The Journey from CECO to Independent Director

An interview with Tony Heredia, SVP and Chief Ethics and Compliance Officer, Target and Independent Director, Bremer Bank

_{FALL 2024 |}_{IN DEPTH}

^{The Journey from CECO to Independent Director}

As SVP and Chief Ethics and Compliance Officer of Target, Tony Heredia has developed enterprise-wide experience into a business-first perspective that enables him to thrive as an independent director, as well as an ethics chief. Interview by Bill Coffin

Taking the next step from CECO to Independent Director takes time, perspective, and most of all, adapting a business-leader mindset.

Can you describe your professional journey so far, and how your experience with Target prepared you for taking on a role as Independent Director at Bremer Bank?

I have been at Target for a little over 19 years. In that time, all of my roles have had something to do with risk, compliance, or corporate responsibility. That has included things like sustainability, strategy, and operations. That put me at the intersection of everything going on across the company, and it allowed me to understand all of our corporate functions, operations, and strategy.

In my most recent role, which I’ve had since 2020, I’ve also staffed the Audit and Risk Committee of the Target Board of Directors. All of that combined really let me see the true detail of the business across the globe in a major retailer as it's evolved over the better part of 20 years.

At the same time, I was on my own board journey in parallel, where I've been on four different nonprofit boards over an 18 year span, which also gave me exposure to what it's like to be in a governance seat versus a management seat.

I was on the Hispanic Scholarship Fund Board for about four years, including their Audit Committee, and led a strategic planning committee that essentially resulted in deciding we should move the headquarters of that location from San Francisco to Los Angeles, which was just a tremendous experience.

Tony Heredia

I was on the board of a Minnesota local nonprofit called Meda, which invests in entrepreneurs of color. I was on that board for 10 years, including Chair of the Board for two years.

My most recent board was the Bush Foundation, based in Saint Paul, Minnesota, which is a private non-profit foundation that that does a large amount of giving in the three-state region of Minnesota, North Dakota, and South Dakota. I was Chair of the Audit Committee on that board for 5 years, and also Chair of the Board for 6 years.

Added up, those things really gave me a good feel for what I liked about being on a board, why it gave me energy, and how I could play a role outside of my professional one to make a difference. I realized that getting a board role at a for-profit company could let me apply everything I've learned from a business perspective in a different industry, on behalf of a different company, for the benefit of their shareholders, their employees, and their customers without necessarily having to leave my current employer and job, which I love. All of those things culminated in this opportunity to be on the board at Bremer Bank.

What challenge or opportunity have you have faced in your role at Target that has helped your professional journey to becoming an independent director?

We had a public proxy contest in 2009 by an activist shareholder. In my role, I had the opportunity to essentially build and run the internal war room around that proxy contest. I got a front-row seat to what it's like to deal with an activist investor and how a proxy contest plays out. Of course, proxy contests are different in 2024 than they were in 2009, but it was good experience, nonetheless.

I was able to build several risk or compliance functions from scratch at Target, including our enterprise risk management program and our corporate compliance program. I've had a lot of international exposure. I've had the opportunity to build our sustainability and corporate responsibility strategies, and I made sure that we were very tightly aligned with what our business priorities were, and what our consumer segments were.

I made sure that we were very tightly aligned with what our business priorities were, and what our consumer segments were.

These things go beyond a traditional risk or compliance role, and I think they helped me gain insight into what it's like to be a business leader across all the different areas of a large company. So, when it came to thinking about board service, I could think about it as a business leader first, who happens to have a risk and compliance background. That really made the difference in the way that I developed my value proposition. Bremer Bank wanted me on their board because I am a consumer brand business leader, more than an ethics and compliance leader. I just happen to come with an ethics and compliance background, which in the highly regulated banking industry, is a great thing to have.

What are your thoughts on satisfying your mandate to create a serious line of communication with the Board?

Board members will always listen to you out of their governance and fiduciary responsibilities. But how you make those communications meaningful is the secret sauce. The signal has to be sent and received in the way that it was intended to for it to be effective communication.

I found in the boardroom, that exchange really comes from building trust, credibility, and true relationships, which only come over time. And it's not necessarily from getting them to listen to everything you want to talk about. It comes from being able to put yourself in their shoes, to determine what they need to know, to effectively execute their responsibilities as a fiduciary and a governing member of the board. Ask yourself, what are the trade-offs they are making to hearing you speak? Every time they decide to discuss one thing, they're not discussing another. Board members’ time is always finite, so it pays to develop and demonstrate an understanding of that, which leads to effective Boardroom communication over time.

For the last four years at Target, I have been able to sit in the boardroom with the Audit Risk Committee at every single committee meeting they have. That is a benefit not every leader gets.

The more you are able to use that insight to pick and choose when and how you are going to convey information, the more you can find the right opportunity to educate people and make them more effective board members.

Now, let's imagine an E&C leader is thrust into their position early in their relationship with their board. When there is a crisis, and you don't have time to build relationships or feel out the room, people will view you according to how well you coordinate with your peer group across the organization. Their job is to trust management with responsibilities and then oversee the execution of those responsibilities. As a member of management, you are being viewed in the context of the broad management team running the entire company, and how well you have integrated the messages they are hearing from other members of management. Those things are critical to the board, especially during times when you haven’t had the chance to do that previously.

Over time, you get a sense for the personalities in the room—especially how they tend to receive and process information.

How has understanding the business at a business level helped prepare you for Board-level leadership?

If you deeply understand the company’s business model, markets, customers, employees, and teams, then you can translate what needs to be prioritized across the ethics and compliance space.

Understanding the trade-offs and prioritization that business leaders are going through and where the company is headed don’t just make you more effective at your job—they make you far more credible with the business leaders across the enterprise that you need to support all of your initiatives.

As an E&C leader, you have a view of the entire company, and it's up to you to take advantage of that. Not all leaders have direct responsibility for every area of compliance in their company. Sometimes those things are decentralized or sit in business units. But the E&C leader in a company still has governance and oversight responsibilities for that compliance function. That's very much like a Board of Directors because the difference between what management has responsibility to do and what they do as governance board and overseers is substantial. E&C leaders who don’t have direct responsibility for all of those things tend to understand that.

As an E&C leader, you know what it's like to want to do everything and know that you can’t. You appreciate all of the trade-offs inherent in prioritizing things, especially when everything is considered a risk. Boards do that all the time. They are constantly making trade-offs with the management team about what we will pursue, what we won't pursue, what the opportunity costs are, what the risks are. That is something that E&C leaders inherently understand.

What advice do you have for E&C leaders who would like to become a director themselves?

Pace yourself. These things tend to take long periods of time to develop. My own board journey has been 20 years in the making. Understand why it is important to you that you do this.

Also, understand what your value proposition is to the organization that might think about putting you on the board. I had to learn that what I thought was my value proposition was not really my value proposition. I probably started where most compliance professionals are. I read a lot of articles and attended industry group meetings that talk about how boards need more compliance leaders, which will lead to better compliance. On the surface, I think that's true. But when you realize how the boardroom really works, you realize how board roles are actually filled. It’s through networks, referrals, existing trust and credibility, and relationships. And pretty quickly, you realize that in the boardroom, you are going to be a business-minded leader 99% of the time and a compliance person 1% of the time. You have to embrace that.

When I joined the Latino Corporate Directors Association, they put you through a two-day board readiness course, and part of that is getting real about what your value proposition is in comparison to what boards actually want. That was a year-long journey for me of iterations and feedback as I found a way to distill my value proposition into reality without shattering people’s dreams or making them believe that when you go to a board, you don't care about compliance. I very much care about compliance. But I also know that the way you get there is by speaking the language of everybody else. And that means sprinkling the compliance in along the way, and not hitting them over the head with it all the time.

The other thing I would advise is to approach this in the spirit of it being a journey. Explore and learn about board roles in general. There are a lot of great education opportunities out there—the National Association of Corporate Directors, as an example, is a really well known nationwide one that I'm sure most people reading this will be familiar with. I also joined the Latino Corporate Directors Association, because they're trying to improve representation of Latinos on corporate boards across the globe.

There are board prep opportunities out there that you can take on when you're ready. The one I participated in was the NextGen Directors Program at UC Berkeley. But as you dig into these, you’ll find that when you’re ready, you can go get advice from people. I probably talked to 30 or 40 different people who currently sit on boards at for-profit organizations who know me well and could tell me if they thought I was ready or not. By the way, building your board network is radically different from building your professional network. That takes time, as well. ■

Tony Heredia is Senior Vice President and Chief Ethics and Compliance Officer of Target and an Independent Director of Bremer Bank. Previously, he had held Board positions at the Hispanic Scholarship Fund Board, Meda, and the Bush Foundation.