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Directors & Boards
Robert H. Rock
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James Kristie
Editor
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Cody
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David Shaw
Publishing Director
Scott Chase
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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
The Byrom-esque Boardroom
Are you ready to be a 5-foot-10
nonswimmer in 6 feet of water?
What’s the road ahead to be for boards in 2009? In one word:
“Byrom-esque.”
Let me explain. As I was just getting into the business world in the
1970s, one of the top corporate leaders of the day was a fellow named
Fletcher Byrom.
He was emblematic of the grand business statesmen of that period in
American capitalism — one who led a major industrial corporation,
served as a powerful presence on the boards of Fortune 500 companies,
moved comfortably between the business world and service to government,
science, academia, and philanthropy, and operated as an all-around
strategic adviser on the world stage. He retired in 1982 as chairman of
Koppers Co. after two decades of leadership of the Pittsburgh
engineering and construction conglomerate.
More than a decade into his retirement to Carefree, Arizona, Byrom was
still keeping his hand in as an adviser and board member, even lending
his wisdom to several start-up situations. I had the pleasure of
catching up to him in 1999, when he was 80 years old, to publish a
remarkable set of his reflections on leadership, which we titled, “A
Message to My Successor.”
Here was one of Byrom’s classic theories of management: “The
best-motivated person is a 5-foot 10-inch nonswimmer in 6 feet of
water.”
Thus, my opening observation. The crisis of credit, markets,
leadership, and confidence that we’re working our way through right now
suggests an immediate future for many directors that will be
exceedingly Byrom-esque: They are likely to feel like 5-foot-10
nonswimmers in a 6-feet-of-water boardroom.
Maybe that’s not such a bad thing. As Byrom himself added to his
swimming (or is it drowning!) analogy: “If you’re doing as well as you
should, everyone’s head ought to be a little bit under water all the
time. People perform best under conditions of moderate tension.”
The tension will be more than moderate in the year ahead, but the point
is no less valid. At the beginning of 2009, I’ll take this occasion to
modestly remind you that Directors
& Boards has a long and distinctive history of buoying our
readers’ competencies. With a portfolio that includes the quarterly
journal, the Boardroom Briefing
series of single-topic reports, the e-Briefings, and our roundtables
and other online and in-person programming, we will help you swim with
confidence.
I welcome your comments at jkristie@directorsandboards.com.
And let me know if you’d like a copy of Fletcher Byrom’s “A Message to
My Successor.” I'll be glad to email it to you.
Jim
Kristie is the editor and
associate publisher of Directors
& Boards.
7 Compliance Metrics for 2009No single approach provides a complete picture of a company’s compliance management situation, but this lineup of metrics will arm you well for the year ahead.
By Richard J. Cellini
Few topics attract more interest these days than “compliance metrics.”
Compliance professionals are under increasing pressure to produce and share business analytics that provide nuanced views into complex compliance problems, management responses, and real-world outcomes. The demand for metrics comes from many different quarters, including boards of directors, audit committees, chief executive officers, chief financial officers, general counsels, chief compliance officers, and global supply chain management departments.
Unfortunately, very few people are very clear about what exactly they mean by “compliance metrics.” To read more, click the link below.
[Click
Here to Read
the Entire Article]
Learning from the Obama Brand
Winning lessons business leaders should borrow from the historical Obama victory and its redefinition of marketing and communications.
By David E. Morey
Show me an American CEO with the fortitude to pick an issue, a theme, a brand, a strategy, a mission that is truly authentic and touches the hearts and minds of their consumer, and then devotes their unwavering commitment, support and resources to that focus for nearly two years, and I’ll show you a CEO that is winning their campaign for consumer allegiance.
Regardless of one’s voter preference, there are significant strategic lessons to be learned from the historic victory of Senator Barack Obama.
After all, this election witnessed the most engaged electorate in the history of this great nation—culminating in the largest voting population ever. And what is a vote but perhaps the most meaningful reflection of consumer engagement and behavior.
This was no accident. It was an awe-inspiring branding campaign that should be studied by enlightened CEOs around the globe.
The Obama campaign was game changing. And the CEO who isn’t paying attention … well, isn’t paying attention. To read more, click the link below.
[Click Here to Read the Entire Article]
Associate Director, Corporate Governance
The Conference Board
Editor's note: Each month, we ask a
Directors & Boards reader to comment on critical issues facing
directors today. If you'd like to participate in this section in
the future, please email Scott
Chase.
How has the protection of corporate reputation evolved into a board-level concern?
Public perception of a business positively affects profitability and stock performance as well as the firm’s ability to efficiently raise new capital. There is plenty of research supporting this correlation. Likewise, reputable firms are more successful in the mergers and acquisitions market (not only for their bargaining power as bidders but also for the higher price premium they are likely to obtain when they are being purchased) and in the pursuit of growth and internationalization strategies.
For these reasons, reputation risk is today a significant threat posed to a company’s business operations. In fact, it may be harder for a firm to recover from a reputation failure than to build and maintain reputation in the first place.
What is the role of the board of directors in enhancing and protecting this pivotal corporate asset?
To answer this question, The Conference Board held a Corporate/Investor Summit in Washington, D.C., in conjunction with the Council of Institutional Investors. Delegates to the Summit were representatives from major corporations and investors as well as academics and other experts in the field. The group called attention to the need to embed considerations of corporate reputation into a comprehensive enterprise risk management (ERM) program, arguing in particular that treating reputation risk separately would fundamentally damage those risk management integration initiatives on which many companies have embarked in recent years. To read more, click the link below.
[Click Here to Read the Entire Article]
Survey indicates nearly one third of companies still expect to make significant acquisitions over the next 12 months
The financial and economic crisis may spur large and potentially transformational acquisitions that could radically alter the corporate landscape, according to a survey of more than 160 CEOs and senior managers of publicly listed companies in Europe--believed to be the first study of its kind.
Conducted by UBS Investment Bank and The Boston Consulting Group (BCG) during one of the most challenging financial periods in living memory--within six weeks of the collapse of Lehman Brothers--the UBS-BCG CEO/Senior Management M&A Survey reveals a remarkably resilient attitude to mergers and acquisitions given the current capital market constraints and economic outlook.
Nevertheless, it won’t be easy for companies to realize the undoubted opportunities that the current crisis presents. More than half of the firms surveyed face internal and external obstacles to executing a larger deal, including the need to focus on profitability, rather than growth, as well as funding limitations.
Key findings from the survey include:
- Nearly one third of firms (29 percent) expect to make a sizable acquisition over the next year and 21 percent of companies intend to make a large transaction.
- More significantly, 43 percent of companies believe there will be deals that will transform the shape of their respective industries, echoing the experiences of previous crises such as the 1930s and 1970s.
- In addition, 58 percent of firms expect the number of restructuring transactions to increase, potentially leading to a substantial rise in the number of divestitures and closures of business units.
- 73 percent of companies have either stuck to their M&A plans (51 percent) or increased their level of planned deal activity (22 percent) over the last 12 months.
- Only 15 percent of firms believe it is too risky to do an M&A at the moment.
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February
25-27, 2009 March
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Compensation of U.S. corporate directors rose in most industries in 2008, although pay increases slowed compared to last year. Boards are increasingly becoming declassified, appointing lead independent directors, and delegating board duties – including oversight of finance, succession planning, and corporate responsibility – to dedicated board committees. These are the major findings discussed in the annual study of directors’ compensation and board practices released last month by the Conference Board, the global business research and membership organization.
Median total compensation varies from a low of $37,239 in the commercial banking industry to a high of $151,550 in the food and tobacco industry. Board members in the energy industry receive the highest compensation ($383,907 at the 90th percentile).
Total compensation rose in 2008 in 15 of the 22 industries surveyed. “Directors keep making more money, but the growth trend we have documented in the last few years seems to be slowing down in 2008,” reported Matteo Tonello, associate director of the Corporate Governance Center at the Conference Board, and one of the authors of the report. For more information on the report, email courter@conference-board.org.
Director Resources
Board Composition: Women’s advancement in corporate leadership continues to stagnate, with virtually no growth seen in women’s share of top positions, according to the 2008 Catalyst Census of Women Board Directors of the Fortune 500 and the 2008 Catalyst Census of Corporate Officers and Top Earners of the Fortune 500.
Corporate Fraud: According to a new study published by the Deloitte Forensic Center, “Ten Things About Bankruptcy and Fraud,” companies filing for bankruptcy protection are three times more likely than non-bankrupt companies to face enforcement action by the Securities and Exchange Commission relating to alleged financial statement fraud. The study analyzed SEC accounting and auditing enforcement releases and bankruptcy filings. Click here to download the full report.
Corporate Fraud II: A new study by the audit, tax and advisory firm KPMG LLP says pressure to do “whatever it takes” to achieve business goals continues as the primary driver behind corporate fraud and misconduct. “A downward market can magnify conditions that give rise to fraud risks, and the KPMG data suggest that managers and employees facing heightened pressure to meet revenue and cost targets may resort to improper means of doing so, especially if they think their jobs are in jeopardy if they miss those goals,” said Richard H. Girgenti, national leader for KPMG’s Forensic practice. The Integrity Survey is available on the KPMG website.
Succession Planning: A new white paper, Overcoming the Obstacles to CEO Succession Planning, has been released by Oliver Wyman - Delta Organization & Leadership. The authors are Mark Nadler, Steve Krupp and Richard Hossack, partners at the firm. Click here for a copy of the paper.
Executive Pay: Compensation committees at U.S. companies had been making significant adjustments to how they compensate their chief executives even prior to the recent financial crisis, according to an annual study by the consulting firm Watson Wyatt. “The legislative bailout package and the ongoing financial crisis, coupled with continued pressure from shareholders, the media and executive pay critics, are leading compensation committees to make their executive pay programs more shareholder-friendly,” said Ira Kay, global director of executive compensation consulting at Watson Wyatt. The firm’s 2008/2009 Report on Executive Pay, “Executive Compensation in Uncertain Economic Times,” is based on public data from 1,058 companies in the S&P Super 1500 that filed proxies prior to July 2008.
Executive Pay II: Compensation packages given to CEOs of the 30 DJIA companies have no relationship to the size, profits, or growth rate of the companies, according to a new study by WhatAreTheyPaid.com. “CEO compensation appears to depend more on their ability to negotiate an attractive package with the board, than on the magnitude of their duties,” says Tim Haidinger, founder of WhatAreTheyPaid.com and co-author of the study. These findings “came as a bit of a shock” to the authors of the study, which was intended to produce a model corporate boards could use to help set appropriate levels of compensation. “Instead of a model,” said Chris Bengs, co-author of the study, “we found a randomness that supports much of the public uneasiness over high levels of CEO compensation.” The study, entitled “CEO Compensation: Does It Make Sense?” is available at: http://www.whataretheypaid.com/research.html.
Fiduciary Responsibility: While a majority of board of directors or board-level committees retain responsibility for appointing fiduciaries for qualified plans, an increasing number are choosing to delegate that responsibility to company executives and internal plan committees amid rising liability concerns, according to a survey conducted by global professional services firm Towers Perrin. As indicated in Towers Perrin’s 2008 Survey on Qualified Retirement Plan Governance, 54% of respondents from U.S. companies said selecting a fiduciary is the responsibility of a board member. Click here for more information on the survey’s findings.
Author Notes
Directors Data Inc. has been selected for the 2008 Best of Sarasota Award in the Computer Software Developers category by the U.S. Local Business Association. The USLBA "Best of Local Business" Award Program recognizes outstanding local businesses throughout the country. Each year, the USLBA identifies companies that have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and community. Leslie Levy, a past Directors & Boards columnist, is president of Directors Data Inc.
Christie Hefner, chairman and chief executive of Playboy Enterprises Inc, announced in December that she will be resigning from the company. Hefner was the subject of a three-page profile in the Summer 2001 issue of Directors & Boards upon her election to the board of then-public Marketwatch.com. She began her governance career in 1979 when she joined the board of Playboy.
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2009, MLR Holdings LLC.