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Anne Mulcahy on building the perfect board

October 5, 2011, 1:15 AM UTC

By Colleen Leahey, reporter

FORTUNE — Female executives packed the room as former Xerox CEO and Chairman Anne Mulcahy took the stage at Fortune’s Most Powerful Women Summit to share her best and worst practices on building boards. Throughout her career, Mulcahy has sat on boards of six public companies, three non-profits, and one privately held international company. “Sometimes, I did not choose wisely,” she recalled. “There were some tough mistakes to rectify.”

Though she hasn’t been on half as many boards as, say, Frontier Communications (FTR) CEO Maggie Wilderotter, Mulcahy claimed the diversity she’s experienced on boards – the good, the bad, and the ugly – is what makes her a good source on the topic.

“Do your homework,” Mulcahy began – and she doesn’t mean studying companies’ 10Ks. “Understand the caliber of the CEO and the management team [of the company]. Do your homework on your fellow directors…[Ask yourself] is it a club I want to be a part of?”

Mulcahy also warned against joining boards that are looking for women. “It’s a bad sign. Boards without women – blacklist those suckers. It’s 2011. They’ve had the time – it’s significant that they don’t have women.”

Her final advice? Work hard. “I have zero tolerance for people who don’t come completely prepared. I expect contribution, I expect attendance, and I expect directors to take trips and visit the company’s programs.” And stay away from directors that are on boards “just to show how smart they are.” You know, those who speak just to be heard. They tend to create more work than value, according to Mulcahy.

Though some boards and CEOs get a bad rep for being too buddy-buddy, boards are more successful when they have good relationships with their companies’ leadership teams, Mulcahy said.

Boards also tend to get criticism during crises. Xerox was slapped with a damaging SEC investigation while Mulcahy was there. “Within my first six months [as CEO], three board members resigned.” Though these directors abandoned ship without trying to patch the leak, Mulcahy said former Johnson and Johnson (JNJ) CEO Ralph Larson and Walt Disney (DIS) Chairman John Pepper didn’t run. Instead, they worked to turn the company around. Pepper, who Mulcahy claimed was risking his pristine reputation by remaining loyal to Xerox (XRX), went so far as traveling with Mulcahy to the SEC – the criminal enforcement division – to settle the suit.

That type of courage is what makes a good board member, she said. “[During a crisis], board members get tested. This is the time when they need to roll up their sleeves and get the damn company out of trouble.”

Mulcahy used Target’s (TGT) board, which she sits on, as an example of success. When searching for directors, Target “never used a search firm. They did their homework and found directors on their own. They found diversity with content.” She was recruited before she was Xerox’s CEO. “It’s one of the most productive and engaging boards I’ve been on… They take responses to their consumers seriously,” she said. She also credits the company’s succession planning; Mulcahy lived through the departure of 10-year CEO Bob Ulrich. She said his replacement, Gregg Steinhafal, was well-prepped, allowing for a smooth transition. “You know a good board when you see one.”

Mulcahy, who is now Save the Children’s Chairman of the Board of Trustees, believes that a non-profit board’s makeup should not be that different from that of a for-profit’s – though it is a different job. “The reputational risk is extraordinary. You have to live the mission… love what you do.” And obviously, a robust skill set is an essential component on such a board, she emphasized.

To wrap up the session, Mulcahy shared her advice on getting more women on boards. “Women [on boards] have accountability,” she quipped, though she wishes it weren’t so. “We need to be more ambitious about ensuring we’re putting women candidates on the table.” And, with that, she held up the Fortune Most Powerful Women Summit program book, which features the bios of all participants. Looks like Mulcahy found a good place to start her search.