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Tech-Savvy Board Members Give Companies Street Credibility


By Eric Chabrow
InformationWeek
October 7, 2002 12:00 AM (From the October 7, 2002 issue)

As an executive VP and management council member at Comerica Inc., CIO John Beran has the ear of CEO and board chairman Ralph Babb Jr. But Babb isn't the only board member at the bank holding company listening to Beran. He regularly briefs outside director Patricia Wallington about major IT initiatives. Wallington is a rarity among corporate board members; she's managed an IT operation.

"IT's a discipline that could play a good role on the board," says Wallington, a former Xerox Corp. CIO. "Other board members shy away from [technology] discussions. They're not as comfortable with technology. It's good to have someone who understands when an important issue occurs that the board should address."

Business-technology know-how is absent on most boards. The few CIOs who serve as outside directors do so mostly for hardware and software vendors and E-business providers, where fellow board members appreciate their expertise more as technology users than technologists. Among the exceptions: Mattel Inc. last year elected Cardinal Health Inc. CIO Kathy Brittain White as a director. Her IT and supply-chain management adroitness adds an essential dimension to the toymaker's board, CEO Robert Eckert says. Last month, Gap Inc. tapped former Wal-Mart Stores Inc. CIO and international division CEO Bob Martin as a director, citing his IT expertise as an asset.

If Agilent Technologies Inc. had had a CIO-director waving a red flag about potential pitfalls, could it have avoided a devastating enterprise resource planning system deployment last spring, costing the scientific-measurement company $105 million in lost revenue and $70 million in operating profit? asks Dartmouth business professor Eric Johnson. "Being able to understand and evaluate the risks ... would be a real asset." Agilent's stock dropped 11% when it revealed its ERP woes.

Research published earlier this year by Vinod Singhal of Georgia Tech and Kevin Hendricks of the University of Western Ontario shows that share prices immediately sink an average of 7.5% on word of an IT-intensive supply-chain hiccup compared with a minute 0.7% price dip when a company announces a plant closing. "Investors feel better knowing someone on the board is asking the hard questions," Johnson says. "Such a person can create confidence with the Street."


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