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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
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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
Simply Appalling
Good judgment seems to have been short-circuited in the Circuit City
boardroom.
A perennial mystery to this longtime governance observer is how a board
can seemingly sit silently by and watch a management trash a business.
This seems to be what’s been happening at Circuit City Stores Inc.
A year ago the company announced a turnaround plan. A centerpiece of
the plan was laying off a slew of more experienced salespeople, to be
replaced with lower-paid hires. But get this: Those who lost their jobs
could reapply for their old jobs, at the lower pay, but had to wait 10
weeks to do so.
That’s simply appalling.
“That’s the most cynical thing I’ve heard about in a long time,” said
Peter Cappelli, in a critique of the plan published by the Wharton
School’s Knowledge@Wharton newsletter.
Cappelli is a management professor and director of Wharton’s
Center for Human Resources . Another Wharton professor, Daniel
Levinthal, termed the layoff plan “a massive de-skilling” of the
company.
I’m all for companies doing what they feel they must do to survive. But
let’s be mindful of what Peter Drucker said: “The purpose of a business
is to create a customer.”
When a company takes steps that are repellent in its treatment of its
human resources — its work force and its customers — is it really a
business anymore? Or a business that should stay in business?
I didn’t write about this abhorrent policy at the time. My personal
response was to vow never to set foot in a Circuit City store again,
and to leave it at that.
I did wait for the follow-on announcement that the current board
members all submitted their resignations — so as, in the spirit of
their approved turnaround plan, to allow management to replace them
with a newer, younger board, which would be paid a lower retainer and
fees than the old directors received. Less experienced? Who cares about
that? And the current board, after a cool-down period, would be allowed
to reapply for their old seats, at the lower scale, of course.
Funny … I missed that announcement. Did you, too?
Well, a year has gone by, and Circuit City is now much in the news.
Perhaps my personal reaction was shared by similarly offended spirits.
The turnaround seems to have run aground. Circuit City’s results are
punk, the stock price has collapsed, and a hedge fund, which has called
the turnaround effort “disastrous,” is at the board’s throat. Then, in
a bizarre turn, in mid-April Blockbuster Inc. weighed in with a merger
proposal. That’s being charitable to call it bizarre. It’s also being
called “crazy,” “reckless,” and “looney” by deals analysts.
All I can hope is that there were some dissenting voices in the
boardroom — “What are they thinking?!”
—when management unveiled the HR components of its turnaround plan. It
must be a sad day in the life of a director when he or she sees the
company’s business and reputation about to be trashed.
Jim
Kristie is the editor and
associate publisher of Directors
& Boards.
Hanging On to Your CFOMore than 2,300 CFOs left their position last year, and average tenure in now down to 28 months. What you should do if you don’t want your company to join these stats
By Cynthia Jamison
Once regarded as an attractive career destination and prestigious management position, the luster of being a chief financial officer has faded: The risks and stresses inherent in the job have escalated –- far outweighing the associated rewards and benefits.
The demands placed on a CFO today are greater than ever. Aside from navigating complex business conditions and meeting stringent regulatory requirements, CFOs must recruit and mentor staff and appease skittish investors, all the while providing daily financial leadership and strategic vision to the CEO.
Coupled with the growing demands of shareholders and boards that need insight, information, and counsel, it is not surprising that an unprecedented amount of CFOs are jumping ship. According to Liberum Research, more than 2,300 CFOs left their positions in 2007, and the average tenure is now down to 28 months.
[Click
Here to Read
the Entire Article]
Where Is the Outrage Over the SEC’s Demands for Executive Pay Data?
This government is continuing to insert itself unwisely in boards’ confidential decisions.
By Gerard F. Hurley
The SEC is forcing a sampling of 350 public companies to more specifically disclose the compensation, benchmarking, and forecasting decisions of their boards and compensation committees. This insistence on increased disclosure — in the “public interest of helping investors better discern” this information — bodes ill for all fiduciaries, whether public, private, or not-for-profit.
This intervention must be turned back by the corporate community before critical leadership prerogatives have been destroyed forever.
Where is the outrage that this government is continuing to insert itself in boards’ confidential decisions on “how the company arrived at particular levels and forms of compensation”?
Isn’t the ROI of a CEO’s compensation measured, with other factors, in the corporation’s ability to make a year-end profit ... even to grow? That’s the key investor measure, not salary numbers and perks. How the company’s management and board (representing the shareholders) generate that net profit is the magic of competition.
[Click Here to Read the Entire Article]
SVP, General Counsel and Corp. Secretary
CDW Corporation
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.
What can senior management and boards do to drive innovation by leveraging risk management practices?
It is important to keep in mind that each identified risk creates opportunity. A company’s ability to effectively analyze and manage risks will provide it an enormous competitive advantage over those less adept. Such adeptness will allow companies to identify and profit from opportunities that others either never considered or thought possible.
The key to capitalizing on these opportunities is to create a culture that encourages prudent risk taking. Striking the right balance between prudence and recklessness can be challenging but is not impossible. Companies want employees to push the envelope but, to mix a metaphor, also want to ensure there is a safety net in place to guard against the envelop bursting. This requires that risk is objectively analyzed and discussed but that the risk analysis does not bog down into a discussion of why not move forward – rather it must include a full understanding and exploration of the benefits of why to move forward. In other words, the discussion of risk must be about identifying and overcoming obstacles, rather than just throwing up obstacles. This, more positive, approach to risk analysis encourages discussions of risks because it is no longer just the means to say no.
What should boards do to help ensure their companies are effectively identifying and managing risk?
[Click Here to Read the Entire Article]
A new report from The Corporate Library, entitled What’s In and What’s Out of the Proxy Statement – Part I, examines three of the key new areas of the proxy battlefield to assess what keeps resolutions out of and what gets them in the proxy. The three new areas are:
- the mortgage meltdown
- succession planning and
- the safety of imported products.
This latest report is the most recent in The Corporate Library’s 2008 Proxy Season Foresights series. With its nsights 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.
The 18-page report is available for $75 from The Corporate Library’s online store.
May 1,
2008
The 7th Annual Financial Reporting Conference, sponsored by the Robert
Zicklin Center for Corporate Integrity at Baruch College, is a premier
opportunity for business and accounting executives to meet with
policy-setters from the U.S. Securities and Exchange Commission and the
Financial Accounting Standards Board. Corporate financial officers,
CPA's, financial analysts, and attorneys who are involved in the
financial reporting process will want to take advantage of this
once-a-year chance to hear the latest reports from the experts. Topics
include the latest FASB and SEC accounting rules and new proposals, as
well as up-to-date information on reporting and enforcement matters.
Register online at
May 5-7,
2008
The American Strategic Management Institute is hosting the Performance
Conference 2008. If you are an executive interested in performance,
finance, operations or HR, the Performance Conference has specific
tracks and workshops to help plan, measure and improve performance in
your organization. Visit
May 9,
2008
The NYU Directors' Institute presents its Sixth Annual program, themed
"Service in the Boardroom in Uncertain Times," an intensive one-day
program that will focus on highly topical issues, including strategic
M&A in the boardroom, and the relationship between a great board
and a strong CEO. Keynote address will be given by Reuben Mark,
chairman of Colgate-Palmolive Co. For further information, visit
May
12-14, 2008
The UCLA Director Education and Certification Program will be held to
aid directors in grasping the nuances of new regulations, envision the
impact of emerging issues and astutely evaluate matters ranging from
accounting considerations to corporate strategy. Faculty co-directors
are senior associate deans Alfred E. Osborne Jr. and Carla Hayn.
Keynote speakers include former SEC Chairman Harold M. Williams and
Daniel Petrocelli, lead counsel for Jeffrey Skilling. The program will
be held again on Oct. 29-31, 2008. Visit
May 15,
2008
DolmatConnell & Partners hosts its Spring Executive Compensation
Conference on "Hot Issues and Trends in Executive Compensation." The
session is designed to provide board/compensation committee members,
executive, and HR and compensation professionals with important
information on what they need to know regarding trends and issues from
the 2008 proxy disclosures. In addition, the event will offer "five
great ideas that your company should consider as you move forward in
2008." It will be held at the Waltham Weston Corporate Center in
Waltham, Mass., from 7-30-10 am. Contact Sabreena Kropp at
sabreenak@dolmatconnell.com or visit
May 15-16
The Boardroom Bound Boardology Institute presents their Pipeline
Seminar in Chicago. Register at
May
20-23, 2008
WorldatWork, an association of human resource professionals from
Fortune 500 and other leading companies, will be holding its annual
conference in Philadelphia. Talent leaders will discuss and rethink the
ways organizations attract, motivate, and retain employees. Jonas
Ridderstrale, Ph.D., author of "Karaoke Capitalism: Management for
Mankind" and "Funky Business: Talent Makes Capital Dance," will deliver
the opening keynote. Now in its 53rd year, the WorldatWork Total
Rewards Conference is expected to draw more than 2,000 HR executives
and corporate leaders from 30 countries. Talent leaders from
organizations such as Accenture, Buck Consultants, Hay Group,
Microsoft, Motorola, and Towers Perrin will be speaking. For additional
information, visit
May
27-29, 2008
The Families in Business Conference - "The 21st Century Family
Business" - will be held at the St. Regis Hotel in San Francisco. Learn
about key strategies and best practices shared by successful family
businesses, and network with a global audience of significant family
business owners. This is a private meeting, exclusively for owners of
family businesses and their senior executives, on structuring for
longevity, securing family interests and planning for the future. To
review this year's program and speaking faculty, visit
May
29-31, 2008
The International Policy Governance Association's 5th Annual Conference
will be held in Vail, Colo., at the Vail Marriott Mountain Resort and
Spa. Themed "Together at the Top: Building Peak Performance Boards,"
the event will bring together board members, CEOs, senior management
and board advisers and individuals at any level of Policy Governance
knowledge and experience for workships, plenary sessions and networking
opportunities with Policy Governance practitioners and experts from
around the world. For more information, visit
June 4,
2008
The National Association of Corporate Directors hosts a day-long
session in Chicago for a seminar on "Executive and Director
Compensation"; "Governance and Nomination Committee: Driving Board
Performance"; and "Corporate Finance Oversight: Understanding Risks
Inherent in Financial Instruments." To register, visit
June 5-6,
2008
KPMG's Audit Committee Institute and the National Association of
Corporate Directors present "Audit Committee Fundamentals," an
educational program for audit committee members and directors, both new
and experienced, who want to enhance their understanding of audit
committee responsibilities and activities. The briefing will be held in
Chicago. Visit
June 5-6,
2008
The Conference Board Directors' Institute holds a Roundtable in New
York City at the Links Club to address key topics and red flags in
corporate governance. Such issues include: where was the board in the
subprime debacle; running the company for shareholders vs.
stakeholders; implications of "say on pay"; and conflicts of interest
in dealing with private equity firms. Register at
June
8-11, 2008
The National Investor Relations Institute presents its 2008 Annual
Conference in San Diego. This year's theme is "Balancing the Art &
Science of Investor Relations." Among the speakers will be Charles
Gasparino, journalist and business broadcaster and author of the new
book, "King of the Club: Richard Grasso and the Survival of the New
York Stock Exchange." For more conference details, visit
June 9,
2008
Women on Boards is hosting a session in St. Louis to educate and
prepare women for board service. Topics include: being an effective
board member; how to position yourself to get on a board; and how to
transition yourself from serving on a nonprofit board to for-profit
boards. Panelists include Sandra Van Trease, group president of BJC
HealthCare; Maty Anne O'Connell, partner, Eppenberger LLC; and Donald
McNees, president of Claymore Consulting. For more information, visit
June
9-10, 2008
The Yale Governance Forum 2008 will be held at the Millstein Center for
Corporate Governance and Performance at Yale University in New Haven,
Conn. This event convenes leading thinkers from the business,
investment and academic communities to address changes in the global
capital markets and their implications for corporate governance. To
register, visit
June 16,
2008
Women on Boards is hosting a session in Dallas to educate and prepare
women for board service. Topics include: being an effective board
member; how to pisition yourself to get on a board; and how to
transition yourself from serving on a nonprofit board to for-profit
boards. Panelists include Fritzi Woods, CEO and president of
PrimeSource Foodservice Equipment Inc.; Elizabeth Solender, president,
Solender/Hall Inc.; Lisabeth McNabb, CEO of w2wlink.com; Martha Smiley,
Counsel, Winstead PC; and Renee Hornbaker, CFO of Shared Technologies
Inc. For more information, visit
June
16-17, 2008
The Haas School of Business, University of California, Berkeley
presents its Corporate Directors Enterprise 2008: Effective Corporate
Governance. Early Bird registration deadline is May 1, 2008.
Registration discounts apply. For more information, email Bart Decker
at decker@haas.berkeley.edu, call 877-822-2932, or visit
June 18,
2008
The 12th Annual Wharton Leadership Conference presents "Emerging Trends
in the Search for Leadership." In this intensive one-day program,
presenters draw upon their own and their organizations' experiences in
finding, creating and retaining talent at all levels of the firm.
Speakers will include Colleen Barrett, president of Southwest Airlines;
S.A. Ibrahim, CEO of Radian Group; William Weldon, CEO of Johnson &
Johnson; and Wharton's Peter Cappelli, Habir Singh, and Michael Useem.
The program will be held at the Wharton School. Register at
June
18-20, 2008
The International Corporate Governance Network (ICGN) holds its Annual
Conference in Seoul, Korea themed "Corporate Governance - Seizing the
Initiative." This year's theme is the globalization of capital markets
and the impact this has on traditional corporate governance. Major
global trends will be explored by over 70 leading speakers from around
the world. The ICGN conference regularly attracts over 500 delegates
including investors, directors, policy makers and other stakeholders.
For more information, contact the ICGN Secretariat by email at
secretariat@icgn.org or visit the website at
June
22-24, 2008
Stanford Law School conducts its 14th Annual Directors' College, an
intensive two-day program for directors and senior executives of
publicly traded corporations. Among the sessions will be "The
Politicized Boardroom," "The Best and Worst Ideas in Corporate
Governance," "CEO Succession" and "The New Enforcement Regime." Keynote
speakers include SEC Chairman Christopher Cox, Vice Chancellor Stephen
Lamb of the Delaware Chancery Court, and James Chanos, president and
founder of Kynikos Associates. The program directors are Joseph
Grundfest, Simon Lorne, and Dan Siciliano. Register at
June 24,
2008
Women on Boards, an annual panel discussion focused on providing the
necessary tools and knowledge for serving as a director, holds its next
event in Chicago. The program is designed for women who are interested
in getting on a board or making the transition from nonprofit to
corporate boards, as well as women who are currently on a board and
want to network with other women board members and hear about best
practices. Panelists include Maureen Beal, Michelle Collins, and Pamela
Forbes Lieberman. For more information, visit
June 25,
2008
The Practicing Law Institute presents "Audit Committee Workshop 2008"
in New York City. 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 Margaret Foran of Pfizer Inc.; John Olson of
Gibson, Dunn & Crutcher LLP; and Edward Smith of the KPMG Audit
Committee Institute. Register at
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
The Millstein Center for Corporate Governance and Performance at Yale University is compiling a list of global “rising stars of corporate governance” — people who, while young and relatively new to the field, are making their mark as outstanding analysts, experts, activists, or managers. They will come from any of the many bodies that comprise the global world of corporate governance: corporations, academic bodies, institutional investors, auditors, advisory firms, rating agencies, proxy services, professional associations, and others.
Nominees are under 40 years of age as of June 10, 2008. Candidates are based anywhere worldwide, but possess a record of outstanding performance in corporate governance that marks them from their peers. Candidates are being judged on such criteria as: past accomplishments and thought leadership; future projects and endeavors; reputation among existing industry leaders; and potential to influence the industry in the future.
The Center intends to acknowledge the selected rising stars as part of its annual Yale Corporate Governance Forum, scheduled for June 9-10, 2008.
Director Resources
Board Education: Insurance brokerage and risk management consultancy Beecher Carlson, through its Executive Liability Practice, has launched TopBoards™, what the firm calls “the first and only ISS-accredited and customized board education and training program provided by an insurance brokerage.” Click here for more details.
IR Influence: The investor relations officer (IRO) is playing an increasingly important role in publicly traded companies and continues to grow in stature and remuneration. A new survey of IROs, conducted by Korn/Ferry International and the National Investor Relations Institute (NIRI), found that four out of five Fortune 500 IROs now report into the C-suite. In addition, the survey found that approximately half of the Fortune 500 IROs polled earn more than $300,000 in cash compensation (base salary plus bonus) with a wide range of equity incentives and other benefits. For full survey results, contact Matt Brusch at 703-506-3574 or by email at mbrusch@niri.org.
PayWatch Website: Compensation schemes for top executives at financial companies helped create the sub-prime mortgage crisis, according to the new Executive PayWatch website launched Apr. 14 by the AFL-CIO. The 2008 PayWatch site also unveils a comprehensive database of new CEO pay figures. Through seven case studies, the site shows “how compensation packages create incentives for CEOs to gamble on risky ventures in hopes they will lead to short-term increases in stock prices, but at the expense of the long-term future of their companies and shareholders.” The AFL-CIO launched the Executive PayWatch website in 1997.
Proxy Disclosure: More detailed proxy disclosure of executive pay programs is unlikely to reduce the size of executive pay packages, according to a survey of 124 public companies by independent compensation consultancy Pearl Meyer & Partners (PM&P). The complete study findings are published in PM&P’s second annual Proxies that Make the Grade report, available at http://www.pearlmeyer.com.
Talent Management: Global mobility programs — proactively anticipating and fulfilling talent needs, effectively selecting assignment candidates, and maintaining legal and regulatory compliance — look good on paper and sound good in theory, but are being treated with far less importance at a majority of companies, according to a new survey from the Human Capital service area of Deloitte. Consequently, companies are exposing themselves to a new level of compliance and competitive risks. For example, only 54 percent of human resources executives from 130 companies surveyed expressed confidence in the ability of their global mobility processes to stay compliant with local and international employment laws. A full copy of the survey report and the “Smart Moves” companion piece are available at www.deloitte.com/us/globalmobility2008.
Legal Settlements: Cornerstone Research released its annual securities class action settlements report, Securities Class Action Settlements: 2007 Review and Analysis. The number of securities class action cases settled last year rose 21 percent, from 92 in 2006 to 111 in 2007. The total value of these settlements, however, plummeted 60% from the all-time high of $17.2 billion reported in 2006 to $7 billion in 2007. The $3.2 billion Tyco International settlement was the third largest case settlement in history and the only settlement approved in 2007 to exceed $1 billion. The median settlement amount spiked to $9 million — an all-time high, thanks to the rise in “middle range” settlements valued between $10 million to $20 million. A full copy of the report is available at http://securities.cornerstone.com.
Author Notes
Directors & Boards Editor James Kristie moderated a panel discussion on “Doing Business in China.” The briefing was presented on April 1 by the World Affairs Council of Philadelphia. On the panel were three experts, led by Jack Perkowski, chairman and CEO of ASIMCO Technologies, who left a career on Wall Street to launch this Beijing-headquartered auto-parts manufacturer in 1994.
The Center for Corporate Governance at Drexel University’s LeBow College of Business presented its First Outstanding Academic Contribution to Corporate Governance Award to Dr. Michael C. Jensen, Jesse Isidor Straus Professor of Business Administration Emeritus, Harvard University. The award was made at a ceremony on the campus on April 3.
Financial advisory and investment banking firm Duff & Phelps Corp. expanded its global advisory capabilities with the opening of a Paris-based restructuring practice that will focus on turnarounds, distressed and special situations.
Document process management and e-discovery provider Oce Business Services has appointed Greg Duke VP of sales for its Records, Compliance and Legal Solutions Division. Duke, with over 25 years of experience that includes delivering innovative solutions to law firms and large corporations in the burgeoning eDiscovery sector, will manage the RCLS division’s nationwide sales team.
International management consulting firm Oliver Wyman has acquired Academee, the leading provider of leadership learning solutions. Academee is headquartered in the U.K. and works with major international clients including RBS, AstraZeneca, and Fujitsu Services. It has enjoyed several years of strong growth. Last year it grew by a record 28% and expanded into the Asia-Pacific region with the launch of Academee AP, based in Singapore.
Sen. Hillary Rodham Clinton’s campaign manager, Maggie Williams, was profiled in Directors & Boards in its Summer 2000 edition as a new member of the Delta Financial Corp. board. Click here for a PDF copy of the article. That article was cited in a recent Baltimore Sun critique of Ms. Williams’ involvement with the subprime lender.
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