A New Frontier
First Quarter 2012
Corporate Board Member
by Deborah Scally
Maggie Wilderotter, chairman and CEO of Frontier Communications Corp., has a full agenda for 2012. To start, she must oversee the telecom as it digests its 14-state acquisition of Verizon and do so amid headwinds that aren’t likely to abate in the near future. But Wilderotter’s moxie and endurance are firmly ingrained, and she has no intention of swaying off course. Corporate Board Member caught up with Wilderotter, also a director on the Procter & Gamble and Xerox boards, just moments before a Frontier board meeting and asked about the company’s boardroom dynamic, her leadership style, succession planning, and what’s in store in the months ahead.
To begin, let’s talk about the relationship you have with the board at Frontier. How would you describe the boardroom dynamic? As both the chairman and CEO, what keys have you found to maintaining good communications with your lead director and the rest of the board?
It’s a great question. I would say, first, when I think about the Frontier board and I think about the dynamic, it’s a very healthy environment. The board is active. [Directors are] participatory. They are passionate about the business. They are diverse in who they are and their experience. So they bring a lot to the table. And we have structured our board meetings where it’s about discussion and decision making, not about download. So we don’t spend a lot of time on PowerPoint presentations. If there’s a thought-starter, it might be one or two slides, but that’s it. So we take topics and we go deep in a discussion and debate environment from a board perspective to really help the company make better decisions. So I would say the dynamic is very healthy.
As for my communication style, I’m a very proactive communicator with our board in between meetings. I send out e-mails probably three or four times a month on different activities that are taking place within the company that are informative for the board to keep them abreast of what’s happening, as well as any key critical updates on the business. I also usually reach out by phone once a quarter to each board member. And if I have a specific topic that we’re going to discuss at the board meeting that I want them thinking about ahead of time, I’ll do a personal phone call to each of them to sort of give them a framework of what I’m thinking about, so when we get together, there’s good discussion and it’s not cold for them.
It’s interesting that you call each of them individually. Do you feel like that allows them to express a reaction or a view to you that perhaps they’d be less than willing to talk about in the full group?
Well, that could be, but that’s not the reason for it. I just think that every board member processes information differently. I do it out of respect to give them all the opportunity, maybe not just for first reaction, but also to ask me questions that would give them better insight to have them think about it. That’s really the whole genesis of that approach.
And I don’t just call two or three. I call all of them.
I assume that part of this approach is because you can put yourself in that position, since you are also a director sitting on the other side of that conversation on other public company boards?
Correct. Because I do sit on the Procter & Gamble and Xerox boards as well, I understand the role of the CEO versus the role of a board member. And as a CEO [sitting as a director on another board], you don’t want to jump in and try to help the other CEO be the CEO. You want to make sure you maintain the right role based upon the position you’re in.
I know when you appeared on Corporate Board Member’s [Oct. 20] webcast “This Week in the Boardroom,” you mentioned Frontier’s board mentoring program. Can you explain a little about how that works and why you think it’s valuable?
We’ve had the program since 2005, so it’s been in place a fairly long period of time. I look at it as part of succession planning for the company. I take the top 10 to 12 company officers and match them with different board members for a two-year rotation program. During that two-year window, the [matched] board member gets together three to four times a year with that senior executive, off cycle of a board meeting. It’s usually for a meal, so it’s more of a casual setting. It allows them to get to know each other, [for the director] to understand the senior leader’s perspective and thoughts about the company, as well as what [the executive is] personally working on and what his or her career aspirations are. It lets the board member provide insights as to what’s important to the board and where the company is headed strategically. Then when I do a succession plan review of our top people once a year with the board, each mentor on the board partners with me on each of those senior leaders to discuss the opportunities for that leader and the succession opportunities in the company.
That sounds like a very productive board development program.
It is. And I’m not involved in any of those [prior] discussions, so it’s really between my senior leadership and the board members. And it’s also nice because since we’ve had it in place for several years, we’ve actually rotated senior leaders through a couple different board members. So my goal over a five- to 10-year window is to get each board member to know, pretty intimately, three or four members of the senior leadership team. I think the board members enjoy it a lot, as do the senior leaders. It’s a win-win all the way around.
Succession planning is always one of the most challenging aspects we hear about from board members. Does Frontier have any other initiatives in place with regard to succession planning and development?
Yes, I do a three- to four-hour session every year with my board strictly on succession planning where I take them through the top 20 people in the company. We call it “Two Great Candidates,” in which I take them through the two successor candidates for each of those jobs in the company. So they get exposure throughout the rest of the year to the potential candidates for those jobs in addition to understanding the capabilities of the folks who are in those positions and their next steps as well.
We also wanted to talk a bit about the topic of boardroom diversity. It must feel good when you and your sister [Denise Morrison, CEO of Campbell Soup Co.] are characterized as role models who embody the best qualities of successful women today. How did your upbringing affect the business success you and your sister have enjoyed?
From an upbringing perspective, I think one of the great things our parents taught my sister and me was that if you get a great education and work hard for what you want, you can do anything you want to do. They built a lot of confidence for us at an early age, and I do think that is a big issue with a lot of women, because they don’t come across self-confident.
They often come across more deferential in how they portray themselves in the business world. And as we all know, our male counterparts don’t know anything but confidence.
So I think that is a big gift my folks gave Denise and me early on in our lives. In addition, my father brought the business world into the dining room every night, so we talked about what he was doing in business. He shared the different activities he did. He even took us to work with him in the ’70s before it was cool to do that.
What was his profession?
He worked for the telephone company—for AT&T and Cincinnati Bell.
Oh, how interesting for you, now that you are heading up a telecom yourself.
Yes, exactly! So he sort of opened up the business world to us so it wasn’t a big mystery. And my mom was one of the top real estate agents in New Jersey. She worked part-time, but was very accomplished at what she did. So I think [we were motivated by the] combination of education, a focus on delivering results (we had to do business plans if we wanted to buy anything), and giving back to the community. We did a lot of community service work when we were kids, raising money for different charities. That gave us a good balance, I think, for being successful later in life in the C-suite and the boardroom.
On a broader scale, in your opinion, what else should corporate America be doing to further move the needle toward a more diverse executive suite and boardroom?
With regard to what companies can do to move diversity forward, I think it starts with the tone at the top. The CEO of the company has to make this a priority and not just talk about it, but put actions in place in those companies by putting women in senior roles and by taking risks and chances on up-and-coming women in the organization for high-profile positions. I also think the CEO has to make sure the pipeline is strong from the hiring of entry-level women and moving them up through mid-management and into senior-level roles, so you have a constant pipeline of diversity. And, I think CEOs also have to look at the makeup of their boards to make sure their boards are reflective of the customers they serve.
Right, and that makes perfect sense, but it does not yet reflect the vast majority of boardrooms across corporate America.
I sit on three public company boards, and all of them have four or more women. So they are very diverse boards. My board, in particular, is quite diverse, and I think when you get what I call a mass of two to three women on a board, it does change the dynamics in the boardroom for the better, because I do think that critical mass really helps bring more of a balanced approach to the decision making.
Speaking of tough decision making, I know you’ve been reporting quite a bit lately about Frontier’s 2010 acquisition of Verizon’s local wireline operations in 14 states in 2010. You’ve been saying that in general, the progress reports are very good, the integration is going very well, and your cost-saving synergies are right on track or even ahead of schedule. Is all of that still the case?
I think you’ve got to consider that we tripled the size of the company 15 months ago, so we are still swallowing the whale, as they say. We are making great progress. Every month, we improve the metrics of the company. Integration and cost synergies are ahead of plan. And we have said since the beginning that fourth quarter 2011 and into 2012 is when the revenue line would start to turn. As you implement different programs and you get broadband builds, what follows, usually at a six-month lag, is the building of the revenue side. I still feel very strongly that’s the case—that we will see it turn, and it will continue to improve on a trend-line basis through 2012. And I think that’s one of the big things the Street is still waiting to see. I think they feel very good that we’ve done a good job on integration, on synergies, but we haven’t really proven the case on the revenue line yet. The ironic thing is, when you’re in a market where there’s a lot of volatility, like we are today, it’s, in many ways, a fear-based market. So you don’t get the same runway that you would get when the economy is good.
Undergoing something like this is a huge undertaking from the board’s perspective to ensure that an acquisition of this magnitude meets, or exceeds, shareholders’ expectations. What steps have you and the board taken to keep shareholders informed of the deal’s progress and its performance, and can you share any challenges or lessons learned along the way for other boards that are considering an acquisition strategy in the year ahead?
My CFO and I are very proactive with our shareholders. Just in the last couple of weeks, I’ve spoken to all 20 of our top holders to keep them informed on how we’re doing, and we attend a lot of conferences. We do a lot of outreach with our analysts as well as our investors. But I also think, and we remind them all the time of this, we’re staying the course; we haven’t changed the story. But there’s an impatience, and there’s a worry about whether the story will have the happy ending that everybody thinks it should have.
In looking at this again, I think we probably should have focused more on some quick hits on the revenue side earlier, versus just building for the long-term foundation for revenue. Hindsight is always 20/20, but I think you have to recognize the dynamic of the market you’re in, in addition to the dynamic of the company. Our board is very supportive of what we’re doing. This was a big, courageous step for the board to take 15 months ago, because we had the option to sell the company at the time. So we chose the longer journey that would deliver more shareholder value. We still feel that way. There’s been no change in our thinking from that perspective. But it’s a journey. We said it would take through 2013 to get all of the integration done and to really get the company humming on all cylinders, and we are still, with our heads down, following that path.
But it’s a difficult thing, isn’t it, to take that courageous step and then tell your story, emphasizing that the benefits will show up in the long term?
Correct. And you want to build sustainable businesses. This is not short term. This is long term. We’re a hundred-year-old company, so transforming every 25 years is not unusual for our industry. But as a CEO and as a board, you have to have thick skin. You’re going to have to deal with noise in the system as you get there. And you talk about that esoterically, about the noise that you’re going to get hit with, but it’s not until you get the noise that you really realize what the noise is.
Well, from all indications, things appear to be moving ahead, and we wish you the best on that front. So in closing, what thoughts do you have about the upcoming proxy season for Frontier? Are there any particular issues you feel will “create noise” for your company this year? What is the Frontier board doing to prepare for its upcoming annual meeting?
I would say it’s pretty much staying the course on a number of the governance issues that have already been on the table over the last year or so. I think the say-on-pay issue will continue to evolve.
I do think there is a lot more emphasis on the rigor the board goes through on executive compensation, and we will see more companies moving into performance-based comp. I think that’s a trend we will continue to see, and it’s one we’re spending a lot of time on with our board, making sure you have not just base salary and annual bonus, but also long-term incentive compensation. That is becoming more the majority in terms of how executives get paid versus just short term. So I think that’s a big issue.
I also think you’ll continue to hear noise in the system about separating chairman and CEO roles, and the pros and cons of that. I don’t think there’s a consensus on whether you do it one way or the other. I think it’s situational based on the company and the board. So, I’m not sure how much change we’ll see this year, but there could be some changes with different companies on that subject as well. Other than that, we’re not really hearing a lot in terms of shareholder proposals or upcoming issues that are happening on the governance front.
With regard to the chairman and CEO role separation issue, it appears to have worked well in your situation. I’m assuming Frontier’s board has been very supportive of the current structure.
Yes, it has. We’ve been candid, and we’ve talked about it. And if there’s a decision at some point to separate those roles, we will do it for the right reason, for shareholder value. I’m very active with our board, though it’s not me who dictates the agenda; it’s a collective agenda. I think the directors feel they have the right access and input to set the agenda and don’t really need to change out the chairman leadership to change that dynamic. We also have a very active lead director who’s proactive with me, and I am with him, so I think that makes a difference on the governance side. And I’ll also say with both Procter & Gamble and Xerox, the CEO is also the chairman of those companies as well, and I don’t foresee that being changed in either of those companies at this point.