Editor’s note: Lionel Nowell, the board of Marriott International and Cisco will be celebrated during an awards ceremony at our annual Boardroom Summit in New York City, Sept. 15-16. Join us!
In serving on Bank of America’s board since 2013 and as its lead independent director since 2020, CBM Independent Director of the Year Lionel L. Nowell III saw the company through seismic change. Along with shedding costs and unprofitable product lines, the bank’s growth strategy hinged on a massive investment in technology—more than $35 billion—and an ambitious push toward digital transformation. It was the kind of long, arduous journey that demanded support from all corners.
“It’s not as if you make that kind of IT investment today and see the benefit tomorrow,” explains Nowell, who sees follow-through on the board’s part as crucial to the success of digital initiatives. “Depending on what you’re trying to develop, you may not see the benefit for 18, 24, 36 months. That takes commitment and involvement by the board to monitor, and that’s what sometimes gets lost. At a lot of companies, boards will approve a spend and then never talk about it again until something goes wrong.”
The need for an extended, deeper level of engagement on digitization is just one among many areas of oversight that have grown more complex in recent years. Directors like Nowell, who is the former senior vice president and treasurer of PepsiCo and has also served on the boards of Textron and EcoLabs since 2018, have stepped up to the challenge.
“It’s a delicate line because you have to be careful not to cross over into management, but today’s directors have to play a more active role in staying abreast of issues and looking for ways to leverage their expertise and experience to make a meaningful contribution,” Nowell told CBM in a recent conversation on leading effectively in the boardroom. Excerpts from that discussion, edited for length and clarity, follow.
Emerging, hopefully, from what has been a crazy-disruptive time, what lessons have you come away with about how boards can be effective in helping companies through a crisis?
The first thing I would say to directors during a time of crisis is you’ve got to stay calm. This is especially important when tensions on the senior management team and in the boardroom are high, which is natural during a crisis. Directors need to be the calming influence. Directors have to take a long-term view, play a supportive role, stay abreast and informed of the issues and ask appropriate questions, but at the same time make sure you’re not overloading management with additional tasks that take their focus off the critical issues or the crisis that you’re dealing with.
I’ve said this a lot of times: We can always debate how we got into the mess and ask difficult questions later, but it’s not helpful in the heat of a crisis if people are being too critical or are trying to be too helpful. It doesn’t lead to the right answer.
For example, as the lead independent director of Bank of America, part of my role is to keep the board informed when we’re in the midst of some of these challenges and surprises while at the same time giving management the latitude and support they need to address any of the issues that are coming up.
Finding that right balance between giving the CEO and the senior management advice, asking appropriate questions, testing their rationale and assumptions and understanding the worst-case scenarios, that’s the board’s responsibility. And that approach is more effective than being overbearing and challenging every aspect of what the management team is doing or planning to do.
It’s a difficult thing, I’m sure, for experienced leaders to be in a discussion about a crisis and not leap in with solutions.
The worst thing I’ve seen happen is that you distract management from where they should be focused and into responding to questions from directors or others that, yes, may be good questions but aren’t appropriate for right now. We have an immediate crisis we have to deal with, we’ll have time to get to those at a later point.
That’s where board leadership steps up. Part of my role, along with working with [BofA’s CEO Brian Moynihan] and the management team, is to make sure that, yes, the board is informed, but at the same time there are things that they need to be doing, and they need to be able to focus on the task at hand.
In the midst of a crisis, it’s, “How can we help you?” and then standing back and taking an objective view, as opposed to “Let me tell you what you should be doing.” That’s hard for boards because the directors want to tell and direct when what you need to do is listen and respond, particularly in the midst of a crisis.
What do you see as the most important factors that contribute to a successful board-management relationship?
First of all, every board’s unique. The composition of each one is unique. So, what I stress is building a mutual trust and respect between the board and management. That doesn’t mean the board shouldn’t challenge the CEO and management. In fact, that is the board’s role, to challenge and debate the CEO, and to help guide and set the strategic direction, but at the same time, that interaction should be done in a constructive, thoughtful way, not in a combative, negative way. I call that positive friction, which is building relationships where management and the board can effectively challenge each other, but doing it in a way that’s vital and productive.
The other thing I’d add is that America is so politically divided today that it’s important for directors to have moral integrity and engage with the mindset that not only management but also the other directors are communicating with good intentions. This is particularly important on controversial topics that the board and directors and management are expected to address. I have this phrase that I use: Assume positive intent. And I think that definitely applies to successful board- management relationships.
Usually people do have good intent. No one’s trying to take the company down.
Right. So, I say that a lot: Assume positive intent. We may not agree, but assume that whatever was being done was done with the best intentions at heart until proven otherwise. Because we are different people with different views. The beauty of the board is that we’re comprised of a diversity of people with a diversity of experiences, diversity of backgrounds. That’s what makes us strong as a board.
It does not necessarily mean that we’re always going to agree, but if we assume positive intent, that we’re all going into this with high moral integrity and we’re trying to achieve the right thing, not only will conversations among the board be more successful, but the board-management relationship will be more successful.
Driving Digital Transformation
During your tenure as a director at Bank of America, it navigated investing heavily in digital transformation—a competitive imperative in today’s world, yet one that many companies and boards struggle to execute on. Can you tell us a bit about the board’s role in that decision?
The world we live in today continues to change, and the expectation of our customers and the clients we serve changes right along with it. At Bank of America, we constantly talk about the future of banking, what that means, what’s important to our clients, what patterns are we seeing, how clients want to interact with this, what are the fintechs doing? That led us to the importance of making long-term investments in technology. You alluded to investment in technology as a strategic decision, and again, it’s an integral part of the bank’s responsible growth initiative to invest in the future, to address our client expectations so that they continue to want to interact with us.
We invested $3.6 billion for technology initiatives this year alone, and over the prior 10 years, or maybe a little more, we’ve invested more than $35 billion to build a more secure and scalable technology platform. That kind of spending necessitates the board’s involvement.
How you justify that is that Bank of America clients are more active than ever on digital. We had 43 million active users in the second quarter of this year alone. Today, more transactions are made using digital payment services than with checks, and nearly half of bank sales are done digitally.
That said, the conversation around investing in technology and the inherent risks thereof that took place in the Bank of America boardroom were not about “Should we invest more in technology?” but rather, “How much can we afford to invest? What projects should we pursue first, and how fast can we achieve our desired outcomes?”
Second, it’s just as important that the board continuously monitors the progress that the company’s making so we can be aware of what changes in spending or what changes in projects may be required. So, having a long-term vision that’s going to the strategic plan, directors being actively involved and encouraging making investments, and having a commitment to not only meet but exceed customer expectations is what we focus on at Bank of America. And I would say to any company, that’s what’s imperative to drive any digital transformation.
How does monitoring work in practice?
At the bank, it’s a continuous, “How are we coming on the projects? How’s the spending on the projects? We’ve got new learnings, do we need to revise or adjust? Do we need to reprioritize?”
That involvement at the board level and the senior management level kept us aligned with what management was doing, and it gave us a lot more comfort in that the monies that were being spent were being spent appropriately and were deriving the results that we would want to have come out of that spending.
So, it’s a lot of time, a lot of effort to do it, but because we stayed close to it, there was less angst than when you just approve the investment and then you don’t hear about it until two years down the road when either it went well or it didn’t. We’re more attuned to and more aligned with what’s happening, and that’s what eases some of the consternation that other companies may be experiencing in making that big of a commitment.
Amping Up Engagement
You’ve been a director for 20-plus years. How has the role evolved?
It’s changed in a number of ways. First, good corporate governance and the role of the board has shifted away from solely focusing on the shareholder to where companies and directors, quite frankly, have to consider a broader contingent of stakeholders, which includes the shareholders but also employees, suppliers, customers, and, in Bank of America’s case, regulators, and communities broadly as we go about making strategic business decisions. It’s not just about enhancing shareholder value, which is undeniably important, but directors today also have to think about how they increase stakeholder value.
Another thing is that the pandemic and the economic environment we’re in has reinforced the need for directors to be more engaged and intellectually nimble in dealing with complex issues such as inflation, supply-chain disruption, market volatility and a host of social and employee challenges. Advancing crises merge and change quickly. So, directors have to make sure they’re getting the right information in a timely manner so that we can stay apprised of key business indicators and ensure we’re exercising proper risk oversight and good corporate governance.
Given the 24-hour news cycle, it’s imperative that directors stay informed and be able to respond immediately, collectively and with good judgment on issues relating to global events or other things that may be impacting the company.
How do you stay informed at that level? Is that something you ask of management, or do you need to take that on yourself?
On a daily basis, I get up and I read the news, I look at the business cycle; I look at what’s happening politically. And I also follow what our key competitors are doing, what’s happening in our industry. I listen to Bank of America’s earning calls, Ecolab’s earning calls, Textron’s earnings calls, but I also listen to the earnings calls of our competitors.
And then, outside of Brian Moynihan, I engage with other members of the senior management team. I’ve talked to our company consultants, regulators. I’ve talked to investors, a lot of stakeholders, just to get an understanding of what’s on their minds and learn about topics I may not be as familiar with.
To your point, most of it is done by the director, because I’m trying not to overload management. They have a role to play in it, but a lot of it’s done by me independently as a director. And it’s not just the time commitment that has changed. As I said before, it’s being ready to engage. You’ve got to have the intellectual curiosity, you’ve got to be dedicated, to be willing to challenge the status quo.
From when I started 20 years ago, it’s definitely more time-consuming, but I would also say more complex. That would be almost an understatement.
A lot takes place outside the boardroom.
Absolutely, because the board meeting is just the culmination of all that coming together. At one point, directors may have walked into the board meeting with the expectations that the company and other directors will inform you of everything you need to know and what you need to do. Now it’s particularly important that you walk into the board meeting, having been informed through either having asked the questions in advance, done the research and the things that you needed to do, or engaged with other constituents outside who are bringing forth ideas and views that you need to share in the boardroom. It’s much more about coming in prepared to make a meaningful contribution as opposed to coming in and just sitting there and looking at presentations.
The shift toward focusing on a broader contingent of stakeholders is something we have heard quite a bit about, but what does it mean for directors? How has it changed boardroom conversations?
At Bank of America, we talk about the term “responsible growth.” I think what you’ve seen from investors is that while investors used to be solely focused on short-term growth, they now expect that growth to be sustainable. That translates to taking and making decisions that have a more longer-term impact on the company.
Companies now have to balance the need for short-term results with long-term sustainable growth and understanding. To drive operations, excellence, etcetera, they have to be engaged not just with the shareholders but also with the stakeholders, and all the things that go along with that.
It’s becoming more of a holistic view of how you run the company, not solely for profit but also for the betterment of all our stakeholders.
Some people say, “Well, isn’t that mutually exclusive?” I say no, because I believe companies can do good and do well at the same time. For example, being socially responsible and investing in communities where employees live and work is a good thing. That’s become more of an integral part of the company’s strategic plan and not viewed as a one-off. It’s embedded in the conversations we have when we talk about the long-term strategic direction of the company that we talk about the whole host of stakeholders who are impacted by the decisions we make.
You see them as truly tied together rather than feel-good things companies did on the side. It’s intertwined?
Yes. Whereas, in the past, these discussions around sustainability, etcetera, may have been comprised of an annual or semiannual [report] to the board, now that topic is, in some form or another, included in most, if not all, of our board and/or committee agendas. We talk about it a lot. And in conjunction with those discussions, having the board and the directors play a role in helping senior management set tangible, measurable goals to help drive the social and environmental change, etcetera, is expected of us. Supporting, encouraging, even incentivizing management as they embark on this sustainability journey has become critically important.
An ESG Advantage
All three of the companies on whose boards you serve undertook significant sustainability initiatives. What role did each board play in those journeys?
Making progress toward environmental and social sustainability has become an integral part of every board’s agenda. But yes, at Bank of America, Ecolab and Textron, we talk about sustainability and the projects that we’re involved with a lot. But the biggest thing, when you talk about the board’s role, is that in conjunction with all these ongoing discussions, you’re helping management with the tangible, measurable goals that will help drive that social and environmental change. Part of what companies are dealing with now is, what will be the metric? What’s the goal, and how are we going to get there?
Specifically, [at] Bank of America, sustainability goals and metrics guide how we go about conducting our business and operations and how we pursue responsible growth across our lending and investment, who we deal with, as in clients, what do we do with supply chain, what’s our relationship with global companies. Because it’s not just what’s happening in the U.S., but it’s what’s happening globally. So, it’s critically important that you don’t just say “sustainable” and assume that it’s going to happen; the directors, in conjunction with management, have to be integrally involved in that.
We’re selective in who we try to partner with in terms of organizations focused on this, across all three of those companies in various ways, because they’re really the ones who finance the services, they’re different companies. But the sustainable initiatives that we’re involved in and that the board, in this case, does have strong oversight for continue to change, continue to evolve as something that we just do on an ongoing basis.
How does that mesh with the shareholder value component?
I wholeheartedly believe that shareholders expect companies to do things that are going to have a positive impact on earnings, not just in the short term but also the long term, and having good sustainability metrics and doing these things will enable companies to be sustainable and have sustainable growth well into the future.
The other thing is that I don’t think they’re mutually exclusive. A lot of people would say, “Well, you do one or the other. You can have profits or you can be sustainable.” I believe companies can, again, do good and do well at the same time. Being involved in sustainability and investing for the betterment of the community where employees live and work is a good thing.
I meet with investors on an ongoing basis, and not only am I delivering that message, but I also get it delivered back to me that yes, we want you to be a good corporate citizen. Yes, we want to drive earnings, growth and profitability, but we’re doing this because we think the sustainability piece is in the long-term best interest of the company. So, it’s not a one-off, it’s integrated into how we go about conducting our business. It has to be part and parcel of how you operate as a company and what you do on a daily basis. And if you do that and get that right, I think there’s no doubt that the earnings and profit will be there. In fact, they’ll be more sustainable, and it may even, done right, give you a competitive advantage where it will be a benefit to the shareholders.
You mentioned the war for talent as one of the top four issues facing boards today (see p. 15). How do the boards you’re on contribute and support the organization in that?
Let’s start with how we work, how flexible a company can be in terms of how and when and where employees work. For some roles, that requires making more technology investments because we have to make sure that if individuals are working remotely, that is going to be secure. So, the board will get involved in the discussion of if, in fact, we’re going to do that, what’s the capital investment? For the comp committee, it may be about salary adjustments—is this a competitive environment where we need to do more or look at it differently in terms of how we compensate various employees or levels of employees in the company?
It’s understanding where this is heading and the impact will be on the company and on our customers we serve. What do we need to be doing strategically ahead of time so that we can address and adapt to that? So, it is not just getting the right people, but how do they want to work? What’s the impact on our customers? What’s the impact on our clients? What do we need to do strategically? What do we need to do from an investment standpoint? So, there’s a broad array of topics at the board level that get discussed, get shared and get talked about as it relates to war for talent and how we’re going to get people, retain people, develop people, promote people and the like.
What else do directors need to be particularly mindful of today?
I have a passion for diversity in the boardroom. And I mentioned the importance of diversity because given the wide array of challenges we’re facing as directors, the need for ethnic diversity, gender diversity, diversity of experiences, diversity of perspectives in the boardroom has never been greater. I’m not suggesting directors embrace diversity because it’s a do-good thing or a quota thing. This, to me, is like ESG. You embrace diversity because to be successful and to achieve the bold strategic objectives that companies face requires strong leadership, outside-the-board thinking and just an overall diversity of perspectives.
Earlier, you referenced the polarization of political stances right now. Is that something you feel business should be playing a role in addressing?
Businesses have to be careful because you can’t stay out of it, but I don’t think you step headfirst into it. And it varies by business. Some of it you can’t avoid, depending on your industry and involvement with the government. Let’s just be honest, it would be naive to think that it doesn’t impact some of the decisions that get made by boards.
But the reason I say companies have to be [thoughtful] is because political views change. And we have to make sure that we’re making the best decisions for the long-term benefit of all our stakeholders and not react to every short-term thing that happens, some of which may have a long-term impact, some of which may not…. You have to look at it through a strategic lens, take into account all the other things we’ve talked about and then determine the appropriate actions that directors and companies should or shouldn’t take.
So your philosophy is not to take a stance unless the business has a direct stake in the issue?
To be blunt, at Bank of America, we represent America. If America’s polarized, our customers are polarized. So, we have to be cognizant of that because I could make a decision that would make you happy and a hundred other customers I have would say, “Why do you even get into that?” So, we make decisions when we think it’s appropriate for the long-term benefit of the company and on which we have a culture and a philosophy, but on others, it’s just not appropriate for us…and our stakeholders would probably say it’s not appropriate for us.
As a director, I represent the stakeholders of Bank of America. So, I can share my personal views, but at the end of the day, I have to do what’s in the best interest for the stakeholders at Bank of America. And if I ever get uncomfortable with that, then I have a personal decision to make: Is that the place where I want to serve? Because I can’t let my personal agenda override what is in the best interest of the stakeholders.
At the end of the day, as board members, we’re there collectively to do what is in the best interest of the company. That’s not to say we get it right all the time. But that’s why we work every day. I get up every day saying, “How can we get better?” Ultimately, that’s the challenge, and that’s the goal. We want to do well and grow profits, earnings and share value for our shareholders while, at the same time, do good and make a contribution that our stakeholders are proud of and that they’re proud to be associated with.
So if I lose sleep over this, it’s over making sure that we never lose sight of what we’re trying to do. We’re in it for the long haul, and we want to do both. And I think we can do both. CBM
