Christa Steele, a trusted financial and governance authority, shares her perspective on the current financial challenges with Boyden US Chair and California Managing Partner Jeff Hodge. She is an admired CEO and Board executive, with experience serving as Board Chair, Chair of Audit, Compensation Committees, and ESG strategic advisor. Here are the highlights from our conversation. To learn more about Christa, please visit www.christasteele.com.
With three recent significant bank failures and slowing tailwinds in general, what is your impression of the current economic moment?
“As somebody that watches Bloomberg every day, follows what’s going on, and keep a close eye on financial markets, I think the consensus is we're heading into a recession. There's a lot of unknown territory that lies ahead because we've got a growing amount of debt on both government and corporate balance sheets. So, I do believe that we have some very torrential times ahead for corporate America.”
For those of us who are not economist, or finance experts, can you describe what to look for?
“What typically happens in recessionary times is there won't be as much capital investment spending. Companies will either do layoffs, which we're seeing really start to accelerate, or they might just freeze hiring and let natural attrition reduce the number of FTE.
As far as corporate balance sheets, organizations will have to pay more attention to how they’ll invest the amount of cash they borrowed cheaply, as the corporate debt obligation has stepped up tremendously.
Those are the two sides I think that are going to have the most exposure in corporate America in addition to just a slowdown in consumer demand which can drive in a very different direction in and of itself.”
How do you think private equity will behave in a market that's conventionally recessed?
“Well, I think we're seeing a lot of funds being raised right now that are ready to pounce on corporate debt restructuring, so there will be an opportunity for some opportunistic buys. I don't think we'll see private equity continue to sit with the dry powder they've had on the side-lines for a long time. As far as the VC startup seed money world, that is really coming to a screeching halt, and so I think we're going to see a lot of unicorns that are either late stage that haven't made it to the public markets or haven’t crossed the threshold of profitability go by the wayside.”
What should a first-time CEO be thinking about in this sort of market?
“Most of it is based on the personality of the individual but having a wartime mindset and willingness to roll up their sleeves and get down below the 50,000 feet level if they must is what’s needed. In general, it's harder to make a move during troubled economic times, but there's an opportunity too, in the right situation.”
And what about Board members, what is top of their minds?
“Silicon Valley Bank rattled the board world and made all of us reflect on the definition of board oversight and duty of care and duty of loyalty. Every boardroom is different. It is important to be a good listener and try to figure out that place where one best fits in the dialogue and can be a contributor relative to the experience around the table. As we move closer to recession and the need for wartime vs. peacetime leadership boards will no doubt need to contemplate refreshment and evaluate areas of board level oversight.”
What can we, as search consultants and talent advisors, do better or differently when bringing executive talent to the conversation, from the company or board's point of view?
“The biggest key is really understanding the company culture and if there are any significant challenges or disconnections where the board might have one type of culture, management has another, and then the rest of the organization might have a different culture.
So, for me, a good search consultant will uncover if that's united or not because that will weigh heavily into the recruitment of a C-level person or a CEO.”
When a big company struggles it often feels like a surprise to most. Is it ever a surprise to the board when things go badly particularly in a public fashion?
“Directors are only operating with the best information available they have at the time. It’s important to review board agendas and decide what's relevant and what's not, see if there's anything new that has emerged.
I believe management should always have the autonomy to lead, however, it's prudent that the Board gets exposure to human capital, maybe hearing from the HR Director, or understanding the turnover inside the company, if there's any recurrence of certain types of complaints.”
What do you think makes a great director?
“Directors must stay up and current on things, stay relevant. Being comfortable in their own shoes and not needing to prove themselves, as well as being culturally minded and aware, is what makes a director, and a CEO, a good one.
In my experience, the quietest directors seem to be the wiser ones in the boardroom. When they speak everybody listens, and they're very thoughtful in their approach.”