Ex-Xerox CEO Anne Mulcahy on engagement and short-termism
She had a relatively short – and harrowing – career as a CEO, but ultimately was hugely admired. As a veteran Xerox sales rep and HR executive elevated to the CEO spot in 2001, Anne Mulcahy led the company through one of the greatest turnarounds ever, culminating in an exemplary succession and her retirement in 2009. Today she’s a board director at Johnson & Johnson, Target and other major companies, as well as US board chair of Save the Children.
So what led Mulcahy to the stage at a NIRI New York chapter event last week? It turns out that aside from her many accomplishments, she is also the cousin of the chapter’s president, Computershare’s Pat Tracey, who was presiding over what he called Niripalooza: an afternoon and evening event hosted at Credit Suisse’s US headquarters, titled ‘IR leadership: mastering trust, integrity and credibility’.
NIRI NY is currently blazing ahead under Tracey and programs heads Theresa Molloy and Rebecca Updegraph. Perhaps the highlight of the event was when Tracey, who had a row of siblings in the audience, introduced Mulcahy with a heartfelt tribute to the most important leaders and mentors in his own life: his parents and the many aunts and uncles they all grew up with.
Earlier in the day, Molloy introduced the day’s theme by identifying IR as a role of courage, because it takes courage to speak truth to power. Over lunch Edelman’s Ben Boyd presented his firm’s Trust Barometer. Then, with the usual NIRI NY crowd boosted by out-of-towners who had come to New York for Bernstein’s big Strategic Decisions Conference, Wharton School’s Thomas Donaldson led a workshop on ethical dilemmas in IR.
As afternoon turned to evening, and Mulcahy prepared to go on stage with Burson-Marsteller’s Mary Beth Kissane as interlocutor, Mulcahy sat down for a conversation with IR Magazine.
On shareholder engagement:
‘Boards are now becoming more engaged with shareholders, and therefore developing more active partnerships with IR. I’ve just done shareholder meetings for Target [as compensation committee chair] and for Johnson & Johnson [as lead director], seeing top shareholders, accompanied by my IR partner or corporate secretary without the CEO, talking about governance and other board-level issues. The IRO’s expertise was really important to me as a director not involved in the day-to-day business. There are still boards that don’t talk to shareholders, but I believe the trend is clear toward shareholder engagement.’
What do shareholders want to talk about?
‘First of all, shareholders want to know the board is operating at a very high level of effectiveness. They want to understand how the board operates, and how committees are lined up. Board refreshment is a huge priority, with committee and chair rotation becoming more and more important. Shareholders also want to know how we think about leadership change, for example a combined chair and CEO versus an independent chair role. They want to talk about proxy access. It’s a mix of the hot issues of the day and assurance that there’s alignment in how we think about the company’s performance and how it’s viewed by shareholders.’
‘Short-termism is a worry, and I was happy to see BlackRock’s letter challenging CEOs on it. That was an important warning about the percentage of capital flowing through to dividends and share buybacks versus both M&A and organic investment. My big worry is that many companies aren’t doing enough in terms of organic investment because the yield takes longer and doesn’t align itself well with quarterly investor communication cycles. There’s a real concern that they’re short-changing internal investment, whether it’s marketing, innovation, training or something else.’
‘DuPont was absolutely a wake-up call for a lot of big, well-performing companies. It’s a healthy exercise to think about shareholder activism in a constructive way. Turn the tables and ask: what are the vulnerabilities? What should we be doing to make ourselves less vulnerable? And are we willing to stay the course because it’s the right thing to do for long-term value for all our constituencies? I’m encouraging all my boards to play the role of Carl Icahn or Bill Ackman. How do they think? How would they view the company?’
‘Probably the most important thing for Johnson & Johnson is its Credo, which lives and breathes in the place. Every year the board does a Credo session. We look at the Credo in light of decisions we made and issues the company had. It’s an intense, almost emotional session where we give ourselves a report card on how we performed in terms of values and ethics in the prior year.’
‘One of the challenges for boards today is ensuring the right balance of risk prevention and risk taking. I think many companies have swung the pendulum so far to risk prevention that they aren’t taking the risks that will potentially lead to performance and future success. Boards should help companies take appropriate risks so they can differentiate and innovate. Instead of risk management, we should be talking about risk taking.’