Don’t tell Carl Johnson that corporate boards don’t matter.
Johnson, founder, chairman and CEO of II-VI Corp., may be among the first to admit that the company’s board hasn’t always made decisions that thrilled him and the other managers. But he’s just as quick to point out that its choices usually turn out to be the right ones.
“We feel that that board process of going four times a year to present your results, problems and your plans to an outside group that’s not there every day, we feel that really strengthened us at every step along the way, including the times when we walked out of there with a ‘no’ to what we proposed to do,” says Johnson.
The company has had such a positive experience with its board that it has instituted boards at most of its divisions, says Craig Creaturo, chief accounting officer.
II-VI’s international business grew substantially between 1980 and 1985, a factor that encouraged management to consider building a plant off-shore. The company developed a plan and presented it to the board, which rejected it. A couple of years later, the managers came up with a second plan for a plant and, once again, the board nixed the proposal.
The managers went back to the drawing board and developed yet another proposal, this one scaled back from the previous one, involving about a third of the investment that it would have required with the previous plans. This time, the board endorsed the plan.
II-VI went ahead with the project, building a plant in Singapore. By the time it was completed in the early 1990s, a global manufacturing recession had hit, and the wisdom of even a smaller plant came under scrutiny. Johnson recalls a shareholder at the time suggesting that the plant should be shut down because it wasn’t needed.
II-VI didn’t close the plant, and it ultimately bounced back as the global economy rebounded. Still, Johnson wonders what kind of a drag the project might have been on the company if II-VI had pursued its original plan.
“If we had gone ahead with the initial kind of large-scale investment we had talked about doing, it might have been a bigger problem,” says Johnson.
The board, it turned out, had given the right guidance, Johnson says.
“They were right,” says Johnson. “The first two times were too grandiose. We were trying to swallow the whole cow instead of a piece of it.”
But the board hasn’t simply fallen on the side of blocking proposals. Johnson says it has provided guidance that, at times, seemed bold, perhaps even risky, but valuable, nonetheless.
II-VI has grown remarkably since Johnson launched the business in 1971, and its sprawling Saxonburg campus has been a major asset, allowing it to grow at its original location. It has expanded several times since it purchased the land, and the latest plan — to add a 60,000-square-foot building on the site — is under construction and slated for completion next year. II-VI management wasn’t wholly convinced that the purchase of the property from Carnegie Mellon University was a sound investment at the time, but the board thought otherwise.
Says Johnson: “We had no business buying a 45,000-square-foot building and 62 acres of land in Saxonburg, Pa., in 1976, but our board gave us the courage to go do it.”
