From Jim Kristie   |   Article of the Month   |   Columnist
Reader Profile   |   Research   |   News   

Welcome to the new monthly e-Briefing from Directors and Boards magazine.  This free email is designed to be a short, easy-to-use reference for directors, executive management and other corporate governance professionals.  Each month, you'll find access to some of our best and most pertinent features and columns, as well as relevant news, research and events.  You'll also find a profile of one of of our key readers, and have access to the letters and emails we receive.  We hope you find this e-Briefing a useful addition to the Directors & Boards offering.

Directors & Boards is the oldest and most trusted journal of corporate governance, written by and for directors of public and privately held companies.  If you're not a subscriber to our quarterly journal, click on the link to the left.  If you are a subscriber, look for more services to come, including free access to our articles archive and other areas of our website, which is chock full of reference sources and tools to help you do your job better.

I invite you to download this issue's Directors & Boards special report, "Avoiding Personal Liability as a Director," written by John L. Reed and Matt Neiderman of Duane Morris LLP.  You can find a .pdf copy HERE.

Our Spring issue is in the mail to subscribers.  Looking forward, our Summer issue will include a special section focused on what directors need to know about  compliance software.

I look forward to feedback on Directors & Boards, and our new e-Briefing.  Please feel free to email me!

Jim Kristie is the editor and associate publisher of Directors & Boards.

Back to the Top

A formula for meeting the expectations of the role is to be deeply informed, perpetually skeptical, and collegially independent. 

By Anthony Knerr

"Fiduciary" is not a word one hears much in common usage these days. It has a certain Victorian ring to it -- an aura of vigorous rectitude out of touch with our contemporary world of moral relativism.

But "fiduciary" is at the heart of governance. Sitting on any governing board -- corporate, mutual fund, or nonprofit -- means first and foremost serving as a fiduciary. And that concept is as relevant today as it was 75 or 100 years ago when our grandparents learned the basics, if not more so.

 At its root, "fiduciary" derives from the Latin fidere, to trust. A fiduciary is someone who holds something in trust for another. Its Anglo-Saxon synonym is "trust," derived from the Middle English traust, meaning trust, protection, or firmness. These two linguistic first cousins share a common concept of confidence in the integrity, veracity, and reliability of someone to act on another's behalf.

At the heart of being a fiduciary

The heart of being a fiduciary is acting as you would wish another to act on your own behalf. Representing the interests of the shareholder as a director of a company means putting yourself in the position of continually asking how you would wish to be treated if you were yourself a shareholder. Would you feel -- at all times and in all circumstances -- fully comfortable with the judgments, actions, and decisions you made as a director? Would you be prepared to entrust additional resources -- financial, intellectual, personal -- to such a person? Would you have confidence that such trust would be warranted, tomorrow morning as well as 10 years from now?   [Read the Full Article]

Back to the Top

By Stephen J. Weiss

You have been invited to become a director of TitanTech Corp. This is one of the most exciting growth companies in the world, and, if truth be told, you are eager to rub elbows with TitanTech‘s current directors -- captains of industry and former top government officials. You want to accept the invitation but have a nagging concern that your personal assets could be exposed if the company becomes embroiled in potentially devastating litigation. You are smart to be concerned. But you may be able to allay your fears if you know the right questions to ask.

Does TitanTech have D&O insurance? This is the place to start your due diligence, and the answer of course should be “yes.” You need insurance to supplement TitanTech’s agreement to indemnify you against losses arising out of your service as a director. TitanTech may declare bankruptcy down the road and thus not be able to honor this agreement, or indemnification may not be permitted for public policy reasons.

Is the policy limit of TitanTech’s D&O insurance program adequate? There is no scientific way to determine the right policy limit. Even so, ask TitanTech’s risk manager for data on policy limits purchased by companies in TitanTech’s peer group and compare the size of TitanTech’s D&O program with that of its peer group. In addition, ask for data on settlements of securities class-action lawsuits and defense costs. This, too, can prove helpful in judging the adequacy of the aggregate policy limit of TitanTech’s D&O program.    [Read the Full Article]

Back to the Top

Norman R. Augustine
Chairman of the Executive Committee
Lockheed Martin Corporation

Editor's note:  Each month, we ask a Directors & Boards reader  to comment on critical issues facing directors today.  This month, Norman R. Augustine discusses his top three  corporate governance issues and his advice for new directors.

Top Three Corporate Governance Issues

First, there is ample reason for concern that some of the well-meaning but misguided efforts now being pursued with the intent of strengthening corporate governance may, ironically, lead to a de facto socialization of corporate America and governance by special interests.  The growth of assets controlled (either directly, or indirectly through pressure on Investment Funds) by pension funds, labor unions, and other institutional investors is growing exponentially.  Many such organizations are promulgating their own rules for acceptable executive compensation as a function of a corporation’s financial performance; promising to vote against re-election of the members of any compensation committee which does not comply with their self-prescribed standards.  The coup de gras will occur when and if the proposed “Direct Election” provision becomes a reality—such that the above withheld votes can trigger a gradual replacement of the board with members more favorable to the views of the self-appointed standard-setters, i.e., pension funds, unions and others.  Many of these latter constituencies are likely to be far more concerned about simply preserving jobs (at least in the short-term) than about shareholder returns.  The result could well be that the discipline of the free-market, which has been so critical to the prosperity of American firms, may ultimately be replaced with the same anti-efficiency practices that now handicap companies in certain other countries.

Second, simply stated, executive compensation is out of control.  One can legitimately  argue that highly effective CEOs can be worth a very great deal to shareholders.  Indeed they can.  One can also question why CEOs should be singled out for receiving high compensation and not rock stars, investment bankers, athletes, actors, strike-suit lawyers, et al.  But it is a fact that the disparity between corporate, top-leadership compensation and that of the work force as a whole has grown to such an extent as to be counterproductive.  General Custer once said, “The reward of command is the opportunity to lead, not to have a bigger tent”.  He had that—at least—right.   [Read the Full Article]

Back to the Top

The NACD's 2003-2004 Director Compensation Survey reveals Corporate America's emerging response to recent market turbulence, heightened concerns about pay irregularities, and the introduction of new regulations related to board governance – all of which have transformed the nature of board service. Among the resulting changes in board pay programs:
 
¶ While overall cash compensation increased significantly, plummeting equity values left total compensation flat or down.

¶ Annual retainers and meeting fees remain the most universal components of director compensation in all revenue groups, with values directly related to company size.

¶ Provisions for additional compensation for committee chairs are increasingly being adopted across all revenue groups, with additional retainers typically equal to 10 percent of annual retainers or twice the value of committee member fees, while chairs receive a 50 percent premium over committee meeting fees.

¶ Nearly one-quarter of all companies provide different levels of compensation for committee members, with premiums most often provided for service on the audit committee. [Read the Full Article]

Back to the Top

May 16-18, 2004
Harvard Business School Executive Education is hosting a series of intensive interactive programs focused on helping directors of public companies understand their primary roles.Topics include preparing for compensation committee challenges (May 16-18); audit committees in a new era of governance (May 18-20); and making corporate boards more effective (July 18-21). Program applications and other information can be downloaded from http://www.exed.hbs.edu or call 1-800-HBS-5577, ext 4148.

May 26-27, 2004
The Goizueta Directors Institute conference, "Creating a New Culture -- Balancing Director Oversight and Management Entrepreneurship," will be held at the Goizueta Business School in Atlanta. UPS will be the presenting sponsor of the school's annual event, a high-level forum for CEOs and directors of public companies. Information on the event can be found at http://goizueta.emory.edu/executiveprograms/execed/di.html or call 404-727-3902.

May 27-28, 2004
The Yale CEO Leadership Summit will address the theme, "Rediscovering Greatness: The Secrets of Successful Transformation," at its semiannual program for CEOs and board members. The event, under the direction of Jeffrey Sonnenfeld, president and CEO of the Chief Executive Leadership Institute and Yale's associate dean of executive programs, will take place at Yale Law School in New Haven, Conn. For more information, visit the Web site http://www.ceoleadership.com/ or call 404-760-8174.

June 7-8, 2004
Center for Professional Education Inc. (CPE) presents its 2004 Corporate Governance National Conference at the Ritz-Carlton, Tysons Corner in Washington, D.C. The theme of the two-day conference is "Meeting Shareholder & Regulatory Demands through Board & Management Excellence." Subscribers to Directors & Boards magazine receive a $400 discount! Visit their Web site http://www.cpeonline.com/conf/corpgov/ or call (610) 328-7086.

Back to the Top

Excerpts from Kozlowski's article were posted Monday on the quarterly journal's Web site, in the wake of a mistrial in the fraud case against him and former CFO, Mark H. Swartz.    [Read the Full Article]

Back to the Top