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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
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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
Channeling Napoleon, Robert E. Lee, and
Gandhi
Some wisdom from a day at the Wharton School on the crisis in talent
development.
Is
there any management team or board that is not concerned about talent
development? The knee-jerk answer might be “No, of course not.” Who
could not be concerned about that?
Well, lots of organizations, apparently. Would you believe that
two-thirds of companies do no workforce planning?
And how about this: A generation ago, 90% of all vacancies were filled
internally. Today, 60% of vacancies are filled from the outside.
Those stats come from Dr. Peter
Cappelli, director of the Wharton
School’s Center for Human Resources. He offered them up at the
Twelfth Annual Wharton Leadership Conference, held in June. Cappelli
and Dr.
Michael Useem, director of the Wharton
Center for Leadership and Change Management, are the hosts of this
conference.
This conference, for me, has attained must-attend status. There is no
other that I participate in that offers, in a one-day expertly run
event, such a richness of discussion and understanding of two crucial
topics: the role of a leader, and leadership development in an
organization. I heartily commend it to all the e-Briefing readers. This
year’s conference, at 300-plus attendees, was the biggest yet.
A look at the program
agenda gives a snapshot of the speakers and topics. Let me share
with you a few soundbites that I scribbled during the day:
• “1) Know your stuff, 2) Be a man, 3) Be good to your men.” — the
essence of leadership as practiced by Gen. Robert E. Lee, distilled by
Lee’s acclaimed biographer Douglas
Southall Freeman, cited at the conference by political analyst and
presidential adviser David Gergen.
• “The role of a leader is to ‘define reality and give hope.’ ” —
American Express Chairman and CEO Kenneth Chenault, citing Napoleon.
• “The answer to the question, ‘Are leaders born or made?’ is ‘Yes.’
All are born … and all are made.” — Prof.
Stewart Friedman, founding director of the Wharton Leadership
Program and author of “Total
Leadership: Be a Better Leader, Have a Richer Life”.
• Why Robert Nardelli lost his job as chairman and CEO of Home Depot,
even when the company’s business metrics were turning up: “He still
thought it was 1982 — that you could still rule by fear and fiat.” —
New York Times business columnist Joe
Nocera.
• ”My son asked me when I got this job, ‘What’s your biggest worry?’ My
answer was, ‘Who is going to occupy this seat when I’m gone.’ ” —
Johnson & Johnson Chairman and CEO William Weldon.
• “When we see employees having a [personal] problem, we ‘adopt’ them
and try to make something optimistic come out of that.” — Southwest
Airlines President Colleen Barrett.
This conference came at a timely moment. The same day the conference
was held, June 18, the Business Roundtable issued its economic outlook,
with a dark warning that more of America’s top executives anticipate a
drop in future employment. That’s sure to roil and foil talent
development even more. And the Boston Consulting Co. just came out with
a survey
that found that talent management and improving leadership development
were the two most critical priorities for U.S. companies. See more on
this survey in the News department below.
Prof. Cappelli argues that we need a new approach toward talent
development. “Everybody is trying to hire their talent from everyone
else,” he said at the conference, “and it’s not working.” He lays out
the case for reform in his new book, “Talent
on Demand: Managing Talent in an Age of Uncertainty”.
If as a director or officer you are uneasy about how your company is
addressing its leadership and talent needs, you’re going to have to
take action. Perhaps talent development must move higher up on the
board agenda, and given much more time and structured attention by the
board.
Advocate for that, and you will be right in step with the advice given
by another of the Wharton Leadership Conference speakers. Indian
businessman S.A. Ibrahim, CEO of global credit risk management company
Radian Group Inc., cited Mahatma Gandhi’s call to action: “You must be
the change you want to see in the world.”
I welcome your comments at jkristie@directorsandboards.com.
And to get in the loop on the 2009 Wharton Leadership Conference,
contact Kay Dowgun at dowgun@wharton.upenn.edu.
Jim
Kristie is the editor and
associate publisher of Directors
& Boards.
Top Ten Benefits of a
Second-Generation Board PortalThose benefits include improved collaboration, better decision support and timely information access, and responsiveness in urgent situations.
By Joe Ruck
For confidential communications at the board and executive level, companies have traditionally relied on a combination of email and paper-based processes. But the advent of geographically dispersed boards and mobile executives has triggered a demand for a more immediate, yet confidential, form of access.
To address this need, companies large and small are turning to second-generation board portals, which combine rich functionality with ease of use while preserving strict confidentiality and tight process control. Here are the benefits of these second-generation board portals:
1. Director Visibility
Communication to the board has traditionally been limited to quarterly in-person meetings, but that is becoming a thing of the past. Globalization and increased regulatory scrutiny has resulted in a quickening in the pace of board work and the need for greater responsiveness of individual directors. Portal technology is better equipped to deal with this dynamic than traditional paper processes because the portal provides ubiquitous access combined with the highest level of commercially available security.
[Click
Here to Read
the Entire Article]
D&O Insurance: A Pressure Check
As companies caught ‘financial flu,’ liability risk rose. A few educated guesses about what’s ahead.
By Evan Rosenberg
If you, as a board director, had been stranded on a desert island for the past year, and you were rescued today, you might not recognize the financial world to which you returned. For one thing, your chances of being hit with a directors and officers (D&O) liability lawsuit have probably increased.
What happened? Well, while you were gone …
• A credit crisis hit the U.S. financial markets. A sudden rise in subprime mortgage foreclosures exposed flaws in aggressive mortgage financing practices and negatively impacted the banking, real estate, and homebuilding sectors.
• The credit crisis spread to additional sectors. The U.S. economy caught a “financial flu” as the subprime mortgage virus spread through dozens (and counting) of business sectors.
[Click Here to Read the Entire Article]
Vice President, Business Leaders Network
3i US Growth Capital
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.
Boards have recently become concerned about the pipeline for new director talent, the next generation of committed professionals who see service as part of their professional obligation. What’s your take on this issue?
This issue is particularly relevant for private companies seeking to hire and retain the best director talent and this is particularly true for companies 3i invests in.
Professionals are usually very excited about joining the boards of private companies as it provides a more hands-on interaction with less of the formal reporting requirements that are now in place for public directors.
At 3i, we have noticed that directors typically see board service as not only a professional obligation, but also as a chance to expand their daily exposure beyond their day-to-day role, and view working with growth companies as a particularly rewarding assignment because they are helping them achieve their next stage of development.
What do you look for in terms of talents and attributes when the 3i team selects an interim chief executive or C-suite professional to lead a portfolio company?
In appointing an interim chief executive or C-suite professional to lead a portfolio company, 3i first assesses the individual’s knowledge and experience: we will evaluate the track record of value creation in an international context, relevant sub-sector knowledge, strategic insight, and strong leadership competence including ability to influence in both minority and majority investment positions.
[Click Here to Read the Entire Article]
Companies are introducing clawback provisions in increasing numbers, according to a new survey by The Corporate Library. The report finds that almost 300 of the more than 2,100 companies surveyed have adopted provisions to recover cash and stock incentives in cases where there have been misstated financials.
“This is an enormous increase over the last time we looked at this issue in 2003, when we found just 14 companies with any kind of clawback or recoupment policy,” said Senior Research Associate Paul Hodgson, author of the report.
Almost half of the companies with a clawback provision were found in the S&P 500, indicating that the adoption of a clawback policy is more than three times as common in larger companies. The report also discriminates between several different types of clawback policies, giving examples of each of them and discussing their relative effectiveness. The six-page report titled, Clawback Policies, is available for $25 from The Corporate Library’s online store at http://www.thecorporatelibrary.com.
This latest survey is the most recent in The Corporate Library’s 2008 Proxy Season Foresights series. With its unique insights into the most important issues of proxy season, from shareholder activism to compliance to disclosure, The Corporate Library is covering all the topics of most relevance to investors, corporations, professional services companies and the governance community.
July 6-9,
2008
The Institute of Internal Auditors presents its 2008 International
Conference in San Francisco. Sessions will address: Audit Management,
Fraud Detection and Prevention, Regulatory Issues and Compliance
Information, Technology and Security, Corporate Governance, Enterprise
Risk Management, Emerging Issues, and other subject areas. Speakers
lined up include former U.S. Senator Paul Sarbanes; Sharon Allen,
chairman, board of directors, Deloitte; and Jim Collins, author of
"Good to Great" and "Built to Last," who will talk on "How Internal
Auditors Can Promote Organizational Greatness." Visit the conference
website at
July 30,
2008
The Practicing Law Institute presents "Audit Committee Workshop 2008"
in San Francisco. A distinguished faculty drawn from public company
directors, lawyers, CPAs, government regulators, and public relations
consultants will review important issues and best practices. The
session co-chairs are Katherine Martin of Wilson Sonsini Goodrich &
Rosati; Timothy Roake of Gibson, Dunn & Crutcher LLP; and Edward
Smith of the KPMG Audit Committee Institute. Register at
August
13-15, 2008
The Directors' Consortium, a joint offering of the University of
Chicago Graduate School of Business and the Tuck School of Business at
Dartmouth, will conduct a three-day intensive program exploring the
fundamentals of corporate governance and board service. Leading faculty
from the two institutions will present a comprehensive approach to the
complex decisions that board members must make. The program will be
held at the Ritz-Carlton, Battery Park, in New York City. For
information, visit
September
8-10, 2008
Columbia Business School Executive Education presents "Corporate
Directors' Responsibility: Enhancing the Integrity of Financial
Disclosure." Led by professors Nahum Melumad and Stephen Penman, the
three-day program focuses entirely on crucial financial disclosure
issues. Directors will deepen their expertise in analyzing financial
statements and in evaluating the appropriateness of financial reporting
and accounting decisions made by management. For more information, call
212-864-3395 or visit
September
14-17, 2008
The Society of Corporate Compliance and Ethics (SCCE) holds its 7th
Annual Compliance & Ethics Institute in Chicago. The SCCE champions
ethical practice and compliance standards in all organizations and
provides the necessary resources for compliance professionals and
others who share its principles. Experts from major corporations,
ethics organizations, law firms, academia, and the government will
address the most challenging issues related to designing, implementing
and managing effective compliance and ethics programs. For more
information, visit
September
22, 2008
The Practicing Law Institute holds its Sixth Annual Directors'
Institute on Corporate Governance at the PLI New York Center. The
program is presented in cooperation with the Society of Corporate
Secretaries and Governance Professionals. Daniel Amos, chairman and CEO
of Aflac Inc., will do the kick-off presentation, and Patricia Dunn,
former chairman of Hewlett-Packard Co., will do a luncheon address. For
more information, visit
October
13-15, 2008
The New York Stock Exchange and Corporate Board Member magazine host
the fifth annual Board Committee Peer Exchange on Oct. 13. The event is
designed for board committee chairs, lead directors, and general
counsel to interact and exchange information with their peers who face
similar challenges in performing their chairmanship duties. It will be
held in New York City at the Grand Hyatt. On Oct. 14-15, the two
organizations will co-host the Annual Boardroom Summit. For more
information on these events, call 615-309-3200 or visit
The National Association of Corporate Directors (NACD) holds its 2008 Annual Corporate Governance Conference. This year's theme is "Building Balance in the Boardroom: Risk, Reward, and Responsibility." The program will cover such topics as: Roadmap for Compensation; Identifying Risk; Effective Chairs and Lead Directors; Oversight of Corporate Pension Plans; and CEO Succession Planning. The conference, which also includes the Director of the Year awards banquet, will be held at the JW Marriott Hotel in Washington, D.C. For registration and hotel information call 202-775-0509, or visit
Recruiting, retaining, and developing talent is the biggest “people” challenge facing companies in the United States and worldwide, and it’s the one they are least ready to handle. In fact, talent management is a more urgent priority than performance management, restructuring, globalization, diversity, social responsibility, and other issues typically involving human resources.
This is a key insight from “Creating People Advantage: How to Address HR Challenges Worldwide Through 2015,” a report based on a global study conducted by the Boston Consulting Group (BCG), the World Federation of Personnel Management Associations (WFPMA), and the Society for Human Resource Management (SHRM). The study, which included over 200 in-depth interviews with senior executives worldwide, is the most comprehensive review of global HR practices ever conducted.
A finding from the study on how companies and the HR function expect to spring into action to prepare leaders:
• Fewer than half the respondents said their companies now measure leadership skills through 360-degree feedback; just about 65% said they will in the near future.
• Fewer than 20% of respondents said their companies have developed leadership seminars with business schools; 40% expect that to be in the cards in the near future.
• Only about 10% of respondents said their companies currently have an internal virtual leadership institute; 35% say they will in the near future.
To receive a copy of the report, contact Eric Gregoire at 617-850-3783 or gregoire.eric@bcg.com.
Director Resources
Board Leadership: The Millstein Center for Corporate Governance and Performance at the Yale School of Management has formed what it calls “a first-ever peer organization of independent chairmen of North American corporate boards.” The kick-off roundtable for the “Chairmen’s Forum” will take place October 7 at the Yale Club of New York City. Harry Pearce, chairman of Nortel Networks, is the founding chair of the Forum. The project is co-sponsored by Spencer Stuart, the global director and executive search consulting firm. “Board directors will benefit from seeing exchanges amongst real world independent chairs who contribute to performance while avoiding pitfalls,” said Ira Millstein. “Independent chairmanship may not be the right way to go for every company. But the Chairmen’s Forum will help make it a successful choice for those that take that route.”
Mutual Fund Governance: As part of its mission to incubate needed market institutions, the Millstein Center also recently announced the creation of the Conference of Fund Leaders, a permanent body dedicated to peer collaboration among independent chairmen and lead directors of mutual funds.
Shareholder Activism: Thomson Reuters has compiled a report on activism initiatives for the First Quarter 2008. Click here for a copy of the executive summary.
Director Compensation: The median amount of Fortune 500 director compensation jumped 7.2% in 2007 to $173,640, according to a survey released in June by Equilar Inc. Click here for additional highlights from the survey.
CEO Succession: An increasing number of CEOs are exiting their positions prematurely, according to a study by Yan Zhang at Rice University’s Jones Graduate School of Management. Of the 204 company leaders Zhang studied from 1993 to 1998, 55 (27%) left their job within three years. Zhang’s study, “Information Asymmetry and the Dismissal of Newly Appointed CEOs: An Empirical Investigation,” announced to the media last month, finds that these dismissals may be due to the effects of information asymmetry — a situation where one party knows less inside information than the other. In the instance of CEO selection, the board of directors of the hiring firm knows less than the CEO candidates regarding the candidates’ true competencies. As a result, it is possible that the board makes a faulty hire and then dismisses the CEO shortly after the succession. Click here to read the complete study.
Financial Reporting: Now that the SEC has proposed rules mandating most Fortune 500 companies to adopt XBRL technology in all SEC reporting, the clock has started ticking for corporate filers that have fiscal periods ending Dec. 15, 2008, the effective date of the new rule. Law firm White & Case's latest Securities Alert offers more information about the SEC proposal and what it means to U.S. public companies.
Author Notes
Michael J. Ryan Jr. has joined PROXY Governance Inc. as president and COO. Previously, he was executive vice president and general counsel and a member of the Office of the Chairman at the American Stock Exchange LLC. There, his responsibilities included the exchange’s legal functions as well as oversight of the public company quantitative and qualitative listing standards.
Wayne Miller, CEO of Denali Fiduciary Management, an expert in the management and governance of ERISA retirement plans, has been invited to chair a panel on the topic of board-level responsibilities for retirement plan oversight at the October annual conference of the National Association of Corporate Directors. His article, “What’s an ERISA Fiduciary to Do?” appeared in the Fourth Quarter 2005 issue of Directors & Boards.
Jay Alix, founder of AlixPartners, the global restructuring, consulting, and financial advisory firm, was named to the inaugural class for induction into the Turnaround Management Association-sponsored (TMA) Turnaround, Restructuring, and Distressed Investing Industry Hall of Fame. The TMA established the Hall of Fame to honor and preserve the names of the individuals who contributed toward the increased stature and respect of the turnaround industry. Future inductions will occur at five-year intervals. Alix, who founded AlixPartners in 1981, was instrumental in introducing a variety of “firsts” in the turnaround industry, including “turnaround teams” involving client employees in implementing turnaround initiatives, results-based success fees, and the role of chief restructuring officer.
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2008, MLR Holdings LLC.