:55:48] Stuart R. Levine: And so I think, um, to really do it right, asking questions, and that's why the CEO and the other NEOs have to be in it. I wanna understand what that [00:56:00] professional relationship is as well. Do they feel that if they have a question about governance, do they call somebody like you or me? If we're on the board together? Uh, if they have a question about some new technology, can I refer them to a friend of mine who's running, you know, Apple Computer?

[00:56:17] Stuart R. Levine: All of those relationships become very helpful to NEOs. So it's helpful at having really healthy relationships and in the discussions to ask how people, uh, learn so that they can stay, uh, current and do they participate in those conversations. And, you know, as an example, so you get a list of 30. And for me, that exercise proved to be incredibly uplifting because I went back to it and I said, you know, I met

[00:56:46] Stuart R. Levine: 5 or 6 people and they're brilliant and you're doing an unbelievable job. And it in the, in the conversation or having a cup of coffee, all I would say, Doug, is I really appreciate your hardware and I'm not looking for anybody to tell me [00:57:00] what, how Richard's doing or somebody else. And 99% of the conversations, I, I think, were very uplifting and the rest of my colleagues on the board that did it.

[00:57:09] Stuart R. Levine: And so did it require a little extra time? Yes. But was it worthy? The exercise? Really, really important. For sure. And so that, and having the CEO succession planning really be well understood because you were engaged in strategy and other corporations you are too. And you see, uh, people leave for any number of reasons today, and our responsibility is as directors is to make sure

[00:57:40] Stuart R. Levine: we have that bandwidth of people. And so again, building those relationships and the knowledge base, uh, of, uh, the leadership becomes, uh, critically important. 

[00:57:51] Doug Chia: Going back to the evaluation of the individual directors, when the, the corporate governance, uh, expert types sit around [00:58:00] and talk about, okay, what are the most important qualities of, of a board member that you're looking for?

[00:58:06] Doug Chia: Inevitably, you know, the words, courage, integrity, judgment, accountability, these kind of words get mentioned, but how do you actually determine that? Unless I've grown up with the person and been in crisis situations with them, I don't know how much courage they have. But, you know, people talk about it all the time in terms of, you know, the most important aspect or judgment, you know, these kind of things.

[00:58:37] Stuart R. Levine: Number one, uh, is the word preparation in my mind. Example, I probably have been responsible for over 20 people joining boards in my different leadership positions. Okay? So one day I was set to meet a very senior woman from a very large financial institution. And, um, [00:59:00] meeting was supposed to start at 12 o'clock.

[00:59:02] Stuart R. Levine: 12:15. And, and this is what you and I call pro bono work. You know, I'm like, it's, I'm not getting direct. I'm just trying to help. And she kind of comes in 20 minutes late: data point. And a data point, because the one thing I always view is, uh, if the meeting's supposed to start at eight in the morning, we start at, at about 7 45, everybody's in their seat with a cup of coffee ready to go.

[00:59:27] Stuart R. Levine: So preparation, can somebody get there on time? One. Two, after the first two or three minutes, I said, by the way, uh, do you have any questions about the Q or the K that you think might be helpful? And she said, well, I wanted to see if this was gonna be a serious, uh, meeting. And then if it was, I would read those documents.

[00:59:47] Stuart R. Levine: She said, you know, they're rather long. And I, I had all to do, but to just get up and walk away. And guess what? She was not a candidate, even though she was somebody's very good friend. So [01:00:00] I get the character conversation, but I would say, do not put yourself in data denial. I saw her actions of coming late and I heard her with great four saying I didn't read the material, uh, because I wanted to make sure that this was a serious meeting.

[01:00:18] Stuart R. Levine: And I'm thinking to myself, I'm working hard, I got other responsibilities today. And I carved out an hour to have a cup of coffee and it showed me something and, and so when I say don't get into data denial, if somebody shows you that type of behavior early on in the relationship, trust me, it will not get better.

[01:00:40] Stuart R. Levine: When you get into data denial and you ask somebody about reputational risk, after all, it's your reputation, Doug, and mine, if we're directors of the same company, that we're gonna be around the same table, and I'm really, really careful about those reputational risk issues. So I think that's second part. Do they prepare?

[01:00:59] Stuart R. Levine: Are they [01:01:00] coming in that way? And you really need to check the character side of that equation. 

[01:01:05] Doug Chia: Every year, I think there's some board or company where it's revealed that the CEO or a board member had something on their resume and it actually wasn't true. And you think, how the heck could that happen? And the answer is everybody was afraid to ask, you know, did you actually serve in the military?

[01:01:29] Doug Chia: And, you know, these kind of things 'cause they don't wanna offend the person. And I'm just like, this is so easy to check and ask. And if you're worried about offending the person then something's really wrong.

[01:01:40] Stuart R. Levine: That's a character issue for leadership of the board. Because to be honest with you, I'm not afraid to ask those questions if I'm in a leadership position and, you know, look, I did serve in the military, so I know a couple of questions about that.

[01:01:54] Stuart R. Levine: And you can tell pretty fast. Or an educational experience or a business experience. And by the way, [01:02:00] it's such an intimate, important conversation that today you can google up anybody in about three seconds. So it, it means if the person is chair of the nominating committee. I, I do believe a third party check on a serious company as well,

[01:02:18] Stuart R. Levine: it's a good practice, but you can do it as if, if you were the leader of the nom gov committee for argument's sake, you should do it a hundred percent. 

[01:02:27] Doug Chia: So let's get to the evaluation report. 'cause you know, these, there's, there's a written report that comes along with this. Talk a little bit about the process of how the report gets put together, who's involved, etcetera.

[01:02:43] Stuart R. Levine: So typically, um, people like Chris Clark and my firm and others, uh, myself, would do the, uh, call it, quantitative review. So we have somebody that would collate the numbers, the data points. Okay. We have that. And [01:03:00] then as part of that journey, uh, we would take the, uh, qualitative comments. Uh, we, I'll call it, this is an important word, not meant to be offensive, but we sanitize.

[01:03:11] Stuart R. Levine: I don't want individual attribution names in the commentary so that people can say, that's what Doug said. Uh, and we take that out. So prototypically, uh, we take it pretty seriously. We do the interviews one-on-one. Uh, that's really the way we do it. Uh, and we take both sides of the equation. So you take the quantitative,

[01:03:34] Stuart R. Levine: and you throw those data points up. And then the qualitative, so when we present as an example, we would take the report, uh, we'd give one to everybody around the table with the following caveat, it is very important, that it's a privileged report back to our early part of the conversation. And we say, uh, by the way, when this meeting is over, leave them on the table because the general counsel will take, uh, [01:04:00] control of those and he will hold one for the records.

[01:04:03] Stuart R. Levine: But for everybody's, uh, wellbeing, we don't wanna have extra copies laying around this hotel room or anything like that. And so everybody's very good if you tell them upfront what the methodology will be. So literally you take quantitative, qualitative, and then we present in executive session, uh, generally, uh, with the CEO, maybe the general counsel in the room, but we talk directly.

[01:04:32] Stuart R. Levine: We put page by page, committee by committee, which is really an important part of the journey. So everybody understands that every committee was reviewed by the, uh, committee members. So obviously if you have nine people, you got three people per committee. Generally, uh, you break it up that way. And then you take all the, the internal communication and culture of trust on the board, which leads directly to the board members and their [01:05:00] relationship with the chair or independent, uh, lead director.

[01:05:04] Stuart R. Levine: And, and we ask direct questions about communication, their ability to access information, which are also extremely helpful at a certain point for the CEO to hear. So to me, the, the methodologies data collection, uh, collation and then presenting it, and this is a, I believe very strongly in this, and I found that as a director on that side of the table, and then when we're presenting,

[01:05:31] Stuart R. Levine: that we're there to answer any questions that people would have and disagree. And then I, I can't tell you how many times I've said, Hey, look, you can get mad at me and because you can't fire us. And I, people laugh and I'd say, no, this is what you said. I'm not gonna tell you who the you is, but this is what you said.

[01:05:49] Stuart R. Levine: And, uh, I'm just sharing. So don't shoot the messenger particularly, you know, relax yourself. Don't hurt yourself, you know? 

[01:05:55] Doug Chia: Yeah. That was gonna be my next question, you know, in the report, you know, whether it's [01:06:00] written or oral, what if the people don't like what they hear? Then what do you do? I mean, there's a certain skill it takes to, you know, deal with that situation and, you know, not let it get into the debate.

[01:06:15] Doug Chia: So yeah, how do you handle this? Because I'm sure you have. 

[01:06:19] Stuart R. Levine: Yeah. It, it happens because who wants to hear something negative? I don't, I'll be honest with you, you know. Uh, but if you go into the journey, uh, and you understand why you're doing it, and that's why the initial letters of why we're doing the assessment and what our purpose is, and forget the boiler plate about shareholder value, that's all easy.

[01:06:42] Stuart R. Levine: But we are engaged in a journey to get more effective going forward. Okay? And, uh, in one case, a client that had, uh, two or three CEOs in four years, I mean, at a certain point it was incredible amount of data we picked up [01:07:00] and they said, look, this is what it looks and feels like. Don't get those people left for a reason.

[01:07:05] Stuart R. Levine: And, and by the way, one of the things we recommended in that case is we should do some exit interviews as a follow up to this conversation. But where you have a challenging question, uh, we're not afraid as long. It, it's not a, see, for us, it's not a personality issue, it's a outcome issue. And if it gets real tight, I, and I've done this, and I'd say, Doug, you know what?

[01:07:27] Stuart R. Levine: Instead of going much deeper, let's take this offline, and if it's okay with the chair, uh, we'll do that and we'll have a one-on-one conversation and you know, then you have a chance to just, uh, I'll call it get the, uh, appropriate perspective. Okay? That's, that's the way I view it. And it's happened one or two times.

[01:07:47] Stuart R. Levine: But I have to say in general, uh, you don't get too many people rolling their eyes, Doug, you just don't. No, they, if you come across like you've done your homework, I and I start by saying, look, I've been in your seat and I understand this might be [01:08:00] a little, uh, sensitive, but let's stay focused on where you think this company could be in the next two years, and how we can help support the strategy and participate in the strategy going forward.

[01:08:11] Stuart R. Levine: So again, if your communication upfront is good, then you mitigate some, uh, toxicity in the conversation, if you will. 

[01:08:21] Doug Chia: Yeah. I think the word you use, journey, is important. This is a snapshot, essentially, and it's, it has to be put in the context of the board. That's been, you know, maybe 10 years ago the board was really, uh, you know, in shambles and, and now it's come a long way, and that's important context that you can't just, you know, uh, yeah, you, you're not gonna evaluate one company or, uh, against another, uh, when, when they, they just got totally different life cycles.

[01:08:55] Doug Chia: So, um, and yeah, it's kind of like, well, look, guys, don't take this [01:09:00] personally, okay, we're, we're this trying to be, we're trying to be helpful here. Not, not, not scold people. So... 

[01:09:06] Stuart R. Levine: I can give you an ex, another example. It's kind of, well, this, it is rushing back to my brain. I was lead director, uh, of a NASDAQ home healthcare company, and we conducted a, uh, independent, uh, process assessment, so forth.

[01:09:23] Stuart R. Levine: I mean, not our firm did it, you know, we retained somebody else and for some reason, uh, they picked up and somebody said it that we should have a clinical outcome committee. And I looked at it and I said, wow, that's phenomenal. That's really interesting because we're a home healthcare company. We have 2000 employees.

[01:09:42] Stuart R. Levine: We're touching tens of thousands of patients on a annual basis. And so as you move around, uh, you hear, uh, those little subtleties. But I would say that came out of the assessment. And, uh, [01:10:00] it was a, we formed a, a new clinical committee, which again, for the culture became a pillar in the corporation. That was really important.

[01:10:10] Stuart R. Levine: And so, um. Those conversations are really helpful. And so, you know, like the, the content that you're referring, you know, to earlier on in the book that was put together by, uh, JP Morgan and New York Stock Exchange, we got feedback from people that were interested I, that were in that initial launch or meeting, whatever the heck went on.

[01:10:33] Stuart R. Levine: And so that, I believe is one of the great things that New York Stock Exchange does with their people, uh, their members. You provide content that is practical and, and can be exercised, which I think is really important. So the, a little kind of funny examples, but important that came out of an assessment.

[01:10:53] Doug Chia: Stuart, thanks so much for joining me and great conversation, 

[01:10:58] Stuart R. Levine: Doug. It's always, uh. [01:11:00] I, I used to see more of you. I kind of, uh, I always had a ton of respect for you, seriously. And, uh, your ethics and your thinking ability. So I'm honored that you have me on today. I appreciate your time and, uh, let's, uh, stay in touch.

[01:11:16] Doug Chia: Thank you. Thank you for those kind words, they mean, a lot to me. So that concludes this episode of The Public Company Series podcast. Powered by OnBoard. Uh, I'd like to thank Stuart, Chairman and CEO of Stuart Levine and Associates, for sharing his insights about board assessments. And I encourage you to read his chapter of the book Board Assessments that Deliver, which you can find in the book Board Structure and Composition part of the Public Company Series published by the New York Stock Exchange and JP Morgan.

[01:11:50] Doug Chia: Uh, you can read and download the entire book at www/nysc.com/pcs. To learn more about OnBoard, visit [01:12:00] www.onboardmeetings.com. For additional resources and episodes, visit www.publiccompanyseries.com. And don't forget to subscribe to receive all of our new episodes of the Public Company Series podcast. And please rate us and leave a review.

[01:12:17] Doug Chia: I'm Doug Chia, we'll see you next time.