boards

A better boardroom can reverse Uber’s cultural woes | TechCrunch

Posted on by ValueEdge blog staff

Board veteran Betsy Atkins has some excellent advice for Uber. The third edition of her book Behind Boardroom Doors was published this month.

Build internal career networks.  At Volvo Car AB, where I serve on the board, we’ve launched a regular program where I have the opportunity to meet with senior and mid-level women executives on personal career development.  We work with these execs to build on their strengths, clarify their career aspirations, and offer advice on advancement.  This is a new program, but it is already proving a success in energizing and motivating the paths of these current and future female leaders.

Make mentoring personal.  On the board of Schneider Electric, I make it a point to directly mentor a number of women on the company’s senior executive team.  Women in management find it tremendously helpful to have someone in the boardroom take a personal interest in their career strategy and development.  At Uber, new board member Ariana Huffington will be in an ideal position to put her mentoring and career savvy to work in helping rising women execs rebuild the company. The key is a regular ongoing program of mentoring and support.

Go beyond mentoring.  The tech industry, in particular has too few role models for rising female talents.  The mentoring aid above is helpful… but why not go one better?  Companies can ask their Male and Female Execs (and Board Members) to either mentor or sponsor their Female Execs. There is a big difference between mentoring which is periodic advising and coaching and sponsoring where you take ownership for introducing and more actively helping sponsor an individual for their next step up in their career. Women who are already senior managers or board members can kick mentoring up a notch by “sponsoring” women hi-pots.  Take personal ownership of career coaching for your top talents.  Give them advice, introduce them to the people they need to sharpen their skills, and introduce their names at strategic moments.Recognize the women making a difference. 

When I served as chair of the board’s compensation committee at tech firm Polycom, we were active in the annual recognition event for sales staff.  I noted that women were leaders in sales, making up less than 10 percent of the sales force, but were 34 percent of our “President’s Circle” top sales performers.  Making an added effort to celebrate (and promote) this talent is crucial in sending the message that sales is not just a “guy thing” in the company.

While Uber’s woes make the news, they can also serve as a spark for making the support and advancement of women in your company a boardroom mission.

Source: A better boardroom can reverse Uber’s cultural woes | TechCrunch

How Wells Fargo’s Cutthroat Corporate Culture Allegedly Drove Bankers to Fraud| Vanity Fair

Posted on by ValueEdge blog staff

An important analysis of the corrupt corporate culture that led to widespread fraud.

Hambek began to see things that shouldn’t have been happening: bankers persuading customers to take out large loans and then immediately repay part of them so that the banker could get credit for the bigger loan, for instance.

Source: How Wells Fargo’s Cutthroat Corporate Culture Allegedly Drove Bankers | Vanity Fair

Pension Funds Vote “No” on Mylan Directors

Posted on by ValueEdge blog staff

Frank Glassner’s Compensation in Context newsletter reports:

Four large pension funds have asked shareholders of the drug company Mylan NV to vote against six directors, including the company’s chairman, who have been nominated for re-election at the company’s annual meeting June 22.
“We believe the time has come to hold Mylan’s board accountable for its costly record of compensation, risk and compliance failures,” said the letter to shareholders, a copy of which was filed recently with the Securities and Exchange Commission.


The letter was signed by Scott Stringer, the New York City comptroller, on behalf of the $170.6 billion New York City Retirement Systems for which he is fiduciary to the five funds within the system; Thomas DiNapoli, the New York state comptroller and sole trustee of the $192 billion New York State Common Retirement Fund, Albany; Anne Sheehan, director of corporate governance for the $206.5 billion California State Teachers’ Retirement System, West Sacramento; and Margriet Stavast-Groothuis, adviser, responsible investment, for the €205.8 billion ($230 billion) Dutch pension provider PGGM, which manages the assets of the €185 billion Pensioenfonds Zorg en Welzijn, Zeist, Netherlands.


Collectively, the pension funds own approximately 4.3 million shares of Mylan stock, worth about $170 million, said the letter to shareholders.

PwC’s Strategy&: CEOs Increasingly Fired for Ethical Violations

Posted on by ValueEdge blog staff

VEA Vice Chair Nell Minow writes in Huffington Post:

PwC’s Strategy& released its annual CEO Success Study on Sunday, May 14, 2017. This year’s study explores the rise in the number of CEOs at the world’s 2,500 largest companies who were dismissed from their posts due to ethical lapses.

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As companies like FOX, United, Wells Fargo, Yahoo and VW are scrutinized for corporate wrongdoing, the study found that the share of CEOs forced out of their jobs due to a scandal increased globally– with a notably dramatic increase at companies in the U.S. and Canada. Specifically, the report found:

  • Forced turnovers due to ethical lapses rose from 3.9 percent of all successions in 2007–11 to 5.3 percent in 2012–16 — a 36 percent increase. On a regional basis, the share of all successions attributable to ethical lapses rose sharply in the U.S. and Canada (from 1.6 percent of all successions in 2007–11 to 3.3 percent in 2012–16), in Western Europe (from 4.2 percent to 5.9 percent), and in the BRIC countries (from 3.6 percent to 8.8 percent).
  • In the U.S. and Canada, forced turnovers for ethical lapses at these companies increased from 1.6 percent of all successions in 2007–11 to 3.3 percent in 2012–16 — a 102 percent increase
  • The share of incoming women CEOs increased globally to 3.6 percent, rebounding from the previous year’s low point of 2.8 percent

Per-Ola Karlsson, DeAnne Aguirre, Kristin Rivera, and Gary L. Neilson, who prepared the report, identified increased public scrutiny and pressure, the rapidity and influence of digital-era feedback, and post-financial crisis regulatory requirements as primary factors in the increase of CEO departures for ethical concerns. The report does not examine the impact of an ethics-based departure on compensation or the correlation between board or shareholder composition and likelihood of such a termination.

In an interview, the authors explained their definition of “ethical lapse” and discussed the impact of social media and the difference between US/Canada CEOs and those in other countries.

What constitutes an ethical lapse for purposes of this study?

An ethical lapse might include fraud, bribery, insider trading, environmental disasters, inflated resumes, and sexual indiscretions. In the context of dismissals, we define an ethical lapse as a scandal or improper conduct by the CEO or other employees that results in the removal of the CEO.

It should be noted that in many cases, even though the CEO was ultimately held responsible, it was other employees who committed ethical lapses.

Are CEOs replaced for ethical lapses most likely to be insiders or those brought in from outside?

We found that there was no statistical difference in the dismissal rate for ethical lapses between insiders and outsiders. We did find that CEOs forced out of office for ethical lapses had longer median tenures than CEOs forced out for other reasons (6.5 years compared to 4.8). One possible explanation is that companies with long-serving CEOs tend to be those that have been achieving above-average financial results, and thus may attract less shareholder and media scrutiny than companies that have been performing poorly. Another is that when an organization’s leadership is static, employees may begin to see ethical lapses as normal, and allegations of misconduct are less likely to be raised, investigated, or acted on.

How has social media put pressure on boards to replace CEOs?

Today, social media plays a large role in not only disseminating negative or embarrassing information about a company, but also allows customers and other parties to directly voice their displeasure to the company and its executives. Often times, the social media backlash becomes a story in itself beyond the negative or embarrassing information which puts extra pressure on boards who may feel they need to implement change in order to take the company out of the negative spotlight.

How does the US compare to other countries in the rates and reasons for CEO dismissal?

In 2016, The U.S./Canada has a CEO turnover rate of 14.2% compared to 15.3% in Western Europe, 15.5% in Japan, and 14.9% globally. Removing, M&A 29% of turnovers in the U.S./Canada were forced compared to 38% in Western Europe, 13% in Japan, and 29% globally. Historically the U.S./Canada has had a lower CEO turnover rate than other regions which is likely due to the fact that companies in the U.S./Canada have more developed governance and succession practices.

In addition, we note in the study this year that companies in the U.S./Canada have the lowest incidence of ethical lapses. Similar to the point about governance and succession practices, companies in the U.S./Canada tend to have more stringent regulation and internal controls than other regions.

What did your study show about women CEOs?

Globally, companies appointed 12 women CEOs in 2016—3.6 percent of the incoming class. This marks a return of the slow-moving trend towards greater diversity—and a recovery from 2015’s recent low point of 2.8 percent.

The share of incoming women CEOs was highest in the U.S. and Canada—rebounding to 5.7% after falling for the previous three years.

We stand by our belief that as much as a third of incoming CEOs around the world will be female. Some of the trends we cited in the 2014 study that supported this findings were: increasing amounts of women on boards, increasing women undergraduates and MBAs, and changing social norms.

What role does shareholder pressure play in replacement of CEOs?

Boards have become much more independent and very infrequently in a position of deferring to the imperial CEO of yesterday. They listen. They listen to shareholders, regulators, other managers. Shareholders don’t want distractions. Our analysis has shown forced CEO turnovers (for ethical lapses or other reasons) are hugely expensive. We found that, on average, forced turnovers cause a hit of $1.8 billion in shareholder value compared to planned transitions. So, by getting ahead of problems, even when they happen, Boards have the incentive to deal with…. ideally in a “planned” way, even if the change wasn’t part of the individual CEO’s plans!

Do Independent Directors Curb Financial Fraud? The Evidence and Proposals for Further Reform

Posted on by ValueEdge blog staff

Cindy A. Schipani, University of Michigan, writes on the Harvard Law School Forum on Corporate Governance and Financial Reform:

One would have hoped these SOX-created independent watchdogs [independent directors] would reduce the incidents of securities fraud and result in better governance. Yet, our analysis of the number of class action settlements for claims of financial fraud for settlements greater than $10 million shows no significant decrease since the adoption of SOX. We presume that settlements of over $10 million indicate serious concern of the board evidencing the viability of the suit. The dollar amount for analysis was chosen to reduce the incidence of strike suits in our data. Thus, the lack of a significant decrease in these claims seems to indicate that it may have been unreasonable to expect independent directors — who almost by definition are not privy to the day-to-day affairs of the firm—to have enough incentives or information to ferret out complex, and likely hidden, fraud.

Moreover, and perhaps even more troubling, our data also shows that independent directors themselves are not necessarily immune from the temptations of financial fraud, particularly with the gains to be had from backdating stock options. SOX’s reliance on them may simply have transferred oversight responsibilities from compromised executives to compromised and ill-informed board members.

An alternative approach to the SOX mandates would have been to empower the shareholders directly and enable them to exercise a greater degree of direct oversight over the managers.

This supports our view that no director can be truly “independent” unless elected through a robust nomination system that includes proxy access and a majority voting requirement — as well as a robust system for enforcing fiduciary obligation in voting institutional shares in the interest of beneficial holders.

Source: Do Independent Directors Curb Financial Fraud? The Evidence and Proposals for Further Reform

Listen to Experts on Governance and Diversity

Posted on by ValueEdge blog staff

Patricia Lenkov and Elizabeth Aris are creating a new digital program, Board-Talk: Diversity & Corporate Governance, created in partnership with the National Association of Corporate Directors (NACD),.

The program will be live streamed on digital platform MOSH., as well as recorded as a video, each week from April 19. The format will be a host (Patricia Lenkov, specialist board exec recruiter) in conversation with leading global Corporate Directors, Investors, Governance and Diversity experts, as below.

April 19 Brenda Gaines – Corporate Director – Tenet Healthcare, Southern Company Gas, Former Corporate Director CNA Financial, Fannie Mae, Office Depot, AGL Resources, Nicor, former CEO Diners Club NA

April 26 Rakhi Kumar – Managing Director, Head of Corporate Governance, State Street (TBC)

May 3 Holly Gregory – Partner & Co-Head Global Corporate Governance & Executive Compensation Group – Sidley Austin LLP

May 10 Michelle Edkins – Managing Director Blackrock Global Investment Stewardship Team

May 17 Tim Smith – SVP ESG Engagement, Walden Asset Management

May 24 Rochelle Campbell – NACD Board Recruitment Practice

May 31 Sol Trujillo – Corporate Director – WPP, Western Union, Former Corporate Director Target, PepsiCo, Bank of America, EDS, Orange, Telstra, Gannett, former CEO US West, Orange, Telstra

June 7 Cari Dominguez – Corporate Director Manpower Group Inc, Triple-S Management Corporation, Calvert Funds, Former Chair US Equal Employment Opportunity Commission

June 14 Virginia Gambale – Corporate Director JetBlue Airways, First Derivatives, Dundee Corporation

Wells Fargo Accounts Probe Lets Board Off Easily But Proxy Advisory Firms Disagree – TheStreet

Posted on by ValueEdge blog staff

Ron Orol writes in The Street:

A report on Wells Fargo’s (WFC) fake-accounts scandal commissioned by the bank’s independent directors is far less critical of the company’s board than two studies issued last week by influential shareholder advisory firms. Instead, the 113-page analysis released Monday of how employees working to meet the San Francisco-based bank’s ambitious sales targets created more than 2 million unauthorized credit card and savings accounts over a five-year period lays much of the blame with former CEO John Stumpf and former community banking chief Carrie Tolstedt.

According to the report board “members believe they were misinformed” (note use of the passive voice, a telling indicator of a failure to accept responsibility). ISS sees it differently:

A report days earlier from Institutional Shareholder Services, the most influential shareholder advisory firm in the U.S., was less forgiving of the board. The firm recommended that investors vote against 12 of Wells Fargo’s 15 directors, including the four members who oversaw the investigation.

Members of two board subcommittees “failed over a number of years” to provide sufficient risk oversight at the scandal-plagued lender, the ISS report said, and the board overall failed to implement an “effective risk management oversight process in a timely way” that could have spared the bank’s reputation.

In our view, the compensation plan alone, rewarding the number of transactions instead of the quality of transactions, is sufficient reason to replace the entire board.

Source: Wells Fargo Accounts Probe Lets Board Off Much Easier Than Proxy Firms – TheStreet

How Are Public Company Boards Transforming Themselves? : NACD Blog

Posted on by ValueEdge blog staff

NACD has an excellent summary of changes boards are making to respond to new challenges, including more focus on cybersecurity, more use of search firms to find new directors, and:

Information Rich, Insight Poor Boards receive much information from management but express concerns about the quality of that information. While directors noted an average increase of 12 hours for document review in preparation for meetings, roughly 50 percent of respondents noted a glaring need for improvement in the quality of information provided by management.

Increased Shareholder Engagement Boards are increasing their shareholder engagement, but their level of preparedness to address activist challenges is uneven. This year, 48 percent of respondents indicate that a representative of their board held a meeting with institutional investors over the past 12 months, compared to 41 percent in 2015. Only 25 percent of respondents have developed a written activist response plan, which may be a critical tool to effectively address a forceful challenge from an activist.

Source: How Are Public Company Boards Transforming Themselves? : NACD Blog

Conference Board: Proxy Advisory Service Firms on the Role of the Director

Posted on by ValueEdge blog staff

The Job of the Corporate Director – Perspectives of Proxy Advisory Firms

Wednesday, March 1, 2017

Mandarin Oriental, 1330 Maryland Avenue, SW Washington, DC 20024

Complimentary event, registration required.

Please join us for the first in a year-long series of roundtable discussions to examine what different stakeholder groups see as the “job description” for public company directors. In this first discussion, we will examine the role and expectations of directors from the perspectives of the leading proxy advisory firms.

The role of the corporate director has evolved over time, and the job has become more demanding in recent years. Structural changes in our capital markets have contributed to this. Major corporate crises and the reforms in their aftermath have also impacted what is expected of boards. The Governance Center is undertaking a year-long examination of the range of expectations of public company directors. Examining this from the perspectives of key stakeholders in the marketplace, we hope to develop a construct for how we think about the job of a director and analyze what that job entails in different situations. As with all Governance Center events, this is a special, invitation only meeting.

Scheduled List of Speakers:

  • Martha L. Carter, Ph.D., Senior Managing Director, Teneo Governance
  • Kevin E. McManus, Vice President and Director of Proxy Services, Egan-Jones Proxy Services
  • Maureen O’Brien, Director, Corporate Governance, The Marco Consulting Group
  • Katherine Rabin, Chief Executive Officer, Glass, Lewis & Co. (invited)
  • John Roe, Head of ISS Analytics, Institutional Shareholder Services (invited)
  • Howard Sherman, Executive Director and Head of Corporate Governance Business Development, MSCI ESG Research
  • Douglas Chia, Executive Director, Governance Center, The Conference Board

Register to attend.

CEO-Chairmen now in the Minority as Split Role Model Gains Ascendancy ChiefExecutive.net | Chief Executive magazine

Posted on by ValueEdge blog staff

Large companies that combine the CEO and chairman roles now count in the minority, marking a new milestone in American corporate governance history that’s been more than a decade in the making.The potential tipping point comes as companies face increasing investor scrutiny about the independence of boards and executives, possibly fanned by the recent bogus-accounts scandal at Wells Fargo that led to the departure of previous CEO and Chairman John Stumpf.

”Of all Fortune 500 companies, 52% now separate the positions, according to a new analysis released this week by Willis Towers Watson. That’s up from 32% a decade ago.

Source: CEO-Chairmen now in the Minority as Split Role Model Gains Ascendancy ChiefExecutive.net | Chief Executive magazine