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Listed|Energy 2014

The Directors Chair

Rick George

Give people the tools and cut them loose

In The Directors Chair with David W. Anderson: As a former CEO and a boardroom veteran, Rick George
knows that fundamentals countand that tough questions can have simple answers
Photography by Jeff Kirk

If the oilsands have a face, it belongs to Richard Rick George, who stepped
down as CEO of Suncor Energy Inc. in 2012, after 21 years in office. But
thats only one narrative line in Georges story. Hes enjoyed a multi-faceted
careerboth in management and around the directors tablethat has
honed his views on important issues in management and governance to razor
precision. Here, George shares insights on what makes a board effective, both
sides in the relationship between directors and their chief executive, and why
good leadership sometimes means getting out of the way.

Richard Rick George

Primary role
Partner, Novo Investment Group
Additional roles
Chair, Penn West Petroleum Ltd.; Chair, Osum Oil Sands Corp.
Director
Royal Bank of Canada; Anadarko Petroleum Corp.
Former roles
President and CEO, Suncor Energy Inc.
Former director
Dofasco, Inc.; Transocean Ltd./GlobalSantaFe Corp.; Canadian Pacific Railway Ltd.; Enbridge Inc.
Author
Sun Rise: Suncor, The Oil Sands and the Future of Energy (2012)
Education
BSE (Engineering), Colorado State University; JD, University of Houston Law Center;
Program for Management Development, Harvard Business School
Honours
kOutstanding CEO of the Year, 1999

kCanadian Business Leader Award, 2000
kOfficer of the Order of Canada, 2007
kInducted into the Canadian Petroleum Hall of Fame, 2008
kIvey School of Business, Ivey Business Leader Award, 2012
kAlberta Oils Canadas Greatest Oilman of the Last 30 Years, 2013

Current age
64
Years of board service
20+

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The Directors Chair

Rick George

David W. Anderson Much has changed in corporate governance

since you first became a CEO. What do todays CEOs face that
you didnt?
Rick George Boards no longer give management free reign. Complacency
in governance is gone. The majority of CEOs and boards are listening to
their shareholdersand rightly so. As a result, the focus is on delivering
shareholder value. Boards are holding management accountable by paying attention to how well management is executing. I think boards are
more aware and better equipped to monitor a small number of issues
that ultimately serve shareholders better.

are in place for management to execute well. Its clear to me because

these are different things. The board is not to interfere in day-to-day
operations such as relations with staff or the market. People get these
roles confused mostly because of personalities and politics. People
like to exercise power. Sometimes its situational, as when a CEO retires and stays on the board. Some boards dive deep into the business,
where it becomes easy to go beyond the boards role. The temptation
is to actually run things. Its important that the chair and CEO have a
regular dialogue on these roles.

David W. Anderson How do you think boards ought to judge man-

practice?

agements execution?

Rick George When I was CEO and felt uncomfortable about the
roles, Id call it. We would listen to get the boards input and thank
them, and then Id remind the board that execution is managements job. What I didnt do was cut off conversation and have
directors feel they werent listened to. Now as chair at Penn West,
I have a constructive conversation with the CEO every few weeks
around how the board can support the changes going on, and
what he needs from the board to get his job done. As CEO, hes got
to be the front guy for the company. If you hire the right leader,
the board can stay above the fray.

David W. Anderson In your experience, how does this work in

Rick George Effective boards care about what shareholders care

abouttotal shareholder return (TSR). They are not interested in

ticking off boxes. TSR is the metric that most companies now report.
Many boards use it to compensate their executives. True performance
can only be judged by comparing managements performance to competitors in the industry. Unlike 20 years ago, boards routinely get comparative industry data, so theyre aware of comparative performance.
David W. Anderson What does a checklist board look like?
Rick George Its the kind of board that spends too much time on

audits and ticking the box on what it thinks are good governance
requirements. It takes its focus off the business strategy and puts it inappropriately on details of execution and efforts to meet external governance standards. Typically, too few directors have an intuitive feel of
the business. The danger is they may even think they understand the
business and are able to hold management to account for what really
matters. These boards too often get in the way by not respecting managements prerogative to run the business.

David W. Anderson You put a lot of emphasis on leadershipgetting the right CEO, in particular. What do you look for in a CEO?
Rick George Integrity, first and foremost. Natural leadership traits
are key as well. By that I mean the ability to relate to people and to
be brave in making tough calls, knowing that you cant make everyone happy. Strategic thinking, good decision-making, and the ability
to executegetting things done quicklyare also important. And, of
course, a knowledge of the industry and commitment to work hard for
the shareholders.

David W. Anderson For a board to know enough to judge managements performance, some say a board needs to dig deep. How
do you get the balance right?
Rick George The board needs to make sure management executes on
the long-range plan by tracking performance. Directors need to know
enough about the business, but not get in the way. The best way for a
board to add value is to have people who have been successful in the
industry. They know the right questions and know the pitfalls.

David W. Anderson What do you expect of yourself in terms of

providing value?
Rick George After sitting in the CEO chair for two decades, I bring
experience to bear through mentoring, which I think is a cool thing.
I know what the CEO is going through. I explain what has and hasnt
worked for me in similar circumstances. I also spend time with the
board working for the shareholder.

David W. Anderson What should corporate governance look like?

Rick George Boards have seven things to do, which I think fall into

your CEO?

three themes: (1) strategy, which is about understanding, shaping and

supporting the business strategy and appreciating and managing the
risks in the business; (2) leadership, which is about getting succession
of the CEO right and making sure good people hold the senior executive roles; and (3) performance, which is about assessing the CEO,
monitoring the corporations execution against strategy over time,
which is where industry comparables are useful, and ensuring the cost
structure of the business is appropriate.
David W. Anderson The divide between governance and management is clear to you. Why does it get confused by others?
Rick George The difference between being part of management or
part of the board is not as complex or blurred as many people make it
out to be. The boards proper role is to make sure policies and practices

David W. Anderson What are some of the lessons you share with
Rick George Ive had an undying belief that success comes when an

organization has a clear strategy, defined goals, good values and basic
principles that the whole organization understands. This clarity reduces politics and you see who really wants to be involved. Give those
people the tools and cut them loose. Its amazing how hard people
work to achieve the strategy when leadership gets these basics right.
Its fun to watch an organization turn its performance around and
see the pride people take in what theyre doing and where theyre goingboth in the community and the industry. This is as good as business gets. Shareholder value then comes as a consequence. You have
to build the company from the foundation upprinciples and values,
strategy and toolsbefore you see longer-term value. Disasters happen when the foundation isnt there. It frustrates people when they
dont know the strategy and dont have the tools to execute.

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The Directors Chair

Rick George

David W. Anderson How does a board know when it doesnt have

David W. Anderson The pursuit of business has ethical implica-

the right management team in place?

Rick George The challenge is it can take a long time for a company to
implode and shareholder value to be lostand there are reasons other
than poor management why value can suffer. The best course of action
for a board is to get to know management and ask the right questions.
Look at employee feedback and figure out if the right atmosphere or
culture is being set. Does management have integrity and live up to the
companys values and principles?
I look for selfless managementleaders who put the needs of others
and the organization before their own. Many people are only focused
on what their boss wants, but if you take care of the people under you,
eliminate politics, give people tools and get peers working together, then
your boss has little choice but to support you. Most people get this reversed, working to please the boss, keep peers in the dark and hammer
their people. Boards have to make sure management helps people feel
empowered, understand the strategy and know their role in it.

tions beyond the corporation and its shareholders. How do you

see the interplay of free enterprise, society and government?
Rick George Business has a responsibility to be transparent with
shareholders and above board in its dealings with others. I disagree
when people say theres too much government and regulation.
Without rules and enforcement there is an element among us that
goes for the quick answer or the fraudulent win. Regulation is a necessary result of these people who abuse the system. We need it to
protect small investors from abuses by controlling shareholders, to
counter insider trading and to level the playing field so investors can
make rational decisions. You cant legislate morality, but we need the
protection and we all pay a price for it. There are consequences for
unethical behaviour. Without morality, all our costs go up.

David W. Anderson What does a CEO have to do to create and sus-

tain the right foundation?

Rick George You get your senior leadership team together and agree

on values and principlesthe ethics that define whats most important and how you will behave. That senior leadership team is your top
leaders in the company who have influence and whom you can hold
accountablebe it 10 people or 100 people.
Once this team buys in, you and your team have to communicate
regularly to employees, new and old, and live these values. Leadership
by example is the most important leadership trait you can have. People
will trust and follow you if they believe what you do and say is aligned.
People sense the hypocrisy and are first confused, and then disillusioned, when you talk one way but act differently.
David W. Anderson Does the board bear responsibility for this
foundation being solid?
Rick George Yes, firstly, the board has to hire the right CEO. When you
dont have the right team, the organization gets politicized and people
dont take responsibility. Secondly, through mentorship, the board
can influence the atmosphere and help management land on the right
values and principles for the organization. Thirdly, through oversight,
the board must verify the organizations ethics are evident in managements performance by looking to those behaviours and decisions that
see the leadership team in action. Ask your management, Are you
sure this proposal fits our values and principles? Simple questions of
this nature generate great discussions. Good boards have these regularly, though its not framed as a discussion of business ethics.
David W. Anderson Business leaders seem embarrassed to talk

about ethics among themselves. What do you say to directors

and CEOs who are squeamish?
Rick George Id say to them, This is your role; you get paid to do
this. Lots of people think these conversations need to be confrontational. I dont see it that way. Its a discussion that can be helpful to
board and management alike. If you want to do it well, find the right
tone. Ask how courses of action or decisions relate to your values and
principles. I think about this everyday because its about doing the
right thing for shareholders. How could this constructive dialogue
not be helpful?

David W. Anderson Whats the positive case for business morality?

Rick George There are huge benefits to living by sound principles.

An ethical, moral company is the kind of company employees want

to work for. Its easy to lead and manage, as people know the rules.
Investors ought to prefer ethical companies, given the heavy price
theyve paid in lost value when ethics were absent. Beyond being the
right thing to do, if you want to build a sustainable enterprise, to be in
business for decades, the only foundation is an ethical one.
David W. Anderson How do long-term sustainability and values

intersect with the energy business?

Rick George We all consume energy everyday. We all can agree we ought

to produce energy that is least impactful on the environment. But no form

of energynuclear, hydro, solaris without consequences. That doesnt
mean we sit back and accept where we are. We need to pursue technological innovation to do better. This applies to non-energy companies as well.
David W. Anderson Given the real and potential environmental
impacts, local and global, of our energy sector, whats your mental calculus to make both the ethics and business make sense?
Rick George Lets look at it this way. A lot of these fuels are produced
in places without strong regulation, among other issues. So I look at the
whole picture, not just carbon emissions. If we dont produce it, we have
to import it. That means negative implications for tax receipts and jobs.
Our best outcome is to run companies at the highest standard of service
to shareholders and communities while respecting the environment.
David W. Anderson Should climate change be factored into our

regulatory or business decisions?

Rick George The climate change issue seems to be too emotional for

rationale debate. Our job is to make sure we do the best we can to minimize our footprint. I believe the UN reports are politically motivated.
The data are not definitive. Statements you hear along the lines the
science is settled is in itself a violation of scientific principles.
David W. Anderson, MBA, PhD, ICD.D is president of The
Anderson Governance Group in Toronto, an independent
advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises
directors, executives, investors and regulators based
on his international research and practice. E-mail:
david.anderson@taggra.com. Web: www.taggra.com

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