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The Power of Transparency and Trust: The CLO-Board Relationship

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By Amy Chai, Associate General Counsel and Director of Advocacy Initiatives, Association of Corporate Counsel

One of the best kept secrets at Steve Madden just may be the collaborative relationship between the board of directors and executive team. This partnership was on full display in a recent conversation with Lisa Keith, Steve Madden’s EVP, General Counsel and Corporate Secretary, and Rob Smith, CEO and Founder of The Phluid Project and a director on Steve Madden’s board. One of the biggest lessons for boards that Lisa and Rob shared is that collaboration and authenticity are not just aspirational qualities, they are essential to the health of the organization and ultimately sustainable value creation.

Recent times have brought multiple existential challenges to businesses, especially in the retail sector. “During these times, corporate governance is so important,” shared Lisa. “As GC, it is critical to build your trustworthiness with the board; and you do that by coming from a place of compliance and truth.” This largely comes down to the CLO and executive team coming to the meeting fully prepared to provide updates and address questions the board may have. The executive team thoroughly evaluates risks and opportunities before bringing them to the board, and while presenting all possible outcomes, often errs along a conservative path in sharing recommendations. This “under promise/over deliver” philosophy allows the board to trust the information they are given, with comfort that there is always a possibility to color within the lines of the company’s risk appetite. “Full transparency is a key value,” said Rob. “Having a CEO and executive team that lays it all on the table and doesn’t sugar coat the facts create trust.”

In most organizations, culture is built at the top; and board members that immerse themselves in the business are able to build trust with the C-suite and employees, which permeates throughout the organization. Board members can engage with the business in a variety of ways, including attending staff meetings and employee learning sessions, and even contributing to the establishment of programs to help develop employees. In the past years, “these learning sessions were bright spots in an otherwise dark time,” shared Lisa. The board may also consider encouraging the executive team to provide deep-dive briefings, where a wide range of company leaders present directly to the board. This approach allows the board to gain a more intimate understanding of the organization as well as the talent it employs, while ensuring company employees view the board as accessible.

Board members that educate themselves on good corporate governance practices can contribute significantly to the organization’s corporate governance know-how. While board members must be well-versed in the business, they must also know when to “get out of the way.” “Ask good questions, empower the right people, and let them lead,” advises Rob.

Another key ingredient to a successful board-CLO collaboration is diversity of experiences and identities. Diversity has long been part of the fabric of Steve Madden’s organization – it is a long-held and respected value – but in recent years, the Nominating/Corporate Governance Committee has made diversifying the board a priority. Key to accomplishing this is intentionality – with respect to the need for diversity of experiences and ensuring that those around the board table reflect those inside the organization as well as those who are part of the broader Steven Madden community. By looking deeply at these two groups, they were able to introduce new perspectives. To an extent, there also needs to be an appetite to bring on individuals who may not have traditional board experience. Rob noted that “sometimes you need to take a bit of a risk” on someone who does not have prior board experience.

Having a board that represents diverse perspectives does not mean having a board with nothing in common. To the contrary, both Lisa and Rob described the board at Steve Madden as having an overarching sense of warmth, mutual respect, trust and camaraderie. This atmosphere is created partly through the use of a comprehensive interview and onboarding process for new board members. “Before they walk into the room for the first time, a new board member has already met five or six other board members.” Relationships have already been established, leading to an overall sense of community and respect for the qualities each person brings to the table. Relationships continue to develop at the social events associated with regular board meetings.

Above all, Lisa and Rob stressed that communication is key to cultivating a collaborative relationship between the board and the executive team. Rob noted that a collaborative board culture does not eliminate disagreement. But when there is a culture of transparent and respectful communication, disagreements can be effectively resolved.

Although good corporate governance might not be as exciting as Steven Madden’s latest shoe line, it is clearly a critical ingredient to creating resilient growth and success.

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The views and opinions expressed herein are the views and opinions of the authors and do not necessarily reflect those of Nasdaq, Inc.

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