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May 1, 2013

A Political Veteran in the Boardroom

Former Interior Secretary and Idaho Gov. Dirk Kempthorne on public service and corporate governance

Secretary of the Interior, governor, U.S. senator and mayor; now, president and CEO of American Council of Life Insurers (ACLI) and board member at Olympic Steel N.A. Dirk Kempthorne, 61, has had a high-impact career, with more certainly to come. He has created a reputation in Washington, D.C., as someone who can build consensus, work with opposing parties—both political and philosophical—to bring people together. That’s a lost art, at least in modern politics.

He was on the long list of potential Republican presidential candidates before the last campaign. At the moment, he is running one of the country’s more influential trade associations: The life insurance industry allocates about $1.6 billion every day. 

At age 33, Kempthorne left his post as state public affairs manager at FMC Corporation, a chemical manufacturing company, when he was elected mayor of Boise, Idaho, a job he kept for seven years. He served in the U.S. Senate from 1993 to 1999, when he was elected governor of his home state. He remained in that position until President George W. Bush convinced him to become Secretary of the Interior in 2006. In 2010, he took over as president and CEO of ACLI. 

Forward talked with Kempthorne after a board meeting at Olympic Steel’s Cleveland, Ohio, headquarters. 

Do you remember the moment when you decided to run for office?

Yes, in 1985 I went to my bosses at FMC Corporation and said since they had always encouraged employees to get involved in their communities, I wanted to run for mayor. They said, “Well, you’re really stretching it,” but ultimately gave me their blessing. I also consulted with the chiefs of staff of U.S. senators in Idaho. Their reaction? Well, they thought it was the dumbest idea they had ever heard. 

But, I knew I could be a catalyst toward positive development in a city where my children were born, and that’s all the reward I would need. Boise ultimately became an award-winning city, garnering national honors for its business climate and quality of life.

What do you consider your greatest accomplishment as mayor?

My greatest accomplishment was to build cooperation, which led to a multitude of construction, starting with a symbolic structure we built in desolate downtown Boise. I had a backhoe and we dug a hole during a press conference, announcing that would be the center of downtown. We put in a magnificent fountain that was donated by Lyonnaise des Eaux, a French water treatment and waste management company. And that is the center of the city today. Watching my little grandkids play in that fountain is a real reward.

Was it a difficult decision to leave your post in Boise to run for the U.S. Senate?

No, I felt the timing was right. I had been re-elected mayor, which is the people’s affirmation of whether you’re doing what you said you’d do. I wanted that under my belt. We were also on a positive trajectory and had built a beautiful city with a 1-million-square-foot regional mall right outside downtown. I was ready to move on to a new challenge.

What attracted you to the position of Secretary of the Interior?

Well, you get the call one day, that’s how. You don’t apply. 

I’m from the West, where public lands are a key issue. I had a record, I was not an unknown quantity and [the Bush administration] evaluated me on that basis.

Obviously, you have a devotion to conservation as a former Secretary of the Interior.  How do you think the government can prevent overregulation while maintaining a commitment to the environment?

Through due diligence and as many facts as possible. I inherited the issue of the polar bear—whether it should be declared an endangered species or not—and nobody wanted to deal with that. You had one group that wanted to do nothing about it, and you had another that wanted to list them as endangered. If we listed them as endangered, it sets in place a whole series of consequences and efforts. I asked the U.S. Geological Survey to do a thorough study. They came back with numerous studies and I read every one of them. I was supposed to do the best biological science, not political science.  

In the end, we listed the polar bear as threatened, but not endangered. The Wall Street Journal and The New York Times followed up immediately with editorials saying our decision was correct. A lawsuit was later filed against us, and on every one of my elements of the decision, the courts ruled that we were correct. I think we threaded the needle.

How has your political experience helped you as a board member at Olympic Steel?

While mayor of Boise, Idaho, Dirk Kempthorne installed this fountain to mark the
city’s downtown center. He considers revitalizing Boise one of his greatest political
accomplishments.

 

In the Senate, I had political cover. With 99 colleagues, there’s always going to be a group of you on one side of an issue. As a governor, you don’t have that. You’re alone. You either sign, or veto. Either way, you have to stand up and say what you did and why you did it. That’s how I feel I have to be on a board of directors.

I reached a level of confidence in public office where if I were presiding over a large hearing, whether as a U.S. senator, governor or cabinet secretary, I was confident enough to publicly say, “I don’t know,” and not bluff. On these boards, I also think it’s OK to say, “I don’t understand. Can you tell me more about this?” My role is to be part of a filter system. If something doesn’t feel and sound right, or if I don’t understand it, I will raise a question. I ask myself if there is some issue in the future that is really questioned, would I be able to explain why I felt the way I did and why I voted a particular way? That’s an enormous responsibility.

Why did you decide to join the board of Olympic Steel?

I think Olympic Steel is one of the great American business stories. And it’s not all about its past—it’s also about what it’s doing right now. Olympic Steel could be a tremendous case study for any business class because what this corporation has accomplished in a bad economy is inspiring. Over the past five years, Olympic Steel has made $125 million in capital expenditures and $150 million in acquisitions. It shows you what can be done.

Olympic Steel has made a conscious effort that it will not simply sit back and allow the economy to dictate its future. I have an opportunity to be at the board table of a great company with great officers and extremely talented directors, and hopefully make some contribution. 

 As former Secretary of the Interior, U.S. senator and mayor, 
Dirk Kempthorne has had a high-impact career. Today, he
sits on Olympic Steel N.A.'s board and serves as president
and CEO of the American Council of Life Insurers

 

To become a board member, you were nominated by a top official at the company. How do you assure your own autonomy and make sure the decisions you’re making are purely your own?

First, even though you are nominated, you have board members who interview you and determine whether there’s compatibility, whether you bring skills that could be of benefit. Ultimately, the board is going to make that determination. Everybody is bringing something unique to the equation. 

Also, it is made very clear to us that you are an independent director. At every meeting we disclose what other activities we are involved with outside of this board to determine if there are conflicts with other corporations. I think corporate governance has good transparency. Every successful board must be collaborative, respectful and synergistic. Ultimately, each one of the directors has to be able to articulate why they did what they did. If they can’t do that, there is a serious problem. 

What has been your biggest challenge as a board member?

Understanding the big picture—where are we going and why we are going there?  I need to know if something makes sense and if it is even doable. I don’t want these magnificent executives to have approval for something and then we, as a board, feel that it’s not going to happen. 

I experienced similar challenges as Secretary of the Interior. You can’t know all the issues. A senator at my confirmation hearing brought up an issue that I knew nothing about. It was in his state and he explained this particular issue had been going on for 20 years. He needed a solution and an answer. After I was confirmed, the governor from that state called me up and said, “Dirk, we need a solution on this issue.” Now a Republican and Democrat were asking me for the answer. I called together the appropriate staff and asked them to explain it to me. I was able to then sit down with both the Republican and Democrat and say, “Gentlemen, here’s my analysis and here’s my proposed solution. Can you both live with it?” And they said, “Hallelujah.”

Would you say it is more difficult for politicians to work together today than it was during your time in local and national government?

Yes, because the atmosphere has become highly charged. A lot of media outlets are also no longer simply reporting. They are encouraging and suggesting, rather than just reporting what elected leaders have done. They’re now saying what those elected leaders should have done. 

We also have people like former Sens. Olympia Snowe and Evan Bayh who’ve retired, saying politicians don’t treat each other well anymore. Instead of thinking, “Even though I don’t agree today, there may be an issue in six months that we’ll probably be teaming up on so I should treat everyone with respect,” they want to make sure that you are destroyed politically and not coming back after the next election.   

We presume boardroom debates are quite a bit different?

I thoroughly enjoy sitting at this board table working with a great group of directors. Right now, the directors will all have dinner or lunch together, and we are all focused on what is the best thing to do so that Olympic Steel is No. 1 in its category and No. 1 against any competition. When directors’ terms come up, as long as they are performing their responsibilities well, we want to see them continue. 

I’ve asked myself sometimes during board meetings, “What if there was a dividing line and half of the directors are on the red team and everybody else the blue team?” How long could a corporation succeed in that atmosphere? Not long at all. But this is how Congress is operating. Just like corporations, we have competition as a country, and there are those in the competition who do not want this country to be No. 1.

Do you see this atmosphere changing in the near future?

I hope so. The country is perhaps one budget deal away from once again being the pre-eminent leader in the world. But if we don’t get that, then what are we? Do we need yet another crisis to galvanize us? I would hope that we, once again, become the United States of America.