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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
Just Look
Around the Board Table
That should tell you what kind of year in directorship you will have in
2012.
How many editors have the opportunity to put out a 10th, a 15th, a
20th, a 25th, a 30th, and now a 35th
anniversary edition of their publications?
Some wags might retort: Who would want to?
Well, I guess I wanted to. I never tired of exploring in the pages of Directors & Boards
what makes boards tick.
And we sure did some exploring of that in the 35th anniversary special
issue that was published in December, with its theme, “It’s All About
People.”
My editorial philosophy from the start has been this proposition:
Having the right people on the board can overcome less than ideal
processes for governance oversight, but the best processes cannot
surmount the weaknesses — even danger — of having the wrong people on
the board.
Doing some year-end culling of my archives — and you can imagine the
Augean stables that my archives must resemble after 30 years of
research, manuscripts, author correspondence, notes, and material of
various origination — I came across two compelling observations that I
had jotted down that affirm my own sensibility about the importance of
people to successful governance:
• When retired Textron Chairman and CEO James
Hardymon received an Outstanding Director Award from ODX in 2005,
he told the audience: “You don’t receive an outstanding director award
without being on an outstanding board.”
• And when retired American Express Chairman and CEO Harvey
Golub received the annual Outstanding Director Award from CTPartners Board Consultants in 2010,
when he was serving as nonexecutive chairman of Campbell Soup Co., he
told those gathered in honor: “One of the secrets of being a good
outside director is to have a truly first-rate CEO.”
My wish to the e-Briefing readers for 2012 is that you are blessed to
be surrounded by first-rate colleagues in the boardroom — that they
make you look good and you do the same for them. Happy New Year!
As always, I welcome your comments at jkristie@directorsandboards.com.
Jim Kristie is the editor and associate
publisher of Directors
& Boards.
The Next Big ThingFinally, a governance initiative that has some consequence for shareholder wealth.
By Carl T. Hagberg
What’s the next big thing on the corporate governance front?
Smart investors will begin to use the shareholder proposal process to hold directors’ feet to the fire on the company’s cost of capital and their stewardship of the company’s stash of shareholders’ cash — insisting that they manage it as a truly “prudent person” would.
Here’s why we believe this, and why we think such actions are way overdue.
U.S. public companies are currently sitting on over $2 trillion in their treasuries — a record-breaking and truly staggering amount of cash. These monies legally belong to shareholders. So what have companies been doing with these funds? To read more, click the link below.
[Click
Here to Read the Entire Article]
What Do Boards and
CFOs Really Need From Each Other in 2012?High on the list: solid investment in the finance department’s infrastructure.
By Michael Flagiello and Alex Unterkoefler
Playing the role of GAAP-reporting expert or guru of the regulatory jungle will not be enough for CFOs in the upcoming year. The volatility of the 2012 economy is sure to require innovation and fast decision making. GAAP accounting and regulators do not run your business. Boards of directors want to see some life from their CFOs. Boards want to see a finance department that understands company strategies, not in isolation but in the context of key issues — political, environmental, and financial.
However, swift adaptability and comprehensive understanding of the economic environment cannot be based on a foundation of outdated technology or kludged-together operational structures. For a company to be competitive, boards must be willing to support their CFOs with solid investment in the finance department’s infrastructure.
It is the finance department that is charged with the critical role of quantifying operational results and assessing risks. The challenge is to convert numbers into knowledge and insights into results. The CFO can play a significant role in translating strategy into action. To read more, click the link below.
[Click Here to Read the Entire Article]
A Q&A with Jonathan S. Sack, Catherine M. Foti and Robert J. Anello,
Principals at Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C.
Jonathan
S. SackQ: What is the attorney-client privilege, and how does it apply to corporations?
A: When a client seeks legal advice from an attorney, communications between the attorney and client are considered privileged and may not be disclosed by the attorney to third parties without the client’s consent. The attorney-client privilege applies to business organizations as well as individuals, and to in-house counsel as well as outside attorneys. Application of the privilege can sometimes depend on whether the attorney is advising directors, officers or employees. The privilege protects communications when senior management and directors seek the advice of the organization’s attorneys. The privilege also generally protects communications when low- and mid-level employees seek the advice of the organization’s attorneys and the subject of the communications is within the scope of the employees’ responsibilities.
Q: Does the attorney-client privilege protect all statements made to attorneys?
A: No. When a company director, officer or employee makes statements to or in the presence of an attorney for reasons other than seeking legal advice, the communications are not protected by the attorney-client privilege. Application of the privilege can be complicated if the attorney has both a legal and business (or other) role. To read more, click the link below.
[Click Here to Read the Entire Article]
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With continued market uncertainty likely on tap for 2012, organizations may find themselves facing 10 major business challenges that will influence their boards's audit committee agendas for the year, according to Protiviti, a global consulting firm. Protiviti reveals these challenges and suggests ways to address them in two publications:
The Bulletin - Setting the 2012 Audit Committee Agenda for Non-Financial Services Companies and its companion piece, FS Insights - Setting the 2012 Audit Committee Agenda for Financial Institutions.
The 2012 Outlook for Non-Financial Services Companies
According to Protiviti, the top 10 business challenges for non-financial services firms include:
1. Achieving customer loyalty
2. Managing supply chain risks and rising commodity costs
3. Managing increasingly complex privacy and information security issues
4. Managing regulatory change
5. Attracting, retaining and developing top talent
6. Improving business performance to enhance and sustain competitiveness
7. Adjusting to changing geopolitical dynamics
8. Capitalizing on the pick-up in mergers and acquisitions and
realizing value
9. Improving information for decision-making by focusing on data
management and analytics
10. Increasing the focus on enterprise risk management (ERM) as risk profiles change
Based on these challenges, the top item on a board's audit committee agenda should be to update the company's risk profile to reflect the changing conditions.
The Financial Services Industry Perspective
Change--from new regulatory demands to industry restructuring--has dominated the financial services landscape in recent years and has shaped the 2012 top challenges for the industry. The top 10 include:
1. Managing regulatory change
2. Dealing with industry restructuring
3. Managing the effects of globalization of financial markets
4. Improving information for decision-making by focusing on data
management and analytics
5. Increasing the focus on enterprise risk management (ERM) as risk
profiles change and regulators demand more
6. Managing the impact of technological innovation on the business model
7. Managing increasingly complex privacy and information security issues
8. Improving business performance to enhance and sustain competitiveness
9. Achieving true customer loyalty
10. Attracting, retaining and developing top talent
Updating the risk profile to reflect changing conditions tops Protiviti's list of recommendations for the audit committees of financial services institutions.
| January 22-24, 2012 Directors Forum 2012 will be held at the University of San Diego. Bringing together institutional investors, directors, officers, and regulators, the event will feature such speakers as Stephen Chizen, president and CEO of Occidental Petroleum Corp.; Robert Khuzami, director of the SEC's Division of Enforcement; J. Travis Laster, vice chancellor of the Delaware Court of Chancery; and Nelson Peltz, CEO and founding partner of Trian Partners. To register, visit http://directorsforum.com/conference/2012/registration.php February
15, 2012 February
15-16, 2012 |
|
CEO Pay in
the S&P 500: Who’s on Top
The survey is based on the analysis of proxy statements and identifies changes in total annual and total realized compensation paid to CEOs for the year prior. Formerly known as The Corporate Library CEO Pay Survey, and now in its ninth year, the survey is one of the largest on CEO compensation in North America.
Key findings from this year’s survey include:
- While total realized compensation for CEOs in the S&P 500 rose by a median 36.5%, total realized compensation for all CEOs in the survey rose 27% compared to a 13% increase in total annual compensation.
- Three of the 10 highest paid CEOs of 2010 are from the Health Care Providers & Services industry, including the top two.
- Four of the 10 highest paid CEOs of 2010 were retired or terminated executives receiving exit packages.
- Perks in the S&P 500 rose 11% from 2009 to 2010.
- Three of the five highest paid CEOs of 2010 received single year pension and deferred compensation increases of $14 million.
- More than 70 percent of CEOs received a restricted stock award in 2010 while only 53 percent received stock options.
The top 10 highest paid CEOs of 2010, according to GMI’s survey:
1. John H. Hammergen of McKesson Corp. at $145 million
2. Joel F. Gemunder of Omnicare Inc. at $98 million
3. John C. Plant of TRW Automotive Holdings Corp. at $77 million
4. Frank Coyne of Verisk Analytics Inc. at $68 million
5. Thomas M. Ryan of CVS Caremark Corp. at $68 million
6. Adam Metz of General Growth Properties Inc. at $67 million
7. Ralph Lauren of Polo Ralph Lauren Corp. at $67 million
8. Michael D. Fascitelli of Vornado Realty Trust at $64 million
9. Ronald A. Williams of Aetna Inc. at $58 million
10. Mario J. Gabelli of GAMCO Investors at $57 million.
The full GMI CEO Pay Survey 2011 report can be downloaded here.
Director Resources
Audit Committee: Mandatory audit firm rotation could significantly impact the relationship between the external and internal auditors; how their audits are planned, coordinated and performed; and how the external auditors leverage the knowledge, experience and expertise of internal auditors to enhance overall effectiveness. This was the overarching message of The Institute of Internal Auditors’ (IIA’s) response to the Public Company Accounting Oversight Board’s (PCAOB’s) Concept Release on Auditor Independence and Audit Firm Rotation. Click here for a copy of the IIA’s response.
Management Information: Jossey Bass/Wiley has launched a suite of new virtual offerings to better access best practices in management and leadership. The offerings include JosseyBassbusiness.com, the Jossey-Bass Leadership Skills app, and the Jossey-Bass Book Club. The new app, for example, delivers what the publishing firm calls “proven leadership content, both theory and practice, in a bite-size format from some of our bestselling authors and globally recognized thought-leaders such as Patrick Lencioni, Jim Kouzes & Barry Posner, Bill George and many others.” The Leadership Skills app can be download for free for your iPhone or Droid.
Dealmaking: Ernst & Young Transaction Advisory Services (TAS) released its annual year-end recap and outlook. Highlights include: TAS expects to see dealmaking pick up in the first quarter of 2012 since M&A fundamentals – including solid cash positions, strengthened balance sheets, improved credit markets, and increased pressure on corporations for growth – are stronger than ever; and 2012 will likely see an increase in the number of divestitures (according to E&Y, 30% of companies expect to execute a divestiture in the next 12 months). A full release on the report can be accessed here.
Executive Compensation: Despite many companies in North America anticipating a decline in shareholder value in 2011, a majority expect to pay executive bonuses that are as large as or larger than last year’s awards. Additionally, the majority of companies plan to fund this year’s bonuses at or above target levels, reflecting strong operating results, according to a survey by Towers Watson, a global professional services company. The Towers Watson survey of 265 midsize and large organizations found 61% expect their total shareholder return for 2011 to decline or remain flat. Meantime, the same number (61%) expect their annual bonus pools for 2011 to be as large or larger than those for 2010. Further findings from the survey can be accessed here.
Executive Compensation II: Frederic W. Cook & Co. has issued its 2011 Aggregate Share-Based Compensation Report. A copy can be accessed on the firm’s website.
CEO Succession: In compiling research for a soon to be published RHR International study on CEO Transitions, the firm discovered over 86% of new chief executives have no prior experience in the corner office. In a new edition of its publication, Executive Insight, RHR explores some of the difficulties facing new CEOs and provide guidelines on how to work through these challenges to accelerate a successful transition. For a copy, click here.
Author Notes
The Weinberg Center for Corporate Governance has a new website for its blog. It can be accessed at http://sites.udel.edu/wccg.
Peter D. Kiernan III was presented with the 2011 Dana Reeve HOPE Award
at the Christopher & Dana Reeve Foundation’s annual fundraising gala
on Nov. 30 at Cipriani Wall Street in New York City. Kiernan is the former chairman of the board of the Reeve Foundation, which honored him “as a dear friend of both Christopher and Dana Reeve and a pioneer in investment banking, philanthropy, media and new ventures.” This year's gala was the most successful to date, raising close to $3 million. Longtime Reeve Foundation supporters Alec Baldwin and Meryl Streep served as the evening's special guests. Kiernan’s article, “10 Things Every Director Should Know About Risk,” appeared in the First Quarter 2010 issue of Directors & Boards.
WomenCorporateDirectors (WCD) has named the winners of the 2012 WCD Visionary Awards: Publicis Groupe (for leadership and governance) and Intel Corp. (for innovation and shared value) as corporate honorees, with DuPont Co. Chair and CEO Ellen Kullman and Desjardins Group’s chair, president, and CEO, Monique Leroux, picking up individual honors. The award winners will be presented at the 2012 Visionary Awards Dinner on May 1, 2012, in New York City, as part of WCD’s second annual Global Institute. Muhtar Kent, chairman and CEO of the Coca-Cola Co., will deliver the keynote address at the dinner.
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