Home Depot Directors Spending Time in the Trenches
Huntsville, TX, June 21--"Where the heck are the toilets?" Greg Brenneman mutters to himself, wandering the aisles of a Home Depot here. Finding them, he pauses in front of a high display and lifts the heavy ceramic lid from a toilet tank above him, his face darkening.
"That's something we'll talk to the manager about," he says. "I just worry about it." Mr. Brenneman believes the lid could slide off its perch and knock a customer on the head. He'd prefer it to be glued in place.
A concerned shopper? No, Mr. Brenneman is a director of Atlanta-based Home Depot Inc. and says the issue will be discussed at a future meeting of the board of the home-improvement retail chain. He's poking around the store here to fulfill the company's requirement that board members visit at least 12 stores and several corporate business units each year to spot store trends and better advise upper management.
As recent scandals have made painfully clear, boardroom presentations by senior managers seldom offer the kind of detailed insight, broad perspective or injection of reality that regular visits to the trenches and face-to-face talks with workers can provide. Corporate-governance experts say more boards are telling their independent members that in order to guide -- and if necessary confront -- senior management in the boardroom, they have to start making their rounds.
"These [visits] are considered part of your responsibility to be an effective director," says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware's Lerner College of Business and Economics.
At Home Depot, one of the best-known companies to use the strategy, on-site visits have been part of the job for about two decades. They can be time-consuming. "It's like a day-and-a-half, two-day commitment per store," says Ronald Matricaria, a former Home Depot director who resigned in 1998 after nine months because he didn't have time for the store visits. Mr. Matricaria is the nonexecutive chairman of Haemonetics Corp., a health-care company in Braintree, Mass.
"I think it's a great idea," he says of the visits. "I just didn't understand what kind of time commitment I was making." Mr. Brenneman's visit in Huntsville took only about two hours because the store is 40 minutes from his Houston-area home. The former Continental Airlines Inc. president, who now runs a private-equity firm in The Woodlands, Texas, reviewed the store's financial performance before he arrived. When he got there, he spent a few minutes inspecting the exterior, to make sure it was clean and bright, and that the rows of John Deere tractors were neatly displayed. He then walked the aisles looking for safety hazards as well as poorly displayed items and out-of-stock merchandise.
Home Depot's chief executive, Robert Nardelli is a big supporter of the site visits. "Nearly every major change we are implementing at Home Depot has an aspect or dimension that has benefited from a director's experience in the stores," he says.
There are companies whose operations don't lend themselves as easily to this kind of inspection. "If you're on the board of an investment-banking firm, what are you going to do, visit the office and check the paper-clip supply?" quips Patrick McGurn, senior vice president and special counsel at Institutional Shareholder Services, a Rockville, Md., proxy-advisory firm. But even in such cases, Mr. McGurn says, mere discussion with employees can yield valuable information. "If there's something going wrong, people at the bottom often know it first."
In any case, site visits can help a company ensure there's a proper flow of information to the board. At companies where the chief executive is also the chairman, he or she sets the agenda for board meetings and controls the information given to directors. Directors in these kinds of situations can use site visits to avoid getting all of their information through reports spoon-fed by management.
As a director of General Electric Co. and women's clothing retailer AnnTaylor Stores Corp., Shelly Lazarus, chairman and CEO of New York ad firm Ogilvy & Mather Worldwide, visits GE operating units and AnnTaylor stores to give her a context for understanding the numbers and PowerPoint slides she sees at board meetings. Discussing a new light bulb with workers at a GE plant in Cleveland, she says, made her understand better what marketing support the product needed.
While Home Depot's Mr. Brenneman says he usually visits stores incognito, the employees in Huntsville were tipped off a few days ahead of his arrival, says John Amann, the store manager. Mr. Amann says that Regional Vice President Dan Paris, who recommended the store to Mr. Brenneman, visited two days earlier, "to make sure his recommendation was right on" and that the store was in exemplary condition. For his own part, Mr. Amann says the only preparation he made for Mr. Brenneman's visit was to order pastries and juice.
