PSEG to be honored as Public Company Board of the Year by N.J. chapter of NACD
Ralph Izzo, the longtime chair and CEO of Public Service Enterprise Group, admits his mindset regarding those positions has evolved over time.
Izzo, who has served in both roles since 2007, said he now understands companies no longer can stay on the sidelines on major issues. Their employees — and their stockholders — want them to take a stand, he said.
“I’ve had to go through evolution myself as a board member and as a CEO,” he said. “Once upon a time, I believed that, if it’s not directly related to our business, we don’t have a role to play.”
The reason, he said, was simple: Why step into an issue that will have strong supporters on both sides?
“Quite candidly, as stark as some issues seem to me, there are oftentimes people on the other side of that issue, and I didn’t need any reasons to stimulate controversy or debate,” he said. “But it’s become pretty clear on a variety of issues that silence and complicity are as much a part of the problem as those who are actively behaving in what I would describe as very unacceptable actions.
“So, recently, we’ve written letters on voter access, we’ve written letters on systemic racism, we’ve written letters on not certifying the election.”
The list goes on and on, Izzo said. Whether it is something directly related to PSEG, such as climate change, or something not as definitively connected, such as pan-Asian racism and hostilities, Izzo and PSEG have let their stance be known.
Izzo suggested he now represents a new term being used in leadership: the political CEO.
It’s a club whose membership is no longer optional, Izzo said. Current employees — and potential future employees — demand it from their leaders, he said.
“Without question, today’s employee wants us to be very actively involved in a variety of issues, whether it’s environmental justice, whether it’s a gender equity, whether it’s systemic racism,” he said. “Today’s employee is saying, because if I’m going to be associated with you, I want to understand you.”
Monday night, Izzo will represent PSEG when it is honored as the Public Company Board of the Year at the annual event sponsored by the New Jersey chapter of the National Association of Corporate Directors. (Click here for more information on the event, which will be virtual.)
Izzo spoke with ROI-NJ about the changing nature of the role boards play. Here’s a look at the conversation, edited for length and clarity.
ROI-NJ: You talk about companies and boards no longer being able to stay silent — but speaking out undoubtedly will evoke reactions for and against your stance, regardless of the issue. How does a company balance the pros — and the cons — that come with making its voice heard?
Ralph Izzo: It is a concern. You try to stick to those issues that really have an objective impact on your employee population, and you can demonstrate that you’re making a fact-based decision. But you have to expect that there are going to be people on the other side of the issue.
The most recent example is when 147 members of Congress chose not to certify the elections, even after having the Capitol building invaded. We chose to defund any one of those 147 members that we had previously funded through our PAC — it turned out that only meant two of them. When we told our employees that, 18 of them stopped funding the PAC. So, you’re going to have folks that don’t agree.
ROI: Let’s turn to board membership. It’s hard to address and understand issues involving diversity, equity and inclusion if your board is not diverse. Talk about the impact of DEI in the boardroom — both in its actions and the makeup of its members?
RI: I’m delighted to say that we’ve seen a major shift in thinking by decision makers. Before, it was, ‘OK, all things being equal, I’ll go with a diverse candidate.’ Now there’s a recognition that diversity is an attribute that is needed. It’s like saying that, if I’m in a quantitative trading company, I want somebody with analytical and math skills. It’s a characteristic, it’s not a tiebreaker. It’s a positive because it brings a different perspective, brings a different way of looking at problems and therefore coming up with solutions to the boardroom.
ROI: How is that playing out at PSEG?
RI: We still have work to do. We’re 30% women, 30% people of color — and there’s some overlap between those two numbers. It’s not 60% when you combine them. I want to do more. We need to do more, because diversity matters.
Many of the things I learned about the systemic racism in the world came from a few people, including Ken Frazier, the CEO of Merck, who basically told me, ‘Ralph, you don’t understand, when I leave that corner office, I’m just another black man driving a fancy car stopped by the police.’ I’m paraphrasing, but that’s basically the message Ken gave me.
If I had an all-white male board when our employees were saying, ‘Are we going to say something about systemic racism?’ that perspective wouldn’t be present in the boardroom and that would be a disaster. That’s just one example. So, yes, today’s board member has to bring a much more richness of social perspectives in addition to corporate expertise and background and experience in running larger organizations.
ROI: It appears as if boards are more active — and more involved — than ever before. Is that accurate? And are there concerns that come with it? What would be your advice to other boards trying to find the right level of increased participation?
RI: Right now, the role of the board is changing, the expectations of the board are changing. And there is a justifiable expectation that the board is more hands-on and more deeply involved (in) more intimate knowledge of the operations of the company. I do think that’s a risky, slippery slope to get on, because our businesses have become so complex. To expect talented women and men who meet six or eight times a year to really understand the day-to-day and intricacies of the regulatory system, or the HR benefits program, or a variety of operational investments that are being made every minute of every day in business is unrealistic.
In that respect, the board’s role hasn’t changed.
What’s the company’s strategy? Is there a succession plan in place for the named executive officers? Are the right governance mechanisms in place to make sure that we have oversight of the compliance functions and of the reporting functions? And are we expanding the activities in the company over which all of that applies? But we can’t cross over the line.
So, while boards need to make sure that they have in place and are satisfied the business-appropriate governance over the increased complexity of running a business, whether it’s cybersecurity or DEI, they really should not get in a position of putting themselves in the role of day-to-day management of those highly complex new issues that CEOs and management teams are encountering.
