It helped that I didn’t see the board as something to be managed or controlled. They weren’t a threat or a burden to me, but something I wanted, even needed, to help me run the company better. I had joined the company to turn it around from its near death in 2008. But rather than go over how The Hartford had got into this mess, I focused on stabilizing and strengthening the company. I was transparent about my intentions and educated the board as to how things were going now. I just had faith that things would work out okay in the end.
Then when the Paulson attack came, I encouraged further trust by not getting defensive. I didn’t change how I related to them. We were under a lot of pressure, but I didn’t go home each night wondering if a director would try to fire me. I worried about lots of things, but not that. So I could keep relating to the board in an upfront way, and that built trust further. I continued to be transparent with them, even if it showed some vulnerability on my part. The board pushed back at times when they didn’t agree with me on an issue. But what could have split us apart ended up accelerating our gelling into a team.
We took the attack seriously…
Paulson was a major owner, so we had to take his proposal seriously regardless of the merits. As I told the board, every shareholder has a right to their view, so we won’t get defensive. Good things can come from shareholders’ perspective. In the height of the attack, I was calling Paulson almost weekly with updates.
A management team, when presented an idea from an activist, can’t just presume it is a bad idea or approach it from their own biases. They have to keep working it to be sure that they’re right, because most activists put a lot of work into their proposal. You need to treat it with that kind of respect.
Right off the bat, we had a strong reason for doubting his proposal. Even if the spinoff had made business sense, our insurance regulator never would have allowed it. The plan would have put too much risk on the policyholders. But we couldn’t speak for the regulator, so we had to focus on the business rationale.
I literally sent our executives back three or four times on the Paulson approach and said “Make it work.” Emotionally and intellectually I didn’t want it to work—the difficulty of ever executing that plan made it a path I didn’t want to go down. But if it could create value, we had an obligation to shareholders to seriously consider and perhaps pursue it.
I couldn’t go out publicly and say this isn’t going to work unless I was completely confident. Paulson was such a successful investor, and things had gotten so public with him and us, that for me to have any credibility in opposing him, we had to be right based on facts for shareholders.
… but we also leveraged it
We certainly didn’t want to be attacked. But it was serendipitous: it gave us cover to pursue what we were going to do anyway. People weren’t happy about the new direction, so the attack helped us move to some painful changes in the organization. We would have had a tougher time executing our strategy without it, and it would have taken a few months longer. That, in turn, would have put off our selling of the three life businesses, and we might have missed the opportunity to sell them at a good price to strategic buyers. Paulson indirectly did us a favor.
Still, it looked to many people, inside and outside the company, that we were forced into the changes. That rubbed me the wrong way. I eventually got over that because we stood our ground, we did something on our terms, and it worked.
As a retired CEO, I think a lot about legacies. Sometimes your achievements are positive ones, where you make something happen that wouldn’t have happened otherwise. But other legacies have to do with preventing something bad from occurring. If we’d handled the Paulson attack differently—whether we knuckled under or fought him hard, the situation could have gotten much worse. Forget about losing my job—the company would have lost valuable time in moving to a new strategy. The Hartford wouldn’t be nearly as strong as it is now. We kept this 200-year-old institution going. It’s now in a position to add more value for society in years to come.