When J.C. Watts Jr. left national politics behind at the apex of his tenure as a leading light of the Republican Party in 2002, he was sought after in Washington, D.C., and enjoyed a certain celebrity outside of it. Watts had already served on some not-for-profit boards and was a desirable recruit in the early days of corporate consciousness about boardroom diversity.
But becoming a corporate director was about the furthest thing from his mind. “I can’t say it was on my list of top three things to do,” recalls Watts in an exclusive interview with Corporate Board Member. “But I kind of thought there might be some opportunities.”
Were there ever. Watts accepted his first corporate director seat in 2003 at Terex, the beginning of a 20-year career on boards that in some ways has been unparalleled. Watts was named America’s No. 1 Value-Creating Director in a new analysis done in partnership with AlixPartners, a leading consulting firm.
AlixPartners compiled the list (which appeared in the last issue of CBM) by analyzing company and peer-industry total shareholder returns during each director’s board memberships and rolling up the results to form indices that identified overachieving directors across industries. The median total shareholder return of the companies where Watts was a director—Dillard’s, Paycom Software, CSX and ITC Holdings—tallied an impressive 39.9 percent and outpaced the corresponding industry peers by 15.3 percent. This placed him at the top of the list of high-achieving directors.
Thus, Watts’ observations on board memberships carry more than a bit of weight. There’s also the matter of his previous careers as a sports hero, clergyman and national political leader. The 66-year-old Oklahoma native was a star quarterback at the University of Oklahoma, leading the Sooners to two Orange Bowl victories as well as picking up a degree in journalism. Watts became MVP of the Canadian Football League in the first season of his five-year career.
Returning to Oklahoma, Watts became a Baptist pastor, then began his political arc, in 1994 becoming the state’s first black representative in Congress. For eight years he chaired the Republican Conference, the fourth-ranking leadership position in the House, and gained currency as a potential candidate for president.
Watts retired from Congress in 2003, citing his family, who remained in Oklahoma, and the fact that he’d served four terms, one more than he’d planned. He founded an eponymous lobbying and consulting firm. In 2020, among other things, Watts launched the Black News Channel as a 24-hour property aimed at an African-American audience, but it went out of business two years later.
In an interview with Corporate Board Member, Watts favors sports analogies and flashes some evangelical fervor. He expounds on the centrality of integrity in a board member, discusses the importance of resisting bad leadership and pushes back against a rising tide of criticism of the DEI movement. The following has been edited for length and clarity.
Why did you decide to become more than an “anecdotal” director?
When I left politics after the 2002 election cycle, I looked at the last 25 years of my life and said, “What can I go and do to try to make a living?” I had always been in either athletics or politics. I had an interesting interview to become the CEO of the [National Collegiate Athletic Association (NCAA), which I’m thankful to God didn’t work out. I think I was a little too aggressive for them, and I’ve been proven right. I don’t think they’re worth a plugged nickel today.
The NCAA has proven to be a useless entity and has been asleep at the wheel for years. I would have been aggressive about advancing women’s sports and creating more equity for the players sooner. You had coaches and administrators who were making millions, and the players were getting nothing out of it until lately, although the players were the product.
Anyway, politics and sports is where I’d been. I hadn’t operated in the arena of sports for some time, so I didn’t think being a coach or an athletic director was a possibility because I didn’t run in those circles. What was of value that I could take and do some things with ended up being consulting and boards and the lecture circuit. I also get to preach six or seven times a year around the country when time permits, and I’m engaged with the church.
I don’t think you wake up one morning and say, “You know, I think I want to be on the Dillard’s board” or some other board. The boards I’ve been on—and there have been some outstanding ones—those folks came looking for me. I probably wouldn’t have known how to go looking for them.
Over the last 20 years, with every board I’ve served on, they sought me out either through personal networks or an executive-search firm. With most of them, I’ve have had some type of personal relationship in the organization where they reached out to me and asked if the CEO or lead director could come and visit with me about the possibility of sitting on their board.
How did you decide how much board work you wanted to do?
After I left Congress, I had four board assignments: Clear Channel, Burlington Northern Santa Fe, Dillard’s and ITC. Today I’m on two boards, including Paycom here in Oklahoma City, 35 minutes from me. I can drive to Little Rock and Dillard’s headquarters in four or five hours. Logistics have as much to do with the boards I’m on now as finances.
But you know, to find a $10 billion to $12 billion company in Oklahoma that is a tech company is pretty mind-boggling. The air in Austin or Atlanta doesn’t make you any smarter than it does in Oklahoma City, and Paycom has proven that. They’ve got good balance sheets and finances and know what they’re doing.
You’ve got a track record of great success, quantifiably, in terms of the companies whose boards you’ve served on. What makes for an outstanding director? What makes a board successful?
Integrity is the most important characteristic of a board. [It’s been said] that if there’s no integrity, then strategy doesn’t matter. We’ve gotten so far down the road in society these days that we normalize lying. We normalize dysfunction. We’re in a scary time because that’s a very slippery slope. So, if you’ve got to choose integrity or strategy, take integrity first. I’ve been blessed that not a CEO I’ve served with hasn’t been a person of character with a strong value system.
Outside of character, it’s just understanding the dynamics and operations of a company and familiarizing yourself with them. I liken it to being a good quarterback: trying to understand the responsibilities of different players, how they do it and what they should be doing. You also understand that there is opposition, there are competitors, and if you don’t deal with your dysfunctions, just as in football, the opposition will take advantage of that. So it’s good accounting, a good compensation system, good operations, good governance—it’s all those things.
You also want to make sure you’ve got a diverse board to cover many spaces: operations, finance, government in a regulated industry. CEOs like to have board members who’ve been there and done that.
Today, AI and cybersecurity are two areas that boards will have to deal with. Cybersecurity has been on our radar screen; it didn’t just pop up yesterday. But the AI thing is something boards suddenly have to be concerned about. Does the company have any overlap with AI? What background does the board have in it? You want someone on the board with experience in areas like that.
Put all that together and the fundamentals of board service are always about operating with integrity, having good chemistry with the other board members, having a good understanding of company operations and keeping up with the ever-changing regulatory environment.
In the late ’90s, Sarbanes-Oxley raised the consciousness level of board members and management concerning their responsibilities. Regardless of what you thought of the legislation, it raised the level of consciousness higher. Sarbanes-Oxley did not go lost on boards or management.
STEERING THROUGH SETBACKS
How have you handled a negative boardroom experience?
One board I found to be pretty chaotic, too strong. There wasn’t a good rhythm in the boardroom. It had too many alpha males on it. But having been in politics, including as the conference chair of the GOP, and having to deal with 435 “independent contractors” in Congress who come to Washington with their own ideas and opinions probably helped, and it gave me a certain temperament to handle the one board I was on that was a bit [problematic].
But I’ve been pretty fortunate. Most board members know there are some things you’d do for the good of the order and some things you’d never do. They know the rules of the game.
Dillard’s is an old family company that just exudes integrity, and that was important to me as a young board member who didn’t know the rules of the game because I could easily have had some slipups. Matthew Rose [former chair and CEO of Burlington Northern Santa Fe], I learned a lot from him about professionalism and demeanor. [The late] Lowry Mays [founder and former chairman of Clear Channel].
So I got exposed early to some good, solid, sound companies that had been around the block a time or two. If it was the best of times or the worst of times in their marketplace, they were the type of companies that said, “All storms run out of rain, and we’ll survive this. And when we get through this downturn, we’re going to still be standing because we’ve got good people, good operations and good balance sheets, and we’ll make this work even after the storm.”
Most board members, that’s their mentality: They aren’t looking to cut corners to get from point A to point B. There’s no right way to do the wrong thing.
Clearly, throughout your careers, you must have been a great communicator, or at least an adequate one. What principals of communication should board members abide by?
The main thing is that you have a good line of communication with your named executive officers, especially your CEO, and the board.
And investor outreach: keeping your investors informed on what and why and when you’re doing certain things. I don’t know if there’s any such thing as over-communicating, but fortunately, I’ve been on boards where we’ve not had a lot of crises. As long as the communication with the investors and the CEO was good, performance was going to be good.
How do you keep yourself informed? Back in the day there were “board books,” but now directors need to go way beyond that.
I’ve learned by listening and observing. And I’ve learned by board education. Attending conferences. You engage in continuing-education opportunities, both in person and virtual, that are made available to you where you can hear from governance, accounting and compensation experts. Today they make virtual board education very convenient, because you can do it in the privacy of your home office and hotel room or whatever. I find all of that informative and helpful.
And having operated my own business—I’ve never been CEO of a public company, but I understand the value of good accounting principles; I understand the value of good governance; I understand the value of integrity in your processes. All of those things combined makes for a pretty decent board member.
You study peer groups, the companies you consider your competitors, and whether you agree with what they’re doing or not, you at least have some sense of what they’re doing. You have investor groups to pick and poke you in terms of governance or compensation or accounting. You have to keep up with SEC regulations, and you have consultants, company staff and outside counsel who help you do that. They keep up with the rules and regulations.
You become a good listener to other board members and their experiences from other boards. You call on your own experiences as a member of other boards.
The most important thing is just having an understanding of the rules of the game and making sure that you have board members with integrity who are willing to follow the rules of the game.
In politics today, we talk a lot about democracy. Our democracy is only as strong as the integrity of the people who execute that democracy. It’s the same on a board. When you’ve got integrity and principled people in management and principled people on the board, you’re usually going to have good outcomes for the investor.
The time investment in order to be a great board member is obviously huge. What do you think about the notion of “over-boarding”?
When I left Congress in 2003, I knew of folks who served on six to 11 corporate boards. These days, companies mostly don’t allow members to serve on more than three boards. And with the responsibilities of a board member, that’s all I would want. To be a good board member, three boards is enough, and more than three, I would imagine, could also create difficult scheduling conflicts.
COPING WITH CONFLICT
You can have integrous board and management, but what do you do when you disagree with something they’re going to do or propose?
Management is going to have a track record of performance. Just like in football, you can look at the statistics and tell if the quarterback is any good or not. The fundamentals of the company are the board working with management and making sure the fundamentals of the company are good and sound.
I’ve served on some private and nonprofit boards that I wouldn’t give you a plugged nickel for. You can just look at the fundamentals, and after about nine months, I said, “I’m not sure that this is my cup of tea,” because management didn’t know what they were doing, and other board members didn’t have the heart to hold them accountable or call them on the carpet, because they’re nonprofits.
So, you can look at the fundamentals of a company and get some sense of what’s good and what’s not so good, and if you have a management team that wants to continue to make excuses for bad fundamentals and nonproductivity, then the board needs to have the backbone to respond and to react and say maybe we need to start looking for new leadership.
Have you had to do that on your public boards at all? Because succession, who those leaders will be, is a huge responsibility of the board.
True. Succession planning is something we get updates on. But I’ve probably had more challenges at my leadership roles in church concerning succession planning than I have in the public boards that I’ve served on. I’ve been pretty fortunate. The entire time I was on the Burlington Northern board, it had one CEO. Dillard’s, one CEO; Paycom, CSX—the companies where I’ve served didn’t have a change in leadership while I was there.
You mentioned your church leadership. I know your faith plays a big role in how you think, see the world and live. Does it play a role in how you serve on secular boards?
You do the right thing based on what’s right. For me, faith is the backbone of my integrity, of my value system, and that’s not to say if anybody disagrees with me that they’re not people of integrity. But it all goes back to sound fundamentals.
I remember one of my [congressional] campaign staffers, when Congress was going through a bunch of ethical things and members were resigning. He was asked, “Would you go to jail for J.C. Watts?” He said, “No, I wouldn’t go to jail for J.C. Watts. He wouldn’t put me in a situation where I had to go to jail for him.”
That principle applies for boards and management teams. I’m not looking to take the fall for anything a CEO or management team might do, but I’ve been blessed that I’ve never been associated with a CEO or management team that put me in a position where I would have had to go to jail for them or do anything unethical.
Speaking of politics: What are board members supposed to make of what’s going on in politics these days? Take sides on issues? Not take sides on issues?
Companies obviously have to be willing to work through your association or the [U.S. Chamber of Commerce] or other avenues you have to protect the principles of being a growing, prosperous company. If I speak out on certain things as an individual or as a former member of Congress concerning the economy or job growth, I speak out as someone who understands how to create jobs and how to create opportunity. I’m going to be on the opposite side of many members of Congress or an administration. And I’m going to be on a different side, probably, from some elected officials when it comes to character in Congress or the White House.
Something new in the public square today is the [recent FTC ban on] noncompete agreements. I understand why companies would want them. If Tom Brady leaves New England and goes to the Buccaneers, nothing says you’re not going to pick his brain about what New England does on offense. You don’t have that protection in sports.
But in business, you should have some kind of protection that says [someone] can’t take what we learned at this software company and go down the street to the next one and use that knowledge against them.
What do you make of the acronyms ESG and DEI and how some people say they’ve gotten out of control?
I do think we have gone overboard on some of the environmental and governance things, and I’ve heard some things over the last [several] months that [suggest] some investors may have recognized we’ve gone too far.
On the diversity side, I find that somewhat perplexing because it seems to me that we should want to create opportunities for people of all colors. I find that, in the investor calls I do, the same people who would score us for a lack of diversity don’t have any diversity themselves. I haven’t been on one investor call where I saw someone who looked like me.
This can be very difficult. In Oklahoma, it seems as though we have an all-out war on diversity, even to the point I often feel that, with some people, anything concerning the African American community they define as “woke.” And I would submit to you that, today, George Washington Carver and Martin Luther King Jr. and Frederick Douglass would be considered woke.
Even last Christmas, we had an elected official [in Oklahoma] who posted a picture with a white Santa Claus and said something to the effect of “There’s no woke Santa Claus in my house.” Santa Claus is fake: He can be red, yellow, brown, black or white.
When I was a young pastor, my first job was in a church that was probably 90 percent white, and I was Santa Claus one Christmas. I didn’t do it because I was making a woke statement, but what was wrong with J.C. being Santa? [People are] going out of their way to make an anti-woke point rather than going out of their way to make a difference.
If some coaches at white universities hadn’t been intentional in the ’70s when I became a quarterback, I probably wouldn’t have been a quarterback. As in my faith: I want to be intentional in sharing God’s love with all people. In the business community, we have to be intentional about creating opportunities for all people.
By the way, I was the second African American board member at Dillard’s. The first was John Johnson, the guy who started Jet and Ebony magazines. Bill Dillard, the founder, invited John Johnson to be on his board [in 1986] when that was drawing way outside the lines. He was intentional about it. He did it because he thought it was the right thing to do. Today, if you invited John Johnson onto your board, you’d run the risk of being accused of being woke.
You always run the risk of going too far and overdoing it. But had somebody not been “making good trouble,” as [the late congressman and civil-rights icon] John Lewis would say, you never would have had people who look like me on corporate boards. But someone was willing to raise the consciousness level and ask, “Why not?” Why can’t you be a Black Republican or CEO of a company? Or Black and be on a public board? Or Black and play quarterback?
Some of these things just [require] someone who’s willing to color outside the lines to make it happen.
