The Risks Of Star Power On Your Board

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Celebrity directors bring lots of attention to your company—and lots of complications to your board.

From movie star Cary Grant joining the board of cosmetics maker Fabergé in 1968 to Jim Mattis taking a General Dynamics board seat in August, the headline-making board appointment is a long and continuing tradition for corporate America. Nancy Reagan was a director of the Revlon Group after she left the White House. Opera diva Beverly Sills was on the boards at Time Warner and Macy’s. Mindfulness guru Deepak Chopra held a seat at Men’s Wearhouse. Oprah Winfrey serves on the board of Weight Watchers, while former pro-basketball great Shaquille O’Neal is a director at Papa John’s.

But an often-difficult question comes along with these headline-making appointments: Do celebrities do more than lend immediate marquee value and high-level connections?

The answer? It depends. Weight Watchers attracted a lot of attention four years ago when it invited Winfrey to serve on its board, as well as buy a 10 percent stake in the company. Her proven business acumen, as well as her own well-publicized struggles with weight, promised a great match. “She has a big investment, so she’s aligned with shareholders,” says Ethan Klingsberg, partner with Cleary Gottlieb Steen & Hamilton, a New York City corporate-law firm. “And she knows what she’s doing not just from a marketing perspective but probably financial as well.”

But Weight Watchers CEO Mindy Grossman is still scrambling to redefine the company’s value proposition because even one of the world’s most admired females can’t keep American women from abandoning traditional weight-loss regimens. And Winfrey has cut her stake back to 8 percent, with a marketing deal with Chicago-based Weight Watchers expiring next year.

At the same time, professional golf megastar Nancy Lopez joined the board at processed-food giant J.M. Smucker in 2011 and flourished in the role. Lopez and Smucker were well-matched. The company already had a long-term sponsorship association with women’s pro golf; Lopez was a successful business owner as well as golfer; and women, after all, remain the vast majority of Smucker’s market, as for most CPG companies. Today, Lopez continues to serve as a member of the nom/gov and social responsibility committees of the Orrville, Ohio-based outfit.

Clearly, companies that are cautious and selective about how they recruit outsize figures from Hollywood, sports or politics and what they ask of them can reap more than pure endorsement value. Here are some tips for making the most out of a celebrity board appointment:

Carve out a role: The best way to utilize a celebrity is to get into their wheelhouse and see what they have to offer, says Stephanie Resnick, a managing partner of the Fox Rothschild law firm in Philadelphia. “As long as the board and the celebrity are aligned in their expectations,” she says, “it can be great for a board.”

Rusty O’Kelley, head of the board practice for Russell Reynolds, says boards should put celebrity appointees “on committees where they can maximize the value they bring. You may not put a Nobel Prize winner on the compensation committee of a scientific company; that wouldn’t be maximizing her value. But put her on the scientific-research committee and let her add incredible value that way.”

Don’t underestimate them: In some ways, today’s celebrities may be better suited to offer continuing business value than in bygone eras. Many of today’s entertainment stars and professional athletes are at the center of personal financial enterprises that generate significant revenues. And successful celebrities, almost by definition, have created tremendous sales and marketing juggernauts.

“You could put Oprah or Magic Johnson on an audit committee,” says Steve Mader, strategic partner at ON Partners, an executive-search firm based in Cleveland. “Celebrities come in all shapes and sizes from an experience perspective.”

Have realistic expectations: Boards should prepare to give celebrity members a pass in more than one way if necessary. “You don’t want to have a celebrity with a very limited time schedule joining the board and having a board expectation that this celebrity is going to be present at every single board meeting and taking assignments at a committee level,” Resnick says. “If they do, great.”

Manage boardroom dynamics: The presence of a celebrity in a boardroom can disturb even the most equanimous and sophisticated of deliberative bodies. It can affect even routine interaction.

“The whole thing can become a little weird in a boardroom if you have a member who is a celebrity,” says Donald Maruska, a management consultant and former tech CEO. “Some board members will want to cozy up to them to have their brand equity rub off, and others may recoil about why they’ve got this person who’s a celebrity, compared with the other directors who are there doing the work of the board.”

Recruit local heroes: Mid-market companies may not be able to land a movie star or MVP athlete to their boards, but they often can attract individuals with high profiles in their particular regional markets or industry verticals—B-listers, if you will. “Maybe it’s not a Hollywood celebrity, but a former governor or a well-known local entrepreneur can add a name-recognition factor even for smaller companies,” says Lars Sudmann, a consultant and former P&G executive.

Understand today’s risks: These days, many people who specialize in getting public attention feel compelled to act more and more outré to retain that very attention, partly because social media has revolutionized the publicity business and disintermediated the professional filters between stars and their fans.

Public following, however, can backfire. Consider O.J. Simpson, who was on the audit committee of Infinity Broadcasting and also a director and investor in two smaller publicly held companies when he was arrested for double-murder charges in 1994.

Beware their agendas: Celebrities often are reluctant to give in to a company’s flirtations because they don’t want to deal with the time requirements of serving as a director or are wary of the growing legal liabilities in the position.

Conflicts also can develop that could damage perceptions of “Number One.” “Celebrities have created a brand, and they’re going to protect that brand when push comes to shove because it’s worth millions and millions of dollars to them, more than a board could ever pay them,” says Maruska.

For instance, former basketball star and successful entrepreneur Johnson joined the board of Square, the mobile-payment startup, with much fanfare in 2015. But less than a year later, he junked the job, instead turning his attention to a billion-dollar infrastructure-investment fund he had launched.

Consider degrees of separation: There are several ways for companies to realize rub-off value from a celebrity without installing that person on their board. This continuum begins, of course, with the classic commercial endorsement. The modern role of “brand ambassador” represents a somewhat closer relationship. Boards can hire celebrities as consultants. Further up the involvement scale, many entertainment and sports stars take small stakes in startups like athletic-wear brands and, in return, talk them up in social media. For even tighter affiliation, companies can form “advisory boards” of well-known personalities.

All of these forms can lend PR and marketing value without committing directors to work around the substantive deficits in experiences and abilities relevant to running the company—or even potential embarrassments—that celebrities might bring to the boardroom.

Soft-pedal the news: Each of four companies contacted by Corporate Board Member—Smucker’s, Weight Watchers, Papa John’s and Poshmark, an online-resale firm that recently added to its board tennis icon Serena Williams, who’s got her own clothing line—declined to discuss their celebrity directors or provide access to them.

Why so mum? Because these board members are, well, different. “The value of those appointments is almost always external, whereas every other director gets pursued and appointed for the value they can offer internally,” says Mader. “And boards may consider that their external purposes are not really something they should disclose, that they shouldn’t really say much about why they appointed someone. They’re giving something up to get something back, and the equation isn’t always a winning one.”

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