The Broad-Gauged Adviser

Speaker’s Corner From The Practice May/June 2020
A conversation with Kenneth Chenault

Kenneth Chenault, chairman and managing director at General Catalyst and former chairman and CEO of American Express, recently sat down with David B. Wilkins, faculty director of the Harvard Law School Center on the Legal Profession, for a conversation on the value of lawyers in the boardroom from a chairman’s perspective.

David B. Wilkins: We are seeing some new research that indicates more and more lawyers are serving on boards of directors—with some research focused specifically on banks and financial institutions. The first question to you is are you surprised about that? Are you surprised that the number of lawyers on boards is going up? That there seems to be some relevance to having lawyers on boards? Does this jive with your experience?

Kenneth Chenault: I would say I’m a little bit surprised, but it does align with the experiences that I’ve had. I would say this for several reasons. One reason is legal training gives you the ability to synthesize facts and issues and see what might be some common themes that emerge. I also think that we’re in an increasingly regulated environment and legal training plays very well to that. The legal training of intellectual inquiry and the need really to understand the facts in an objective way is critically important in board service.

Moreover, increasingly what is needed in the boardroom is judgment. And part of what you need is someone who is able to dispassionately listen to different perspectives on an issue. And, again, legal training is very relevant in this process and in the ability to render judgment.

You want the law to be an enabler and to provide guardrails.

Kenneth Chenault, chairman and managing director at General Catalyst and former chairman and CEO of American Express

I would say in the last 30 years or so, lawyers have gotten more involved, both at law school and in practice, in understanding broader environments. Law is not a narrow discipline. It’s a very broad discipline. And so what has been very, very important is lawyers being aware and therefore becoming very relevant to dealing with a broad range of operations.

To that end, there are growing numbers of lawyers who are not practicing law. That speaks to both changes in legal education and the ability of the law to attract people who have transferable skills. I think what’s very important about the law is it really does meet the needs of preparing you broadly for almost any type of career.

Wilkins: I wonder if you might address the flip side of that. You’ve been on many boards, and obviously chaired the board at American Express. Have you also seen any limitations or liabilities that lawyers sometimes bring to the board setting?

Chenault: No. What I would say is that, for someone who has legal training, whether they’re advising a company or they are on a board, is not to focus narrowly just on the law. Where I see lawyers sometimes not able to make the transition is when they become overly cautious and they look at the law purely from the standpoint of “Protect me.” The reality is, from a business standpoint, you want to innovate, you want to be creative, you want the law to be an enabler and to provide guardrails. And it is not that you throw caution to the wind. But you do have to have the willingness to say, “I’m going to take a risk.” The law is the type of field that you can argue both sides and you can put yourself in a situation where you become very reluctant to make a decision.

Wilkins: When you were chairing the American Express board, or when you’ve been on board-selection committees, did the professional background of the potential board member come up? Did you think, “Oh, we’ve got some people in financial services, and maybe we need somebody who has a technology background?” Or was it really much more about either broad business experience or some of the other issues you’ve been talking about, like judgment.

Chenault: Clearly I would answer yes, that sometimes you’re looking for people from specific backgrounds. Sometimes we would say we need someone from technology. We need someone who understands the internet and who has had strong digital experience. Other times we might say we need someone who has a marketing background or someone who has a global perspective. Depending on the type of board, you’re going to look for certain industry-related experiences.

The best thing you can do to prepare to be a board member is to be intellectually curious and be broad gauged.

But what also happens on a board is you’ll hear the phrase, “”We need a wise head.” For example, increasingly we hear, “We need someone who can be an audit chair.” “We need someone who has an understanding of the compliance regulatory environment.”

But I think if you talk to anyone who has had experience on a board, they will invariably say all those capabilities are important and very important, so it’s not one is better than the other. They would also say, irrespective of all those needs, you need at least two or three wise heads on your board who have experience, who have judgment, who can look at the broad perspective, and who understand how to synthesize facts.

And I think the ability to be strategic—something that is very important for lawyers who are working in business or at organizations or on the board is they’ve got to have a strategic perspective. That’s absolutely critical. What I look for when I think about involving someone who has a legal background is their intellectual curiosity. I want them to be a broad-gauge thinker. I want them to be strategic. They don’t have to be strategic in the classic business sense, but I want them to be pretty broad gauged.

Wilkins: When in your career did you first start thinking you might want to be on a board? Was this something you had thought of at an early age, or did it come later on or after becoming CEO?

Chenault: The reality is I didn’t have interest in going into business when I was in college or when I was in law school. I wasn’t really thinking about the skills, experiences, or capabilities that I needed to have to be a board member back then. But when I was 39 or 40, I was asked to join a board, and that was very fortunate. I really learned a great deal of the role of a board member and, in particular, the balance you have to have between not formally leading the company but at the same time making sure that the CEO and the management team are thinking through issues, thinking about the future, dealing with leadership and cultural issues.

So I think my view, David, is that the best thing you can do to prepare to be a board member is, frankly, some of the same things that you need to do to be an outstanding law professor or to be an outstanding practicing lawyer: be intellectually curious and be broad gauged. Put yourself in your client’s shoes and understand—really understand—not just the specific and legal issue that the client is facing, but also the challenges that the client is facing from a business standpoint and from a leadership standpoint.

Of course, there are training programs that are useful. But my view is that what people want, and particularly in someone who has a legal background, is a terrific adviser. If you’re a terrific adviser and you happen to have a knowledge on what the needs are of the company or the regulatory environment or the technology industry, that’s great and helpful. But fundamentally, what people are looking for is, “Is this person going to give me really good advice?”

Make sure you’re aligned, and you’re energized, by what the organization is doing.

Wilkins: Did you do nonprofit boards before you did for-profit boards? Is that something that people seeking to join corporate boards might find helpful?

Chenault: Yes, I did. And that is one of the things that I really recommend to people. You can learn a great deal from being on a nonprofit board. People often tell me that they want to join a board and wonder what kind, and I often ask them: What are you passionate about? What do you believe in? What are your values? Do you believe in the mission of the organization? How do you feel about the leadership of the organization?

I really urge people, whether it’s a nonprofit or a for-profit board, to make sure you’re aligned, and you’re energized, by what the organization is doing. If you’re not, in my view, I don’t think you should pursue that opportunity. It’s not a transaction.

Wilkins: This is just enormously helpful. We’re living through a cataclysmic moment of change in our history. You have such a unique perspective because you’ve been the chair of the board of a 150-year-old financial services company; you’re on Berkshire Hathaway’s board and the Airbnb board; you’ve been on the Facebook board. You’re now in a company that consults new technology and helps put together boards and leadership teams. As you look forward, what do you think the role and composition of boards will be moving forward? Obviously, I’m interested in what you think the role of lawyers might be on that, but also more generally.

Chenault: We are all trying to figure out the exact implications of what is going on right now, but what I would say is that there are real questions on what the role of companies should be going forward and what their business responsibilities are. Part of the business responsibilities are very much understanding the implications of what we do—the products and services that we come out with. What are the first-order, second-order, and third-order effects? What are the governance principles that we should follow?

I think that understanding what the values of the company should be going forward is critical. I’m a capitalist, but I also want to be part of an enduring company. So, to your point, American Express is 165 years old—and I’d like them to continue. So that was my philosophy when I was managing it. What’s very important now is thinking through the responsibilities and obligations of capitalism and companies in our system. There has been some progress there. People have focused on this issue, but I think the pandemic has put us in a situation where we’ve got to accelerate the progress on how to balance all these issues.

What people want, and particularly in someone who has a legal background, is a terrific adviser.

Someone who is broad gauged, strategic, and understands the legal and regulatory environment as well as the business environment can play a very important role in this process. What law schools have to do is not just look at the short-term consequences of the pandemic, but they have to also ask, “How do we need to transform so that we can deal with both the challenges and opportunities that have been presented to us?” We’re entering an era where it’s becoming increasingly difficult to separate your business life from your personal life, and the question is how to reconstruct that in a meaningful way and how to allow society to be a place that benefits all of us.

Kenneth Chenault is chairman and managing director at General Catalyst and former chairman and CEO of American Express. He is a member of the Harvard Law School Center on the Legal Profession’s Advisory Board and a 2017 recipient of the Center’s Award for Professional Excellence.

David B. Wilkins is the Lester Kissel Professor of Law at Harvard Law School, vice dean for Global Initiatives on the Legal Profession, and faculty director of the Center on the Legal Profession.