This article is the third part of a series that profiles boards that stand out for their drive to constantly raise their game. The authors, who are partners at Guided Futures, have interviewed over 75 directors, chairs and CEOs on how boards must evolve to make a real difference to their company’s future success. Read part one Taking on global leadership at Methanex, part two EPCOR tackles hard choices with ambitious board and part four Corporate Governance: From golden rules to golden principles.
The directors of Canadian National Railway oversee one of North America’s most successful corporations. Since its IPO in 1995, CN’s CNR-T stock has risen 17 times and its operating ratio of 63.1 for the first nine months of 2011 leads the industry.
CN’s $8-billion of strategic acquisitions since privatization have given the company a true North American footprint spanning Canada and mid-America, from the Atlantic to the Pacific to the Gulf of Mexico.
Its commitment to operational and service excellence – anchored on its precision railroading model – has captured increasing market share by giving customers a competitive edge.
Does this sustained success lighten the board’s task: to govern a company that could thrive without them? Or does it get tougher each year: making a difference to a business with such strong momentum? We found no adherents to either view.
In our interviews, CN’s directors and senior management emphasized their drive to continually raise the bar on performance, including operations, customer satisfaction, market share, health and safety, and investor returns. Predictably, this board measures itself by how well the business performs.
Though the standards are high and the hours long, commitment runs deep. Many directors go on contributing long after they retire. David McLean has chaired this board since 1994. Directors portray his sustaining role as part orchestra conductor, chemist and mentor, adding:
“He fosters the right environment.”
“Doesn’t let egos get in the way.”
“Symbolizes our relationship of trust and respect with management.”
“Hears people really well.”
“His feedback has helped my own growth and development.”
Such positive perspectives naturally invite scepticism. Does the longevity of senior directors risk complacency? How much of this progress has the board made possible? How much would have happened without them?
Certainly, most accounts of CN’s progress stress the able direction delivered by three CEOs since 1995 – Paul Tellier, Hunter Harrison, and today, Claude Mongeau. Each represents a different management style, drawing on his own strengths and priorities. So how can we tease apart the special value contributed by their directors?
The first two CEOs brought great strengths and initial gaps that the board could offset. As Mr. Tellier, a former senior civil servant, rebuilt CN, he often tapped into their deep business experience. Mr. Harrison was an entrepreneur and rail operations leader. Directors added complementary value in financial policy, health and safety, and public affairs.
The board also earned management’s high regard by:
1. Developing a membership of high distinction; rich experience; and strong collegiality. CN directors volunteered these words:
“Vast business experience; diverse skills.”
“In-depth insight into customers, competitors, logistics and public affairs.”
“Judgement and wisdom.”
“Cohesiveness; good chemistry and trust.”
“Rigorous; hard-working; gaining a deep knowledge of the company.”
“Taking time to prepare for the big future decisions.”
“Caring passionately about CN’s success.”
2. Fostering a board environment conducive to candid discussion and principled decision-making. To directors, the board’s culture shapes the value they experience:
“People who speak candidly, who don’t hold back.”
“An open and critical environment but not hostile.”
“Open and honest debate – everybody understands it’s all coming from the right place.”
“No big egos making big speeches – we prefer to reach conclusions.”
