This article is the first in 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 two EPCOR tackles hard choices with ambitious board, part three Raising the bar at CN Rail and part four Corporate Governance: From golden rules to golden principles.
How does a board of directors prepare itself – and its company – for a very different future? This challenge becomes more acute when a business rises to global leadership. At Methanex Corp. MX-T – Canada’s world leader in methanol production and distribution – a new era in board governance began in 2004. Pierre Choquette, the long-time CEO who had guided the firm to its worldwide prominence, handed over the reins to his trusted successor, Bruce Aitken.
At the Board’s urging, Pierre did not retire, but became chair – a conscious breaking of governance best practice. He recalled: “People said the CEO should disappear”. His joining the board was seen as “holding up your pants with both a belt and suspenders”.
He proceeded anyway, on one key condition: He was convinced that the board should embark on a program of wholesale renewal, to equip itself to provide the governance and guidance worthy of a growing global enterprise.
This renewal has taken many forms, beginning with composition. Urgently, the board needed more directors able to guide the company Methanex had become. Over the past five years, out of 10 outside directors, five new members have joined to bring richer industry expertise, insight into world markets, and more diverse life experiences. The turnover continued last year when Tom Hamilton, a senior U.S. oil and gas executive, became the new chair.
In light of these changes, fostering director involvement and a constructive board culture has won top priority. Both the current and past chairs have invited all members to contribute more widely, often seeking the views of each director, in turn. While some may be apt to defer to greater expertise, the message is clear: All are welcome – and expected – to speak up.
To participate is one thing, but to express controversial or contrarian views is much riskier. This board works hard to ensure that they build the trust that makes risk-taking possible. They take time to get to know each other, along with members of senior management. As more new members join in future, renewing this trust and board chemistry will remain a pre-occupation.
Many may see this story as a reversion to the Best Friends Forever model of the past. This board acknowledges the risk, but will not let closeness degenerate into clubbiness. They stress that candid conversations only take place with deep personal trust. As with the ex-CEO becoming chair, if the spirit and the motives are right, behaviours that may break classic governance taboos may also be right.
This trust has delivered the greatest dividends at watershed moments in the life of the company. Just four years ago, Argentina sharply cut the natural gas supply to company production facilities in Chile. That one event ushered in a new era of uncertainty and market disruption, establishing a more complex environment for doing business.
Years before, Methanex had risen to global dominance on the wings of a simple, compelling business model. Locate abundant supplies of stranded natural gas in countries with stable governments in attractive regional markets, sign 20-year contracts at fair prices, and build production facilities to profit from that certainty. No one has done this as well as Methanex.
