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Directors & Boards
Robert H. Rock
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James Kristie
Editor
Lisa
Cody
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David Shaw
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Scott Chase
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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
Press On
Silent Cal had it right for an approach to governance and to life that
will work in 2010.
I don’t try to predict the future — not even a few months out much less
a year out. What I am inclined to do at the start of a new year is to
predict the mindset that will be needed to survive and thrive in the
year ahead. Here is my prediction for 2010.
For inspiration, I turned to the 30th President of the United States.
Not many people would put Calvin Coolidge on a list of great
Presidential orators. Although historians note that he was an effective
public speaker, Coolidge was, after all, nicknamed "Silent Cal."
But he did put forward one of the most stirring principles of achieving
success — his call to "Press On." Here it is:
"Press on. Nothing in the world can take the place of persistence.
Talent will not; nothing is more common than unsuccessful men with
talent. Genius will not; unrewarded genius is almost a proverb.
Education will not; the world is full of educated derelicts.
Persistence and determination alone are omnipotent. The slogan Press
On! has solved and always will solve the problems of the human race." —
Calvin Coolidge
On this first workday of 2010, the view ahead looks both promising and
treacherous. There are still big legacy troubles at home and abroad
from the economic collapse and political unrest. The world is a
dangerous place (yes, that means you too, Washington and Wall Street).
It will take a special Coolidge application of persistence and
determination to fully emerge from the devastation of 2008-09 and have
your business and boardroom regain a confident stride.
I'd like to see Silent Cal's counsel imprinted on every board book that
goes out this year and at the top of the agenda handed out at every
board meeting. Let this be your mantra as you get your businesses back
on the upswing.
For a nicely
rendered presentation of Coolidge’s “Press On,” click here.
I hope you’ll determine to be a regular reader of the e-Briefings in
the year ahead. I always welcome your comments at jkristie@directorsandboards.com.
Jim
Kristie is the editor and
associate publisher of Directors
& Boards.
*****
Special Note: On January 20,
at 2pm EST, I will be moderating a special Directors & Boards Webinar on
the topic of "Enterprise Reinvention: How Directors Can
Elevate and Sustain Corporate Performance Through Enterprise Risk
Management." My speakers will be Jack Bergstrand, the
author of Reinvent Your Enterprise,
and the founder of Brand Velocity, Inc., and John A. Wheeler, the
managing principal of Weelhouse Advisors LLC, and the former senior
vice president and senior risk offier within the corporate risk
management division of SunTrust banks, Inc. This webinar
will provide an exploration—from an enterprise perspective—on how to
transcend outdated “siloed” management approaches and become more
systematic in the rapidly changing global environment. To
register for this free webinar, click here: http://www.visualwebcaster.com/event.asp?id=64478
Reining in the ‘Too Big To Fail’ Let’s see some action on new capital requirements, profit-based compensation, and board control over risk management and pay.
By Philip J. Purcell
Americans have grudgingly supported the use of tax dollars to save the financial system and the economy, recognizing the action as both right and necessary. Unfortunately, saving the financial system required rescuing many firms considered “too big to fail” that individually did not deserve to be saved. Taxpayers rightly resent their money being used to keep these firms out of bankruptcy and, in some instances, to protect the multimillion-dollar compensation packages of the people who caused the crisis.
In short, Americans understand the need to protect the financial system, but don’t want the events of the last 18 months—or anything close—ever to happen again.
So one would think that we would be putting in place changes to prevent future catastrophes or, at least, substantially reduce the cost to taxpayers. But to date, there have been only short-term, stopgap measures.
There are three areas that require attention and where action could be taken right now: new capital requirements, profit-based compensation, and greater board control over risk management and pay.. To read more, click the link below.
[Click
Here to Read
the Entire Article]
A D&O Liability Wish List for 2010
Whether troubled times continue or calmer seas lie ahead, here is how boards can best navigate the way.
By Evan Rosenberg
At the end of each year I take time to reflect on the previous year’s management liability market and how it will influence trends in the year ahead.
This past year, the tumultuous economic environment, the truly global and interconnected nature of business, the evolving regulatory landscape, and the sheer complexity of conducting business gave me more to think about than in previous years.
As I lapsed into a state of wishful thinking for the management liability industry and corporate governance, I thought to myself: If I could wish for anything this year that would truly help boards navigate in these turbulent times, what would it be?
Here is my “wish list” for the year ahead:
- I wish companies would comply with both the letter and the spirit of governance requirements and strive to work for the true owners of the corporation — the shareholders.
To read more, click the link below.
[Click Here to Read the Entire Article]
Stephen Wallenstein
Director, Directors' Institute
Robert H. Smith School of Business, University of Maryland
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 will the overall corporate governance environment change in the coming year for directors of publicly traded companies?
Directors are closely watching the SEC to see what it does. Any meaningful reform of proxy access would be the biggest single thing to occur, but it is not likely to happen until 2011. However, the SEC has recently adopted expanded governance and executive compensation disclosures that will apply to the 2010 proxy season that will greatly increase the disclosure levels of individual directors and director nominees, as well as the disclosure of consultant compensation. I am interested to see how the SEC continues to respond to the challenges of balancing executive compensation and risk in light of last year’s compensation scandals, as compensation committees may face more scrutiny.
Is it becoming more – or less – attractive to serve on a Fortune 1000 board?
It’s about the same - it would still be attractive to me. Fortune 1000 companies generally have good D&O insurance, as well as substantial support for the board’s activities. The risk in being a board member has not profoundly changed, with the possible exception of serving on a bank board, due to the increased time commitment and the challenges of extensive risk management oversight.
The Obama administration has been in office for a full year. Have you been surprised at how board service has evolved in light of the changes within national, regulatory, and legislative circles? To read more, click the link below.
[Click Here to Read the Entire Article]
Companies identified as having a successful pay-for-performance link in 2008 that did not meet target performance either drastically reduced bonuses or eliminated them altogether, according to a new report from The Corporate Library, an independent corporate governance research firm. The report, “Pay For Success III,” identifies and examines the pay policies of 12 companies where long-term value creation and moderate compensation of the CEOs responsible are clearly linked.
According to the report, all of the “Pay For Success” companies set targets – both annual and long-term – that were truly stretch targets, requiring significant outperformance of prior year results. Additionally, the companies will only pay out maximum bonuses if performance significantly exceeds targets.
“There are CEOs out there who get paid for success and who have compensation committees that actually do what most boards claim they are doing – set pay responsibly, set challenging performance targets, and provide the CEO with the same benefits that the whole workforce is getting,” said Senior Research Associate Paul Hodgson, author of the report.
Other findings in the report include:
- While most companies in the report used pay surveys, only a few used compensation consultants, with many relying solely on the common sense of the compensation committee to design effective pay policies.
- Many companies approached executive pay much as they approach the pay of other managers and professionals at the company, setting salary ranges, using company-wide bonus plans, etc.
- For many of the same reasons that they use company-wide pay plans, many companies have a “no executive perk” policy.
- Many of the companies included in the report have introduced clawback provisions, while such companies are still in a minority even in the S&P 500.
- Few companies employ executive employment agreements.
- The vast majority of the CEOs and other named executive officers included in the study have significant tenures with the companies.
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Directors Forum 2010 will be held at the University of San Diego. Bringing together institutional investors, directors, officers, and regulators, the event will feature such speakers as Delaware Vice Chancellor Leo Strine, Business Roundtable President John Casttellani, and William Ackman, founder and managing partner of Pershing Square Capital Management LPl The theme this year is "Directors, Management and Shareholders in Dialogue." To register, vitit January
25, 2010 January
26, 2010 January
28, 2010 February
4-5, 2010 March
3-5, 2010 March
16-18, 2010 The 2010 Catalyst Awards Conference will be held at the Waldorf-Astoria in New York. Anne Mulcahy, chairman of Xerox Corp., delivers the keynote at the luncheon. Coca-Cola Co. and Walmart are sponsoring. The Catalyst Awards Dinner is the signature event for Catalyst and its many supporters. Each year, close to 1,600 attendees - including CEOs from preeminent organizations around the world - gather to honor the Catalyst Award-winning initiatives an celebrate extraordinry programs that result in the recruitment, development, and advancement of women. For more information, visit |
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KPMG released a study in December that looked at what factors most impact M&A success. The study analyzed 460 global corporate deals announced during 2002-2006, measuring price appreciation at one and two-year intervals. The top findings include:
• Cash-only deals had higher returns than stock-and-cash deals, and stock-only deals.
• Acquirers with low price-to-earnings (P/E) ratios resulted in more successful deals.
• Those companies that closed three to five deals were the most successful; closing more than five deals in a year reduced success.
• Transactions that were motivated by increasing financial strength were most successful;
• The size of the acquirer (based on mar¬ket capitalization) was not statistically significant.
Click here for the full report.
Director Resources
D&O Insurance: “A Buyer’s Guide to Obtaining Comprehensive D&O Insurance Coverage” has been published by the Holland & Knight law firm. The 78-page booklet is authored by two D&O specialists with the firm — Thomas Bentz Jr., a partner in the Washington D.C. office who leads the firm’s D&O and management liability insurance practice, and attorney Shannon Graving, also of the Washington office. (Both served for a tenure as columnists for Directors & Boards on D&O insurance matters.) For a complimentary copy of the guide, contact Bentz at thomas.bentz@hklaw.com.
Director Compensation: BDO Seidman LLP released the findings of its annual board compensation study which tracks board compensation by industry, including energy, financial services, manufacturing, real estate, retail and technology. The study found that technology remains the most lucrative industry for board members, with compensation averaging $142,370. This is more than triple the amount of the lowest-compensated industry, financial services, where board directors receive an average of just $40,575 — a 10% decline from last year. Click here for a copy of the report.
Litigation: Two key findings from the most recent poll from Deloitte Financial Advisory Services: 27% of executives reported cuts in their companies' compliance and internal audit departments during the past 18 months; and 18% are more concerned about their company becoming a target of securities litigation today than they were two years ago.
Corporate Fraud: In the Deloitte Forensic Center's third annual analysis of SEC enforcement releases, findings include: C-suite individuals (not companies alone) were most often named as allegedly committing fraud in 2008 — however, some less-than-usual suspects (middle management, GCs, boards) are also primary investigative focuses; and compared to 2007, alleged fraud schemes in technology, media, and telecommunications decreased, while there were increases in the consumer business and financial services industries in 2008. Click here for full results.
Innovation: Growth company C-suite executives want more government help to drive corporate innovation, according to an Ernst & Young survey. The executives assert tax credits, R&D grants from D.C. would spur innovation and growth.
Executive Pay: Pearl Meyer & Partners has issued a report “Looking Ahead to Executive Pay Practices in 2010.” This survey provides detailed data on how 395 participants are addressing the challenges raised by a difficult economic environment and the drive for increased regulatory and shareholder oversight of high-level pay programs. Click here for the executive summary.
Author Notes
Jefferson Wells, a global provider of risk advisory, tax, and finance and accounting-related services, established an alliance with Great Sands Consulting, a leading business and technology consulting company in the United Arab Emirates. The alliance marks Jefferson Wells’ first expansion into the Middle East. The firm has also established a new alliance in Japan and its first expansion into South America, with an alliance with Baker Tilly Brasil, an independent member of the international accounting and consultancy network, Baker Tilly International.
Milberg LLP and Governance for Owners USA Inc. (GO USA) have entered into an agreement to work cooperatively to advance the cause of good corporate governance. “This initiative breaks new ground for us, extending our work in shareholder advocacy by joining forces with the leading class action law firm in the world,” said Peter Clapman, chairman and president of GO USA. Working together, Milberg and GO USA intend to pursue corporate remedies that include governance structures that provide long-term management accountability and improved shareholder value.
At the invitation of Forbes magazine, Directors & Boards columnist Gary Sutton (“Sutton’s Laws”) contributed a piece to Forbes.com titled “The Fiction of Climate Science.” It generated record noise — 300 comments and counting, and was a “most forwarded” website article. Click here to read what stirred the passions of all manner of climatologists.
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2010, MLR Holdings LLC.