The Director’s Chair
Integrity, discipline, and a yen for learning distinguish DFW’s most outstanding corporate board members.
Serving on a corporate board, my old high-school band instructor director might have said, is like spilling a hot drink on dark pants: It gives you a warm feeling, but few people know about it.
Still, countless men and women line up for duty, despite increasing scrutiny from stockholders and the federal government. In most cases, they’ll say, it’s not for the pay. Sure, there’s the prestige of saying you help guide a multimillion-dollar company, but for every mention in an annual report, there are countless daylong meetings and thick files to examine.
Which explains why the number of boards directors serve on has shrunk over the years, says Eliza Solender, who serves on several boards and who is president of the North Texas chapter of the National Association of Corporate Directors. “You’ve got to be fully focused on the job,” Solender says. “That means they have to commit time and they have to be willing to attend board meetings that are scheduled and unscheduled. Because in an emergency, there could be an immediate meeting.”
So, why do it? “It’s an opportunity to associate with very intelligent people that have a similar goal,” says Unity Hunt President and CEO James Holland. “It can be a rewarding intellectual experience.”
Following are profiles of five executives, including Holland, who’ve been selected as among North Texas’ most outstanding board members.
DOING THE RIGHT THING
Besides serving on countless corporate boards of directors, Kneeland Youngblood has been ringside to—and has actually taken part in—making history.
Youngblood jeopardized his plans to become a medical doctor when he joined a 1978 student sit-in at Princeton University, to protest the university’s investments in companies that did business with South Africa.
And Youngblood recently served on Barack Obama’s national finance committee, helping bundle up to $200,000 in contributions from others to get Obama elected, according to the Washington-based Center for Responsive Politics. Youngblood says his work with and for Obama now is over.
“I’ve got my hands full,” he says.
Youngblood runs Dallas-based Pharos Capital Group LLC, which manages more than $600 million in investments involving technology, business services, and health care companies. And he serves on the boards of directors of The Gap Inc. (since 2006), Burger King (since 2004), and Starwood Hotels and Resorts Worldwide Inc. (since 2001); in 2007, he joined the board of Energy Future Holdings, formerly known as TXU Corp., after an investment group including Texas Pacific Group bought the company.
“He is refreshingly candid and direct,” Jeff Liaw of Texas Pacific says. “Kneeland’s sense of humor provides much-needed levity in [Energy Future Holdings’] boardroom setting and enables him to serve as a critical consensus builder in the organization.”
Youngblood says he sees his work on corporate boards as a form of public service.
“It’s an opportunity to make a difference,” he says. “You can improve shareholder value. You can learn a great deal about leadership and, hopefully, as a consequence, better run your own business.”
He says it’s the duty of board members to bring in an outside perspective to better inform the managers who make decisions.
Board members often mix it up verbally, with a free exchange of ideas and comments. Sort of like when Youngblood discussed with his parents the implications of taking part in the Princeton sit-in.
In that instance, Youngblood’s parents trusted his instincts, which were vindicated. The act of civil disobedience didn’t impact Youngblood’s academic future. And Princeton agreed to direct some of its investments away from pro-apartheid South Africa.
“I realize that many who opposed us in 1978 would still disagree with this position,” he wrote in the Princeton Alumni Weekly. “But [I believe] that economic sanctions played a significant role in ending apartheid. As a student, I believed that taking part in the Nassau Hall sit-in had been the right thing to do. As an adult, I know it was.”
GUARDIAN OF ETHICS
If shareholders at the Penske Automotive Group are getting more than their fair share of notices of U.S. Securities and Exchange Commission filings, they might have Ron Steinhart to thank.
“If there’s a hint of whether it’s something you should report, now, with leadership like Ron’s, it gets reported,” says Eustace W. Mita, chairman of Achristavest Properties LLC. “I would say the Penske board errs on the side of reporting, if anything.”
Mita is chairman of the Penske board’s corporate-governance committee, which is responsible for assuring that the board and the company operate ethically. Yet Mita says it’s Steinhart who helps lead the company and its board in promoting ethical behavior.
Sixty-eight-year-old Steinhart serves on Penske’s audit committee. Gladly.
“My favorite part is being exposed to bright, capable, driven CEOs,” the Dallas resident says. “That’s the exciting part: watching managers in action. The least [favorite part of the job] is the regulatory minutia you get into that takes time, and you question the significance of it.”
Steinhart says he understands government’s tendency toward over-regulation after Enron’s blowup. Overall, he says, the increased regulation is positive, despite the extra work.
Steinhart is no stranger to regulation and disclosure. Between 1969 and 1980, he helped charter or purchase six banks and eventually was chairman and CEO of the Bank One Corp. Commercial Banking Group.
He earns high praise from H. Brian Thompson, executive chairman of Global Telecom & Technology, who isn’t nearly as tolerant of the Sarbanes-Oxley Act of 2002—which followed the Enron accounting scandal and other Wall Street debacles—as Steinhart is.
Thompson says that bureaucrats have turned four paragraphs from the Act into 400 pages of regulations that have resulted in millions of dollars being paid to outside consultants, with no real value to shareholders. “It’s created a nightmare of activities for board members,” says Thompson, who is lead director at Penske.
“Too many people try to imply that boards are good-ol’-boy clubs,” he continues. “Nothing could be further from the truth, from my perspective. We’ve made it so hard for people to be on boards, with Sarbanes-Oxley, it seems like you’re spending full-time on administration, when you should just be a sounding board for leadership.”
When Steinhart joined the Penske board in March 2001, the stock was about $5 a share. Before the stock market took a bath in the last quarter of 2008, Penske stock sold for more than $15 a share.
James R. Holland Jr.
Perhaps in heaven we will regain the time lost to the Tangent. The Tangent (or distraction or digression) has robbed us of our waking hours (time equals money) without our even realizing it.
The Tangent has a nemesis named James R. Holland Jr., according to Texas Capital Bancshares Inc. CEO and President George F. Jones Jr. Holland serves as the lead board member for Texas Capital. He’s been on the bank’s board since 1999.
“I think one of [Holland’s] biggest attributes is a sense of organization and accomplishment,” says Jones. “Jim’s always the guy who’s very prepared, he takes copious notes, and he’s very organized and disciplined. And he’s a taskmaster, in terms of managing the board process. Some boards can get off on tangents.”
Arguably, someone who serves on seven boards of directors—beyond his work as president and CEO at Unity Hunt Inc., which owns about 100 companies—must be organized and to-the-point.
But Holland is just that way.
When an interview with D CEO stretches beyond its allotted time, Holland quickly asks how much longer the questioning would continue.
He’s had ample opportunity to be direct. His biography on the web site of Booz Allen Hamilton (a global business consulting firm where Holland worked) indicates he has served on more than 80 boards of directors so far. He is director of the executive committee of Texas Capital’s board, a panel that oversees appointments to the board; that committee also has the power to make decisions when the entire board of directors isn’t in session.
Holland’s also a director of Colorado-based National CineMedia Inc. and sits on the board’s audit committee. A filing with the SEC indicates that he’s also on the audit committee of Placid Holding Co., which deals in petroleum refining. In addition, Holland serves as chairman of the board and on the audit and compensation committees of Hunt Midwest Enterprises Inc., a development firm. Holland also serves on the board of the North Texas branch of the National Association of Corporate Directors.
Holland landed on Texas Capital’s board, Jones says, because Unity Hunt holds a major interest in Texas Capital.
Jim Holland might be a hard-nosed curmudgeon, but he has a soft spot for helping businesses out.
Jones says Holland recently helped guide Texas Capital Banchares when it raised $55 million from five institutional investors using his knowledge of banking—no small feat, given the credit markets in recent months.
“He’s very good at what he does as a board member,” Jones says. “There are people who serve on boards but who don’t have the experience that he has. To find a Jim Holland is incredibly hard.”
For his work on Texas Capital’s board, Holland was compensated $41,475 in 2008, according to SEC reports. His work on the National CineMedia board fetched him about $65,800 in 2008, according to a Forbes magazine report.
“I’ve spent my career building companies,” Holland says. Board service is “an opportunity to associate with very intelligent people that have a similar goal. It can be a rewarding intellectual experience. It’s certainly not rewarding compensation-wise. I don’t track it.”
Robert A. Estrada
COMMITTED TO SERVICE
Robert A. Estrada is an admitted public-service junkie.
“When I got asked, I never said no,” Estrada says with a laugh.
As a result, the opera buff landed on boards ranging from the Federal Reserve Bank of Dallas to the Dallas Opera Foundation.
“It’s been a lifetime curiosity, to not only learn about my own profession, but others,” Estrada says.
Most recently, Estrada agreed to joined the board of TXU spinoff Oncor in 2007. Estrada recognizes the Oncor position as a heavy-duty responsibility, but still embraces serving on boards like the North Texas Super Bowl Host Committee.
“The other stuff I do is much lower liability,” he says. “I do a lot of community stuff. I’m not too worried about those deals.”
Estrada works full-time as chairman of the board at Estrada Hinojosa & Co. Inc., an investment banking firm he co-founded in 1992; he founded an earlier incarnation of the company, Estrada Securities Inc., in 1990.
“The Oncor board, I thought, that was a fascinating opportunity,” Estrada says, adding that the invitation came at an interesting time in energy delivery. Not to mention that Estrada would be paid for his membership (since Oncor isn’t publicly traded, it’s unknown exactly how much he’s paid; Estrada says the pay is comparable to other boards).
Fellow Federal Reserve board member and Sam Houston State University professor Jim Bexley says that Estrada has an analytical, deliberate approach to discussions held by the board.
“He stands on his convictions,” Bexley says. “The Federal Reserve board is unique in that everyone can have an opinion, but no one goes away mad. I’ve really enjoyed his careful analytical discussions and also his friendship. He’s the kind of guy who, when you talk to him, he cares about how you’re doing.”
Estrada serves on the Dallas Fed board alongside Southwest Airlines co-founder Herb Kelleher and JCPenney CEO and Chairman Myron E. Ullman III.
“You have a wide diversity of people on the Fed board, and I think it factors in real well,” Bexley says, adding that Estrada’s knowledge of bond markets helps the board in those discussions.
Estrada had his baptism by fire as a member of the finance committee of The University of Texas System Board of Regents in 2001. When Sarbanes-Oxley regs took hold in 2002, Estrada chaired a newly formed audit committee that ensured that the UT system followed SOX-inspired disclosure laws. He said The University of Texas was one of the first university systems in the country to adopt the principles of Sarbanes-Oxley.
He served on UT’s board through February 2008.
“I put in 20 hours a week on that assignment,” Estrada says. “Nothing now comes close to that. But it certainly got me disciplined ... using every spare minute to look at news articles and keeping up.”
Estrada says it’s not unusual for him to spend weekend hours paging through company reports to prepare for an upcoming board meeting. He suspects there will be new regulations following the year-end meltdown of global markets, which saw numerous financial institutions fall, including Lehman Brothers.
“They’re probably going to be writing new laws,” Estrada says. “We [in investment banking] are subject to all the same rules that the Wall Street firms are.”
Estrada says he only gets involved with companies or organizations whose leadership he believes in.
Doing so, he says, helps him sleep better at night.
A WILLINGNESS TO LEARN
When Cynthia Pharr-Lee joined the board of directors at Spaghetti Warehouse in 1991, being on such a board didn’t carry the weight it does today. “Not very many years ago, board members were close associates of the CEO, and their duties included hiring and firing of CEOs, things like that,” says Pharr-Lee, who joined the board of Chuck E. Cheese’s founder/developer CEC Entertainment in 1994, and who remains on CEC’s board.
“Now, directors have a much bigger role in risk management. Most directors who understand this scope of expectation are working much harder these days,” she says. “They’re asking more questions. They’re attending more educational sessions and seeking their own counsel.”
Though Pharr-Lee isn’t a certified financial expert—her background is in public relations and marketing—her willingness to learn the ways of the balance sheet has earned praise from CEC’s chief financial officer, Christopher Morris.
“While she knows the business very well and has a very good understanding of the financial statements, she does not have a traditional accounting and finance background,” Morris says. “As a result, her approach and perspective on matters, in some cases, is different than those who have worked solely in accounting and finance.”
Morris adds that Pharr-Lee’s comments often help clarify language on corporate filings.
Pharr-Lee also serves on the board of Behringer Harvard Opportunity REIT II, a private commercial real estate investment trust. All the while, she has operated her marketing and public relations firm, C. Pharr & Co.
While her compensation for serving on the Behringer Harvard board was unavailable, SEC filings show that in 2007 she was paid more than $117,000 for her work on the CEC Entertainment board. She served on the Spaghetti Warehouse board until the company went private in 1999.
In the ’90s, corporate board members weren’t necessarily expected to have read and digested all the material for board meetings, she says. But with the Sarbanes-Oxley Act and other developments, board members are expected to have read their packets and have questions at the ready.
Further, SEC regulations mandate that board members spell out exactly why executives are being paid as they are. Pharr-Lee says she spends an average of one day a week on board-related work and keeping up with developments in executive-compensation regulations.
“Compensation is much scrutinized now, and it’s complex,” Pharr-Lee says.
In her time on the CEC board, Pharr-Lee has witnessed an unsuccessful hostile takeover of the company; she was there when the company fell under suspicion of backdating options. In 2007, the company declared it had found no such practice had taken place, saying that if anything were done improperly, it was record keeping.
How We Chose Them: D CEO put out a request for nominations. Nominees were to be Texas residents serving on the board of a public or private for-profit company, of which he or she is neither an employee nor a majority shareholder. The list of nominees was then added to, vetted, and finally narrowed by an independent panel of experts including members of the National Association of Corporate Directors; The Corporate Library, a 10-year-old independent research firm that examines U.S. and Canadian corporate governance; and D CEO Executive Editor Glenn Hunter.