Jeff Cunningham is former publisher of Forbes Magazine and founder of Directorship Magazine, the leading publication for corporate directors. During his 40-year career, he served as an adviser to many Fortune 500 CEOs and boards on corporate governance issues, leadership and crisis management. Jeff served on the board of several technology and multinational corporations.
In addition to having his own extensive boardroom experience, Jeff has also interviewed some of the biggest names in business, including Berkshire Hathaway’s Warren Buffett, Hewlett-Packard’s Meg Whitman and Goldman Sachs’ Lloyd Blankfein.
Jeff is a faculty member at Arizona State University’s W. P. Carey School of Business and the Walter Cronkite School of Journalism and Mass Communication.
He and Richard Torrenzano met recently to discuss the evolution of the media and its impact on CEO communications and corporate governance.
Richard Torrenzano: Can you tell us a little about your background and how your career evolved?
Jeff Cunningham: I was publisher of Forbes magazine. When the Internet started, the popular thing was to put it down. We all learned a lesson of what happens when someone is innovating.
As I watched what was happening at Forbes over the years, you had to take one of two paths. You either concluded that the others would never match what I was doing, because I am so smart. Or, you went the other way and said maybe the market would be satisfied with something less if it were free.
Around 1996, I thought things were not looking so good at Forbes. I concluded that print wasn’t going to come out very well and that’s when I said I’ve got to get into the Internet. I joined an incubator called CMGI, which at the time was worth 40 billion dollars. This move taught me, everything I know about disruption and innovation.
After CMGI, I went into venture capital and invested in Internet companies. Today, I have a portfolio of 200 early stage startup companies and I’m a professor at Arizona State University’s Thunderbird School of Global Management.
RT: Everyone thought by now that most print would be gone. Will print be around in five or ten years? If so, in what form?
JC: I am reminded of MacArthur’s expression, “old soldiers never die, they just fade away.”
Print is still very effective. Digital content is ineffective as an advertising medium. It’s just cheap, frankly. You are not selling a lot of product through digital content and I’m not referring to search spending, which is totally different. Today, native advertising and digital media are really just ad agencies in disguise creating content to promote advertisers. So, that leaves print as the last pure form of traditional advertising, so there is a place for it. I think readers respond to it. It will never be a major advertising vehicle, but I think it will stabilize.
RT: Recently, there was a milestone, which went unnoticed. While Forbes has an exceptionally fine website, Forbes did something interesting that was that they started posting content on Twitter and Facebook and LinkedIn before it was posted on their website. Is this a trend that will emerge in 2017?
JC: I think you could argue that the end of the website is analogous to the end of print. Websites are a gross misspending of financial resources – nobody’s going to a website anymore. Facebook, Twitter and the swarms of social media platforms have done to the website what online banking has done to the teller.
Now the question we have to ask is – are they throwing fuel on the fire that is burning it, because a magazine without a website, without traffic to the website, is just a hollow brand. I think they are being realistic that all their traffic is coming in through social media. That is where they are getting their clicks. But the more that they play the social media game, the less reason there is to go to the website. I think they are being realistic, but I do not know that they have an endgame.
RT: Let’s change subjects and talk about corporate leadership, particularly CEOs. You do many interviews of CEOs through your interview program at Arizona State University. If you looked at CEOs today, what do you think are the two or three things that they’re most concerned about going forward?
JC: When I interviewed Jeff Immelt, he had said this is the most anti-business period he’s known in his 30-year career at General Electric. He has seen it all and from a perspective that frankly, is very credible.
I would say that chief executives have to recognize disruption. Their businesses are being disrupted, but just as importantly, their employee base is being disrupted and their relationship to the centers of power, governments, bureaucratic organizations around the world – those relationships have been disrupted.
A company can be successful in the United States and have trouble in China, trouble in Europe. When you’re running a global organization, you’re taking on a degree of complexity like never before. I think the challenges for CEOs are one that they have to have incredibly good people on the ground in various parts of the world and a reporting relationship that is stronger than command and control. A CEO today is really a coach of a team of CEOs.
They have to understand their employee base. They are hiring millennials and the rules are different. If they expect the same kind of commitment they had twenty or thirty years ago – that is going to change. I think those millennials and diverse employees are committed, but they are committed in a different way.
Finally, they have to be mindful of regulators who are in the most anti-business mood imaginable, but they also see business as a fund for their pet projects. You saw this in the financial crisis; you have $250 billion of fines, and an equal amount in legal fees that the major banks had to pay to the Department of Justice. Those were shareholder dollars that paid for mistakes that were, to a certain extent, caused, or at least contributed to by the very government that’s supposed to oversee the banks. The relationship to those centers of power is so incredibly complex ... Jamie Dimon said that their biggest branch office now is in Washington, DC.
RT: If you look at the disruption that is coming to Washington, we are going to see a paring back of many regulatory apparatus, and many regulatory rules from taxes to banking oversight, healthcare and so forth. This seems to be setting a stage. If we have this pushback in regulation in the United States, what sort of pushback do you see in the regulatory apparatus, perhaps in Europe and Asia?
JC: I think you’ll see increasing regulations in the developing world, China, sub-continent India, parts of Asia, but I think in places like Japan, EU and the United States there has to be regulatory reform because regulation has impeded growth. Some of the regulations that we have put into place have made no difference in terms of the environment, climate change, humanitarian issues, and yet they have been tremendously costly. And that’s where the media has really failed. The media has jumped on the bandwagon of regulation and my perspective on the media is that they’ve recognized that government is a power player and to maintain their relationships with government, they’ve simply become more of a parrot.
I remember the days when media and government were antagonistic. You go back to the administrations of Richard Nixon, or Jimmy Carter, Ronald Reagan as well; they despised the media. The Obama administration has been very cozy with the media, and I think the media in their own self-interest found that it payed to play the government’s game.
RT: Donald Trump, love him or hate him, has about 40 million social media connects, friends – 18 million on Twitter alone. 40 million impressions are two and a half times today what the nightly news shows have as eyeballs each night. There is a shift coming and I’m wondering if Trump is showing the way for other CEOs to build a following in social media and using that to grow the company, perhaps in a different way.
JC: It is a slippery slope. If you were an industrial CEO and I were on your board and advising you ... and you said should I go on Twitter, the answer would be yes and the discussion would be around how to do it without doing something stupid, which is so easy to do.
Trump is clearly a perfect example of a disruptor. He bypasses the gatekeeper, which is the media, and he speaks directly to constituents. The downside is it is hard to convey nuances, and so he’s constantly having to walk back comments because of misinterpretation.
A CEO today who does not use social media is no different from the CEO in 1960 that did not know how to speak in public. CEOs have to be adept at social media. I think the question is how; and there aren’t many that are good at it.
RT: Let’s switch to corporate governance a little bit, and let’s talk about boards. If you talk to some of the key recruiters around town, they’re always complaining that they are having trouble finding qualified board members; or people that are qualified just don’t want to serve on boards anymore because of the nature of lawsuits and other things that we’ve seen over the years. You advise many boards and you have served on several boards. What do you think the field is today in terms of board governance and board members serving? Do you see this becoming harder and harder to do? Do you see people stepping up to the plate? Do you see people not wanting to put their long hard life savings on the line of deep pockets from some investors who might want to sue them? What do you see in the next couple of years in the governance and board area?
JC: The board is a very complicated place. I will use the example, when you are growing up, you probably had a pool in your backyard, or a neighbor’s pool. For the most part, the parents around the pool watched over the children, and if some child was in trouble, they stepped in and saved them.
The example of the board today is the regulators come in and say no, no, no; we need a lifeguard with twenty years lifeguarding experience. We call it Sarbanes-Oxley, and Dodd-Frank. We changed the dynamics of who is in the boardroom and we worship to the god of expertise. The problem is we stopped worshipping to what Warren Buffett described as business savvy. So, board directors are not advising their chief executives anymore, they are monitoring.
The key problem is time. There are five times a year when board members step into what might be the most complicated organization in the world and given reams of information you cannot possibly digest and being told things you cannot check. It’s all being confirmed by lawyers and accountants who don’t work for the company, but are paid by the company. And you’re expected to be an effective steward.
That is the problem. The solution is board diversity. The example I just gave you of the tyranny of expertise is what is preventing significant numbers of women and minorities from serving on boards. Because they have not been in the game long enough to have risen up through the chief financial office, to be able to serve on boards.
If we simply wanted people with common sense to advise the CEO on what is happening in the world and in their world, the numbers of candidates for boards would increase dramatically.
The reasons boards do not make these changes is the liability question. The plaintiff bar is the largest contributor to the Democratic Party, so the Party must support laws that enable the Plaintiff Bar to pursue class action lawsuits against directors. People who have never stepped in a boardroom will tell you that, well, there have only been a handful of cases where directors have been personally liable, and that is true. The problem is saying a heart attack isn’t dangerous because most people survive it.
A class action lawsuit against the board may last for three years or more, and every day the director is burdened by this could force them to disgorge all their personal wealth. At the end, if it went to the jury, they would disgorge. That’s why there’s always a settlement, but the settlement is never clear, and the plaintiff bar, knowing that you have to have a settlement, has all the leverage, so they’re getting enormously wealthy. That is one reason boards will not be bringing on many new, inexperienced – meaning not having deep C-suite expertise – board directors. They cannot take the liability.
RT: Like we did with the CEO, let’s look at boards. What trends do you see may be emerging that we have not seen yet for boards?
JC: There was a trend towards smaller boards after DoddFrank. That is probably the biggest reason we don’t have sufficient diversity. Obviously, if you are downsizing your board, only new directors are filling in retired places, and they are seldom. When I first started serving on boards, the first committee you went on was audit because you saw the whole company. That stopped after Sarbanes-Oxley. It now requires an advanced level of financial expertise to be on audit. It treated audit committee members as if they were jet pilots, not as if they were in the cockpit learning how to fly. And so that reduced the number of board members, but I think boards actually have to increase.
Otherwise, women are 21.5 percent of an S&P 500 board of directors right now. In ten years, they will be at 28 percent. I think women are saying they are not going to stand for that. So, that’s going to be a problem. Minorities, Hispanics, African Americans, Asian Americans, or even a lesser minority, are going to want to have larger, dominant roles on boards. That is not going to happen unless we find a way to bring people on.
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