|
 |
|
Are you reading a pass along copy? Get
your
own FREE subscription. To unsubscribe, please click HERE
and send a blank email. You will be automatically unsubscribed.
Directors & Boards
Robert H. Rock
Publisher
James Kristie
Editor
Lisa
Cody
Chief Financial Officer
David Shaw
Publishing Director
Scott Chase
Advertising Sales Director
Barbara Wenger
Subscriptions
Jerri Smith
Reprints
1845 Walnut Street
Suite 900
Philadelphia, PA 19103
+1 (215) 567-3200
The Directors & Boards e-Briefing is produced by GRID Media LLC.
From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
On Presenting New Ideas at a Board Meeting
I asked, you answered: What to do in Cathie Black’s situation.
In last month’s e-Briefing,
I presented a mini-case study of how a new director was swatted down
for her impulsiveness when she said she “lobbed what I thought was a
great idea” into a board meeting.
Cathie Black, president of Hearst Magazines, in her memoir “Basic
Black,” recounted the tale of how she was chided by a member of that
board for this breech of board etiquette, and then told in no uncertain
terms that she should have “seeded” the idea first — i.e., that she
“should have built support for it in advance.”
I was appalled at the culture of this boardroom being a no-new-ideas
zone. So I opened it up for second opinions — on my reaction, on the
advice given Cathie Black, and on the wisdom of Ms. Black, after being
chastised, buying into this vetting process.
Wow … what a response I got! This matter struck a nerve. So many of you
weighed in with thoughtful pointers on board behavior and
communications.
The number and quality of the comments are way too much to present here
in my editor’s note. So we’ll do something extra — here
is a link that will take you to a special section of this month’s
e-Briefing for a full roundup of reader opinion on how this question of
board openness to new ideas, and presentation of such, should be
handled.
The responses offer superb insights. Enjoy. Thank you to all the
e-Briefing readers who were moved to comment. You’ve given us strong
guidance on boards as a deliberative body — as they are … and as they
should be.
Jim
Kristie is the editor and
associate publisher of Directors
& Boards.
The Full MontyFollowing the logic of full disclosure, everything you might need to know about a CEO.
By Hoffer Kaback
Recent focus upon the level of disclosure by Apple regarding CEO Steve Jobs’ health suggests consideration of the larger issue: What should be the scope of disclosure about highly personal information concerning executives (and directors), and what should be off-limits? What is fair game?
The touchstone is disclosure of “material” information — what a reasonable investor might consider important in making a voting or investment decision. Sophisticated securities lawyers will, however, admit that deciding what is “material” can be difficult.
Arguably, there are many data that a reasonable investor would indeed consider important in deciding whether to buy, sell, or hold, but that, to my knowledge, are not currently disclosed by any public company and that, at no time before or since 1933, have ever been systematically disclosed.
Consider venture capitalists, who operate by their own set of (private company) rules. They generally delve deeply into the backgrounds of key people involved in a potential investee, including their marriages, kids, medical history, habits, etc.
Is it reasonable, or is it unreasonable, for the following — which most likely would be ferreted out by VCs — to be disclosed by public companies as material facts? To read more, click the link below.
[Click
Here to Read
the Entire Article]
Pass the Tums, Please
A brush with backdated options shows how precarious board service can be.
By Gary Sutton
“A panel of SEC lawyers would like to have you appear before them,” our corporate counsel told me.
“Gee, that sounds fun,” I replied. “What for?”
“They’ve read the report on backdated options, and have some more questions.”
Great. This all started 10 months before. An analyst wrote a report suggesting a company, where I’m on the board, might be backdating options.
And so the process began. First our law firm sent in their expert, a guy who probably hadn’t heard the word “backdating” a year before. I sure hadn’t. But he was in demand and would end up costing our shareholders his share of the $800,000 in fees, copies, and forensic accounting chores that we ran up. To read more, click the link below.
[Click Here to Read the Entire Article]
Audra L. Schwartz, Fellig, Feingold, Edelblum & Schwartz LLC
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.
You’ve focused on the “up or out” concept, patterned after the Military’s Time in Grade structure, to deal with distressed companies – what exactly is this concept?
Most companies we deal with on a daily basis pride themselves on low employee turnover, but does this promote growth, or complacency and an inward focus? Many companies under stress in the recession have long-tenured employees (including C-level) who don’t know any way but “our way” and that’s not working today and won’t in the future. Similarly, companies are bringing in new leaders, but these new C-level executives have to combat strong internal cultures before they can get anything done.
The military, and many professional services companies such as auditing and law firms, use an up or out approach to ensure the highest quality personnel at each level. Realistic goals and skills, and the time within which they are to be achieved, are set for each employee level. As discussed in our whitepaper on the subject, the military says you can be at each rank for only a predefined number of years, and the next level of promotion is drawn from an increasingly smaller pool of potential candidates, further refining the quality. Anyone passed over for promotion twice has to resign or is asked to leave. Many professional services firms use a similar approach, only they tend to give their non-promotable employees a soft landing in the hopes of goodwill. Bottom line – where outward focus, creativity and competency are of utmost importance, each level is staffed with only the most promotable, highest achievers. Doing the same job for 20 years is out of the question. To read more, click the link below.
[Click Here to Read the Entire Article]
Background checks led to renegotiation, withdrawal from deals, partnerships and investments
According to a recent Deloitte survey, in the past three years, 75 percent of survey participants reported increased concern about potential violations of the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
As a result of FCPA concerns, 42 percent of survey respondents indicated their companies had renegotiated or cancelled a planned business relationship or acquisition.
According to the survey, companies are most concerned about the potential
for FCPA violations in Russia/Commonwealth of Independent States (94 percent), China (92 percent), Africa (91 percent) and the Middle East (91 percent). Across geographies, the most common bribery schemes reported were subcontractors who don't add value (48 percent), fraudulent training and travel expenses (46 percent) and third-party foreign payers (45 percent).
The survey indicated that, as a result of background checks, more than half of executives renegotiated (59 percent) or pulled out (55 percent) of a potential investment. The most common reasons for renegotiations and deal withdrawals were lack of transparency in contracts (61 percent), unusual relationships with third parties (48 percent) and use of agents to obtain business (38 percent).
Nearly one-third (31 percent of survey respondents) of companies do not always conduct background checks before committing to transactions outside of the United States.
To help maintain FCPA compliance, survey participants reported having clear corporate policies and procedures in place (72 percent), using appropriate financial and accounting procedures (60 percent) and appointing officials responsible for FCPA compliance in the organization (56 percent).
About the Survey
Deloitte contracted Bayer Consulting to conduct a survey to assess how companies are managing investigative due diligence in acquisitions, investments and business relationships outside the United States. The survey was conducted online from May to October 2008 and was completed by 216 senior professionals.
Senior professionals came from companies across a broad range of industries, with the greatest concentration in the financial services (26 percent), manufacturing (25 percent) and technology/telecommunications (12 percent). Regarding company size, 48 percent of respondents№ companies had annual revenues of $1 billion or more, 25 percent had $100 million to less than $1 billion and 27 percent had revenues of less than $100 million.
|
June
3, 2009 June
4-5, 2009 June 7-10, 2009 June
9, 2009 June
9, 2009 June
10-12, 2009 June
11-12, 2009 June
16, 2009 June
16, 2009 June
18-19, 2009 June
21-23, 2009 June
24, 2009 |
|
The National Investor Relations Institute (NIRI) reports that despite the recent extraordinary economic downturn, public companies have generally made measured, rather than dramatic, changes to their forward-looking guidance policies. Key findings from a survey of NIRI’s public company members:
• 60% of respondents provide earnings guidance (i.e. earnings per share or EPS) compared to 64% in 2008.
• 82% provide other financial guidance (all quantitative economic measures of a company’s performance excluding earnings per share guidance) versus 86% in 2008.
• 55% provide non-financial guidance compared to 57% in 2008 — i.e., any information about current market or business conditions that may impact company performance and that are not typically reflected in a company’s financial statements.
• 25% provide guidance in all three of these guidance measures.
The primary reason cited for ceasing earnings or other financial guidance within the last 12 months was due to a change in visibility/forecasting ability of business. The most common frequency of guidance communications (how often guidance, updates, or reiterations are provided) is quarterly.
“Despite the economic downturn, NIRI member survey respondents have not abandoned guidance in large numbers,” said Jeff Morgan, president and CEO of NIRI. “I believe the message these survey results provide is that companies understand that communicating with investors in challenging times is as important, if not more so, than it is in good times.” Click here for full survey results.
Director Resources
Board Diversity: In the first quarter of 2009, 38% of executives named as independent directors on corporate boards were women. This is a chart-busting percentage of women board appointees in the 15 years of quarterly tracking of board appointments by Directors & Boards magazine. Click here for more information on this data finding.
CEO Succession: The CEO position has become more secure in North America and Europe, despite the global economic recession. According to the ninth annual Booz & Company study on CEO succession, boards want battle-tested captains at the helm of their companies during uncertain times. The report, “CEO Succession Survey 2008: Stability in the Storm,” available at http://www.booz.com examines the leadership tenure at the world’s 2,500 largest publicly traded companies and analyzes the 361 succession events that occurred last year. In all, CEOs are older, more experienced in running a business, and have spent more time inside their current company.
CEO Compensation: A majority of directors who serve on corporate boards believe that the executive pay programs of U.S. companies need to change as a result of the financial crisis, according to a new survey by Watson Wyatt, a leading global consulting firm. Nearly two-thirds (63%) of outside directors said they believe American companies should modify their executive compensation programs to adapt to new economic realities, according to the survey. Additionally, most directors (68%) are not concerned or only slightly to moderately concerned about the retention of high-performing executives. Further reinforcing this point, 70% of directors expect executive pay opportunity to decline over the next two years. The survey also found that directors do not expect legislation to have a significant impact on executive pay for performance. A majority (54%) said legislation and public pressures would have little or no effect on improving pay for performance. To view the research brief, visit http://www.watsonwyatt.com/BoardViewReport.
Fraud Detection: “Corporate Resiliency: Managing the Growing Risk of Fraud and Corruption” is a new book from the Deloitte Forensic Center, published by John Wiley & Sons Inc. Written by Toby Bishop, director of the Deloitte Forensic Center for Deloitte Financial Advisory Services LLP, and Frank Hydoski, leader of Deloitte’s Analytic and Forensic Technology practice, the book provides a foundation for boards, audit directors, and senior executives to help reduce vulnerability and enhance chances of recovery from instances of fraud and corruption. For more information, visit http://www.deloitte.com/us/corporateresiliency.
Legal Fees: Following a significant decline in corporate expenditures on legal services in 2008 and the first half of 2009, businesses will once again begin increasing their law budgets in the second half of this year, according to a study by legal industry research leader BTI Consulting. The study, titled “BTI Mid-Year Spending Update and Outlook,” covers 16 practices and 18 industries and is based on 370 interviews with corporate counsel at Fortune 1000 companies that average $19.4 million in outside counsel spending. To download an executive summary of the study, visit BTI Consulting’s website at http://tinyurl.com/c4pz9r.
Corporate Auditing: The Center for Audit Quality (CAQ) has released a new resource that illustrates for capital market stakeholders the vital role public company auditors play in providing transparency in the markets. The “Guide to Public Company Auditing” is an overview of the key processes, participants, and issues related to public company auditing. Presented in a straightforward, easy-to-use format, the guide demonstrates the important role public company auditing plays in preserving the strength and stability of U.S. capital markets. To access the guide, visit http://www.thecaq.org/newsroom/pdfs/GuidetoPublicCompanyAuditing.pdf.
Audit Committees: Economic conditions are driving directors to recalibrate the way they work amid concerns about financial crisis risks and the quality of information they’re receiving, according to a joint survey by KPMG’s Audit Committee Institute (ACI) and the National Association of Corporate Directors (NACD). Three out of four audit committee members say they have increased their “hands-on involvement” with management, and are reassessing risk management and oversight as a result of the economic crisis. “Board oversight is very different from what it was a year or two ago—and it has to be,” said Henry R. Keizer, global head of Audit–KPMG International, and U.S. vice chair-Audit, KPMG LLP. Click here for the full report.
Alternative Energy Industry Comp: With President Obama’s announcement last month of tough new rules for fuel efficiency and emissions in the U.S. auto industry, he focused attention again on his energy and environment agenda. DolmatConnell & Partners http://www.dolmatconnell.com believes the Alternative Energy and Clean Technology industry is an emerging leader and will soon be one of the top performing sectors in the near future. Click here for the firm’s compensation study of the industry.
Author Notes
Wayne Miller, CEO of Denali Fiduciary Management, been asked by the Board of Governors of the Federal Reserve Bank of the United States to address an inter-agency (SEC, FDIC, OCC, OTS, NCUA, FHFA and others) conference on investment management in July 2009 in Washington, D.C. The senior staff at the Board has requested that he address the topic of “Fiduciary Governance.” His article, “What’s an ERISA Fiduciary to Do?” appeared in the Fourth Quarter 2005 edition of Directors & Boards.
AlixPartners LLP, the global business-advisory firm whose engagements include corporate turnarounds and investigation and litigation consulting (including the recent Bernard Madoff matter) has opened an office on Washington, D.C., whose focus will include providing services for corporate and other investigations and for regulatory readiness and response. The new office is the firm’s 14th globally and ninth new office in the past seven years.
James Kristie, editor of Directors & Boards, addressed the Life Sciences CEO Workshop hosted by Safeguard Scientifics Inc.. He spoke on “Best Practices in the Boardroom” for this semiannual gathering of CEOs, senior officers, and board members of the firms that Safeguard invests in.
Back to the Top
Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2009, MLR Holdings LLC.