The Directors Chair

The Directors Chair

The compleat director

In The Directors Chair with David W. Anderson: Annette Verschuren, former president of Home Depot Canada and Asia, says todays best directors are equally successful in the boardroom and in the community
Photography by Jeff Kirk

Annette Verschuren is a highly regarded CEO, chair and director who served as president of Home Depot Canada and Asia for 15 years through 2011. Here, in an exclusive interview with Listed contributing editor and governance and leadership adviser David W. Anderson, Verschuren discusses how being an experienced business operator influences her work as a director. According to Verschuren, directors must walk a fine line, providing quality strategic advice to the CEO without getting too absorbed in details best left to management. She also elaborates on her strong viewsagain born of personal experienceas to the essential importance and high value that senior executives, directors and their companies derive when business leaders spend time serving in their local communities.

Annette Verschuren
Primary role Chair and CEO, NRstor Inc. Other roles and organizations National Leadership Executive, Habitat for Humanity; Executive Advisory Board, Summerhill Group Current directorships Liberty Mutual Group; The North West Company; Icynene Inc.; Centre for Addiction & Mental Health; Conference Board of Canada Former executive roles President, Home Depot Canada and Asia; President and co-owner, Michaels of Canada; Vice-president, corporate development, Imasco Ltd.; Executive vice-president, Canada Development Investment Corp. Former director Sobeys Inc. Education Bachelor of Business Administration, St. Francis Xavier University Honours k Officer of the Order of Canada, 2011 k Honourary doctorates from St. Francis Xavier University, Mount Saint Vincent University, Dalhousie University k Retail Council of Canadas Distinguished Canadian Retailer of the Year, 2005 Current age 55 Years of board service 15

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The Directors Chair

David W. Anderson As a business leader, youve proven yourself to be

The Directors Chair

competitiveness. On the boards I currently serve, I do the equivalent, because its critical to get good information from all the stakeholders.
David W. Anderson The idea that stakeholder perspectives should be

an outstanding operator, getting things done and producing results. How do you bring those strengths to your work as a director? Annette Verschuren I offer my view based on experience, and make sure weve considered the pros and cons. At times I offer my network to gain advice not represented at the table. Sometimes I share my thinking with the board and sometimes with the CEO directly. Its true Im an operator, but Im wary of boards being too involved in the operations of the business. The last few years Ive seen a shift in governance that risks inviting too much of the wrong type of involvement. Boards have the power to make consequential decisions. They should exercise that power with great care to judge the appropriate level of involvement to add value. for boards do you think makes them most effective? Annette Verschuren Directors should provide insight and advice, but be mindful not to become overly influential in running the company. I have seen a board openly challenge a CEO on a decision to make internal organizational changes. While its appropriate to understand the rationale behind such decisions, its not helpful to encroach upon the domain of the CEO. Philosophically, I believe that getting too involved as a board is a problem because it takes the responsibility away from management to run the business. In practical terms, when a board gets into too much detail, the discussion with management is biased away from matters of strategic direction and oversight. Furthermore, a board that isnt disciplined in its governance role takes the pressure off itself to ensure management is doing its job. In my view, the board has the obligation to ensure the CEO is qualified to perform to expectations and to replace the CEO if not performing to those expectations.
David W. Anderson Yet the pressures on boards to demonstrate accountDavid W. Anderson How should boards involve themselves? What role

integrated into business decision-making is not widely shared on boards or in corner offices, yet this conviction has been at the heart of your leadership. How did you come to this view? Annette Verschuren The 28,000 people at Home Depot, living in their own communities, were central to Home Depots sustainability. Store managers were ambassadors to our communities. They built Habitat homes and playgrounds in low-income areas. In a crisis, they had unlimited budget to go and help out in a community. Its part of why we were successful. Doing the right thing in our communities aligned with what our customers wanted. It may be hard to quantify the return, but in the long run, it was positive. Corporations need to become more creative and engage employees in how they give back. The return comes in customer and employee loyalty. I also believe its a great way to educate people in leadership. For example, our department manager leading a playground build in the community develops leadership skills in planning, motivation and teamwork.
David W. Anderson Whats the learning from this you apply to your Annette Verschuren The positive experience at Home Depot has

the watchful eyes of regulators and exchanges are felt by directors, but more bracing still has been the swift change in the posture of the investment community. Investors greater assertiveness with boards and impatience with lagging performance have cemented the notion that individual directors face reputational exposure as never before. The experience of well-known failures and challenges in the marketplace, including examples close to home such as Nortel, RIM and CP, are the stuff of nightmares for directors. Directors work hard to stay out of these situations, in part by developing a better understanding of where things can go off the rails. Finally, succession planning has become recognized as the great responsibility of boards. Attention to succession at the CEO level and below has sharpened as directors have recognized the long-term impact of leadership decisions on the corporate well-being. Boards must be adept at ensuring CEOs engage in solid performance management and actively develop pools of leadership talent in the organization.
David W. Anderson In practical terms, what are boards doing differAnnette Verschuren Simply put, risk and succession management are

position because of the effect it has on the ability of a board to add value. Current and former CEOs have the best overall vantage point of their businesses, so its clear why boards favour that level of experience. However, I see a lot of professionals populating boards lawyers, accountants and others who have expertise in the nonoperational side of the business. I think boards have become overweighted in favour of professionals. Arguably the worst outcome for a CEO is having a board largely composed of people without industry knowledge or operational experience and yet favouring the type of involvement in decision-making Ive already cautioned against. Its important that boards put people in director roles who are disciplined and best-suited to making governance-level decisions.

ently in these areas?

board work today?

ability and valueand the desire of directors to avoid liabilityare making it necessary for boards to be more engaged in the business. How do you reconcile these tensions? Annette Verschuren I think the tension is addressed in the division of labour among committees. The place for getting into detail is at the committee level. Thats where fine-grained examination, analysis and close support for decision-making are warranted. Board-level discussions are best left to focus on strategic matters, oversight of CEO performance and organizational culture.
David W. Anderson How else are directors responding to these pressures? Annette Verschuren In my experience, directors have stepped up

reinforced my view that promoting a culture of fairness and of giving back to communities is good for business. Profitability without social responsibility gets you in trouble in the long run. If you are seen to be selfish by employees and customers, taking the short route to profit or other considerations, you lose in the long run. Boards must keep this balance in mind, consider the implications for people and environment in their decisions, and ensure management acts accordingly, promoting better health in aboriginal communities in places they invest, for example, and supporting community and business partners.

areas in which boards have gotten much more process-oriented. Before, it was not uncommon for insiders to make decisions seemingly off-thecuff, with scant analysis to back up their decisions. Directors now insist on being engaged and dedicate a lot of effort over longer periods of time to get the process of decision-making right. Transparency has improved, reducing the distance between directors, managers and stakeholders. The best information is from the people who are invested, close to the issues and willing to speak the frankly. Succession planning, for example, is greatly enhanced when directors give up the old ways of having little exposure to executives below the CEO and take time to get to know managers personally. How else can a board verify a CEOs judgment and come to its own conclusions?
David W. Anderson How do you respond to the concern that process

Wise directors listen carefully, gather information and bring well-reasoned, strong advice to the CEO. When a board believes it is not being listened to, it becomes a serious matter
David W. Anderson Is it more difficult now to get operationally experiAnnette Verschuren Yes, were so busy as CEOs, most of us dont have

enced business people with CEO-level experience on to boards?

Promoting a culture of fairness and of giving back to communities is good for business. Profitability without social responsibility gets you in trouble in the long run
David W. Anderson Youve served on many types of boards: public,

to the challenge by coming to meetings much more prepared and ask probing questions in areas where they need clarification. I have meetings with management between board meetings, spending time to understand the business and where theyre going. I think directors are pulling up their sleeves and are prepared to work.

reduces efficiency? Can decision-making be too efficient, to the detriment of effectiveness? Annette Verschuren Yes, I prioritize effective decision-making over efficiency. Efficiency that undermines effectiveness is no virtue. The positive effect of good processes in which directors share perspectives and insights among themselves and with the CEO, particularly after visits with managers in the business and stakeholders, is a higher level of confidence in the decisions made by the board and the CEO. Directors must frankly and honestly address the issuesthen let the CEO decide how to work with the information and insight from the board. Great CEOs welcome this kind of involvement. the board?
David W. Anderson What happens when the CEO doesnt agree with Annette Verschuren This is where in camera sessions of the full board

time for the rigours of todays board service. Many boards dont allow their CEO to be on other boards for time and liability reasons. On two of my current boards, we are looking for this CEO-level capacity for the operational experience, but are having a hard time finding it. I think theres an opportunity to find good operational experience in non-CEO executives. We just have to go deeper to find them. In my view, boards are not taking enough risks in this area.
David W. Anderson How should boards respond to the growing Annette Verschuren Diversity of thought is important for the contrary

expectation that boards diversify their composition?

expectation did you set as CEO for your directors, in order to get the most value from them? Annette Verschuren I asked board members to spend time in our stores each year. Our expectation was that each director would visit a minimum number of 10 stores a year, either announced or not, and would talk to me about what they observed as a customer. The original American founders of Home DepotArthur Blank and Bernie Marcusstarted this tradition and I maintained it because it reinforced the culture of customer focus that was central to our
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David W. Anderson When you ran Home Depot in Canada, what

private, crown and not-for-profit. What distinguishes the ones on which you were able to make your best contribution? Annette Verschuren Ive been able to contribute my best and see the board be most successful when there have been good relationships amongst the directors and a professional respect with the management team. This fosters open, honest dialogue and a board culture in which were not afraid to challenge and be challenged. Relationships and the mutual respect that sustains them are a two-way street.
David W. Anderson How has the focus of board deliberations changed Annette Verschuren As directors weve put a greater focus on risk,

opinions and richer debate it brings. This is extraordinarily meaningful. While Ive emphasized operational experience, it is still necessary to have professionals on board, particularly with financial acumen. Bringing differing perspectives to boards is a work in progress. Ive been disappointed in the number of women on boards, though it is getting a little better. Whatever their background, talented people must communicate their views effectivelyand be willing to listen to othersfor the benefit of diversity to be realized.

in your experience, and what have been the catalysts for such change?

and potentially the work of an executive committee or governance committee are critically important. Wise directors listen carefully, gather information and bring well-reasoned, strong advice to the CEO. Dealing effectively with disagreements is a healthy process that we engage in a lot. But when a board believes it is not being listened to, it becomes a serious matter. Ultimately, the board must have confidence its CEO is in alignment on what matters most.

David W. Anderson How do you help build such diversity on boards? Annette Verschuren I mentor women and men. I love dealing with

younger people, listening and giving advice. I take every chance I can to put women forward as candidates for board positions. I speak to women about corporate leadership and what it takes. David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independent advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises directors, executives, investors and regulators based on his international research and practice. E-mail: david.anderson@taggra.com. Web: www.taggra.com.
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reputation and succession. Discussions on sources and responses to enterprise risk are now integrated into major decisions. Certainly
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David W. Anderson There is much discussion today about board comAnnette Verschuren Im particularly concerned about board comwww.listedmag.com

position. In your view, who should serve on boards?