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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
Nancy Maynard
Account Executive
Barbara Wenger
Subscriptions
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Reprints
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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
A Data Point on Director Accountability
Worth noting at last month’s annual
conference of the National Association of Corporate Directors was the
size of the crowd — and the audience’s attentiveness.
When the poohbahs from the private equity firms descended on
Congressman Barney Frank to try to deflect the government’s interest in
changing their tax structure, here is what the chairman of the House
Committee on Financial Services told them: “You guys are way too rich
to be feeling so sorry for yourselves.”
A funny line — and it brought down the house. And what a big house it
was. Rep. Frank shared that anecdote with the attendees of the National
Association of Corporate Directors (NACD) annual conference last month.
Anyone looking for a gauge of increased director accountability would
have found some compelling evidence at the NACD assembly. The crowd,
for starters. This year’s conference attracted almost 700 registrants,
which makes it one of the top draws, if not the top draw, in the
director education field.
I’ve been going to these NACD annual meetings for over 20 years, and I
can remember in the early days when NACD founder John Nash and staff
struggled to get 100 senior executives and board members in the room.
Beyond size, what also was striking was the attentiveness of the
audience. It used to be that as the conference entered its afternoon
sessions on the opening day, the crowd noticeably drifted away. The
event is usually held in Washington, D.C., so the town’s other
attractions provided stiff competition to keeping the audience in their
seats. And then by the second day there were gaping holes in the
meeting rooms until the conference wound down to its final session,
when the speakers were mostly talking to themselves.
Not this year. The first day — all day and into the Director of the
Year dinner — was a full house. The second day was also a full house,
with Barney Frank kicking things off at 8 a.m. and Ira Millstein
presiding over a still-full ballroom for the final plenary session.
This was an audience hungry for information and insight — not just from
the impressive roster of speakers (close to 80) but also from the
exhibitors. We exhausted our supply of Directors
& Boards copies at our table and I talked with other
exhibitors who similarly saw a big run on their governance materials.
I remember the attitude in the primeval days of board service that if
you were invited to be a director it was presumed that you knew what
you needed to know to operate at that rarified level. A quaint notion
nowadays — one that the NACD crowd would certainly refute.
It’s a little early to be pondering new year’s resolutions, but here is
one to start thinking about: Get yourself to a director education event
next year.
It’s not just the formal keynotes, presentations, and panels that
provide a rich learning opportunity. It’s also all the sidebar
conversations between sessions and the serendipitous encounters in the
hallways and over meals that can really pay off in enlarging your
sphere of contacts and context.
Take in the next NACD conference
and/or one or more of the superior programs run by Harvard, Stanford, Duke, Columbia, NYU, and other university and
professional services offerings. We keep a master calendar of director
events in the e-Briefings (see below)
and on the Directors & Boards
website.
Be counted in this data point that demonstrates heightened director
accountability.
Jim Kristie is the editor and associate publisher of Directors & Boards.
Engaging Nonprofit Board Members
Through Innovative E-GovernanceJust as in the corporate sector, new tools will help nonprofit agencies to better communicate with their boards and meet their missions more effectively.
By Leanne Bergey
For better or worse, the nonprofit sector has experienced as much scandal as the for-profit world. Executive directors with outrageous incomes. Millions of dollars diverted to causes specifically forbidden by their endowments. Misuse of funds earmarked for families of 9/11 victims. The past five years has seen increased attention on mismanagement at nonprofit agencies.
While these instances are not the norm, they should be considered a call to action for our country’s 1.5 million nonprofits.
Many board members at these agencies are corporate executives working out of a spirit of goodwill, a passion for creating change. Experts claim that the spirit of that “engagement” — actively connecting with fellow board members, agency staff, and the global community — is not making its way into the boardroom. Having preached on the importance of board structure and streamlined process, governance consultants are now tackling the nuances of what makes a board move from good to great.
[Click
Here to Read
the Entire Article]
‘Access Denied!’ Redux
The SEC is poised to act on shareholder access. Maybe. Calling Lawrence P. Berra?
By Hoffer Kaback
Should shareholders be given the right to have information about their own slate of director-candidates included in the company’s proxy statement?
Readers experiencing deja vu can be assured that that sensation is fully warranted.
For this issue of proxy access is decidedly familiar, having been the subject of not inconsiderable attention several times during the last 30 years and, most recently, in 2003. An SEC proposed rule mandating it was actively promoted (and actively opposed) during much of that year, with copious attendant publicity. Most observers anticipated that resolution of the matter would occur before the end of 2003 through the adoption of a final rule requiring access, even if some provisions were watered down to reflect points made in comment letters and elsewhere.
Several of the infirmities of the 2003 proposal were analyzed in my column “Access Denied!” (Summer 2003). Undoubtedly, SEC adoption of a proxy access rule based principally on that proposal would, in short order, have been challenged in court.
That “round two” never happened.
[Click Here to Read the Entire Article]
Partner
Oliver Wyman – Delta Organization & Leadership
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.
How serious is the looming global shortage of corporate leaders capable of taking businesses into the next decade and beyond?
The shortage of leadership talent is critical for a large percentage of organizations today and will increase in the coming years. With the Economist Intelligence Unit, we published a Global Leadership Imperative research study last year based on interviews with more than 220 executives around the world. The findings revealed that more than 75 percent say they face shortages in their leadership bench to meet the pressing business challenges confronting their company now and in the future. This has become even more acute in 2007 and been confirmed repeatedly in discussions and research with company executives, board members and HR leaders, many of whom are concerned with gaps in succession plans for key roles at the top as well as deeper in the pipeline. It is especially exacerbated in hyper growth markets like India and China where some companies are growing by 25 – 100 percent annually.
What are the key issues that have contributed to this global leadership pipeline crisis?
There are several reasons for this crisis:
[Click Here to Read the Entire Article]
Achieving Greater Risk Coverage at a Lower Overall Cost Will Drive Significant Change in the Internal Audit Process
nternal auditor leaders must redefine the function’s value proposition and adopt a risk-centric mindset if they aspire to be key players in assurance and risk management in their organization, according to a new report released today by PricewaterhouseCoopers LLP (PwC). “Internal Audit 2012” identifies major trends that will likely shape the world of internal audit over the next five years. The study, which was based on interview and survey data from Chief Audit Executives of Fortune 250 companies, found that the controls-focused approach that has dominated internal auditing is expected to diminish in relevance over the coming years.
The central finding of the study is that over the next five years, internal audit leaders must re-define the function's value proposition. Based on the study, PwC has determined that a “risk-centric” internal audit model would provide assurance on the effectiveness of risk management in addition to controls assurance. This additional level of assurance would help internal audit align itself more closely with the organization's maturing risk management capabilities.
The study also highlighted five trends that will have the greatest impact on the internal audit profession in the coming years – globalization, changes in risk management, advances in technology, talent and organizational issues, and changing internal audit roles. By understanding these trends and their implications, internal audit leaders can help senior management identify and manage risk, thereby providing added value.
Trend One: Globalization
Nearly seventy-five percent of survey respondents expect globalization to have a moderate to very strong impact on the roles and responsibilities of internal audit.
Seventy-seven percent of survey respondents believe that the wide-scale outsourcing of corporate or enterprise-wide functions or operations will have a moderate to very strong impact on internal audit roles and responsibilities.
Trend Two: Changing Internal Audit Roles
Ninety percent of respondents anticipate that continuous auditing will produce additional responsibilities for internal audit over the next five years.
Eighteen percent of those surveyed expect to have somewhat more responsibility than today, while sixty-one percent expect neither more nor less responsibility, and twenty-one percent anticipate less responsibility in the coming years.
Trend Three: Changes in Risk Management
More than half (fifty-one percent) of survey respondents expect that an annual audit planning process focusing on an annual risk assessment will be more important in 2012 than it is today. A total of fifteen percent expect an annual risk assessment to be far more important, while thirty-six percent believe it will be somewhat more important.
Trend Four: Talent and Organizational Issues
Nearly two-thirds of survey respondents expect the number of internal audit professionals to increase over the next five years, with the largest increase occurring in the technology area.
When asked where staff increases would likely occur, fifty percent of respondents indicated technology; forty-two percent said increases would be linked to regulatory developments; thirty-nine percent said globalization; and thirty-five percent indicated risk management.
Trend Five: Technological Advancement
One hundred percent predict that their use of technology will increase over the next five years. Over the next five years, ninety-five percent of respondents expect technology to have a significant impact on internal audit responsibilities, with sixty percent anticipating the impact to be either strong or very strong.
Central to internal audit’s strategic repositioning is the ability to adopt an all-inclusive, conceptual approach to audit, risk assessment, and risk management that extends well beyond a focus on financial controls.
To download a full copy of the report, entitled “Internal Audit 2012,” visit www.pwc.com/internalaudit.
November
7, 2007
Women on Boards holds a program from 3-6 p.m. in Denver to discuss
vital issues of board composition and diversity. Panelists include
Tucker Hart Adams, CEO of The Adams Group Inc.; Dorothy Light, author
of "Into the Boardroom"; and Caz Matthews, president of the Wellpoint
Foundation. Directors & Boards is a national event sponsor of the
organization. For more information, visit
November
7-9, 2007
The Global Capital Markets Center at Duke University hosts the Sixth
Annual Duke Directors' Education Institute, an ISS-accredited intensive
program that addresses recent developments in corporate governance.
Topics to be discussed include "CEO and CFO Retention and Succession,"
"Current Issues in Executive Compensation," "Can Boards Handle both
Their Strategic and Compliance Duties?" and "What Directors Must Know
About Financial Reporting." Speakers include Steve Miller, chairman and
former CEO of Delphi Corp., Chuck Noski, director of Microsoft and
Morgan Stanley, and Leo Strine Jr., vice chancellor of the Delaware
Court of Chancery. For additional information, call 919-613-7260 or
visit
November
8-9, 2007
The Boardology Institute presents Boardology 400, the Pipeline Seminar,
in San Francisco. The seminar is designed to jump-start prospective
candidates' preparation for corporate board service and equip them with
tools and insights to conduct successful Board Appointment Campaigns as
well as pre-qualify them for the Boardroom Bound Referral Service. For
location and to register, visit
November
13, 2007
Forbes magazine and FTI Consulting will host "The New Director: Life
Inside the Fishbowl," an invitation-only program to be held in San
Francisco. Confirmed speakers include Joseph L. Bower, Donald Kirk
David Professor of Business Administration, Harvard Business School,
and author of The CEO Within: Why Inside-Outsiders Are the Key to
Succession Planning; William H. Donaldson, former chairman, U.S.
Securities and Exchange Commission; Jack B. Dunn IV, president and CEO,
FTI Consulting; Quentin Hardy, Silicon Valley bureau chief for Forbes;
Juliet Flint, partner, Kleiner Perkins Caufield & Byers; and Noel
Tichy, professor of Organizational Behavior & Human Resource
Management and director, Global Business Partnership, Ross School of
Business, University of Michigan, and coauthor of Judgment: How Winning
Leaders Make Great Calls. More information can be had at
November
13-14, 2007
The Corporate Responsibility Reporting & Communications conference
will be held in London. Two-thirds of the world's leading public
companies now produce CR reports. Top-level speakers representing many
companies at the forefront of CR reporting and communications will
offer expert guidance about CR communication, CR reporting, and
effective stakeholder engagement. Companies confirmed include:
GlaxoSmithKline, Hewlett-Packard, Aviva, Lloyds TSB, Novo Nordisk,
Royal Sun Alliance, British Telecom, and Vodafone. For more
information, visit
November
14-15, 2007
The HSM organization presents "Family-Managed Business: Learn the
Principles and Practices of Leading Family Companies." Join family
business management expert John Davis and 120 other executives for
intensive and candid discussion on the challenges facing family
businesses, include life cycle, governance, succession, and next
generation development issues. The program will be held in New York
City. For more information, visit
November
14-16, 2007
The University of Wisconsin-Madison School of Business will hold its
Seventh Annual Director's Summit. Sessions include "New Board Member
Orientation," "Mutual Fund Governance Issues," "Compensatuion Committee
Issues," and "Board Oversight of the CEO." Speakers include Tom Falk,
chairman and CEO of Kimberly-Clark Corp., Beverly Behan, managing
director, Board Effectiveness Practice, Hay Group, and Sharon Allen,
chairman of the board, Deloitte & Touches USA LLP. To register,
visit
November
27, 2007
The Women Corporate Directors Mini-Conference will be held from
2:00-9:00 pm at KPMG Headquarters in New York City to share
perspectives on corporate governance and discuss the significant issues
being raised today by corporate boards, regulatory agencies and the
courts. For more information, contact Vaiva Razgaitis at
partcom@verizon.net.
November
27, 2007
Women on Boards holds a program from 5-8 p.m. in Minneapolis to discuss
vital issues of board composition and diversity. Panelists include
Cheryl Mayberry McKissack of Nia Enterprises, Nazie Eftekhari of
HealthEZ Inc., and Cathy Connett of Core Connections. Directors &
Boards is a national event sponsor of the organization. For more
information, visit
November
29, 2007
Drexel University College of Law is hosting "No Seat at the Table; A
Discussion of Women and Corporate Boards." The main speaker is Douglas
M. Branson, professor of business law at the University of Pittsburgh
School of Law and author of the recent book, "No Seat at the Table: How
Corporate Governance and Law Keep Women Out of the Boardroom." A panel
discussion will include Elva Banks, SVP of CEO Resources Inc. and
president of the Forum of Executive Women; Joan MacLeod Hemmingway,
professor of law at the University of Tennessee College of Law; and
Ellen C. Wolf, SVP and CFO of American Water and a director of C&D
Technologies. The panel will be moderated by Karl Okamoto, professor of
law at Drexel and a board member of Champps Entertainment Inc. For more
information, visit
Outstanding Directors Exchange (ODX) and Columbia Business School hold an ODX New York session for a series of panels on key issue in corporate governance. For information, visit
Media coverage of the ineffectiveness of corporate boards of directors forces those boards to take corrective actions and increases shareholder profits in the months after the negative publicity, according to new research co-authored by three professors from Penn State University, Georgia State University, and Arizona State University.
In their paper, the co-authors look at the impact of the media on managers' and investors' behavior by examining how media exposure of board ineffectiveness affects corporate governance, investor trading behavior, and security prices.
Their study is based on BusinessWeek's past publications of the worst boards of directors. The authors find that, among the 50 unique firms that appeared on the magazine's worst board lists in 1996, 1997, and 2000, 34 (or 68 percent) took observable steps to improve their governance structures.
Of those 34, 82 percent replaced their chief executive officer, president, or board members, 18 percent increased the number of outside board members, and 12 percent instituted some broad corporate governance changes. Firms that appeared on the worst board lists significantly increased the number of outside directors and were significantly more likely to abandon their staggered board structures after the negative public exposure.
A draft of the paper can be found online here, or by contacting Wyatt DuBois at 814-863-3798 or wdubois@psu.edu.
Annual Business Roundtable Corporate Governance Survey Finds Increased Independence and Company Oversight by Boards
The Business Roundtable, an association of chief executive officers of 160 leading U.S. companies, released its fifth annual survey of corporate governance practices among its members. The latest survey found an increase in the number of independent directors serving on corporate boards and a significant rise in the number of companies that have adopted majority voting for directors.
“The spotlight on governance reform in Corporate America is well placed and speaks to the accountability corporations share in creating long-term value for stakeholders,” said Anne M. Mulcahy, chairman and CEO of Xerox Corp. and chairman of Business Roundtable Corporate Governance Task Force. “The results from this CEO survey demonstrate the importance of governance in leading a successful company through independent boards, performance-based compensation, and smart business practices that align with the influential role Corporate America plays in our world today.” For a summary of the findings from the survey, click here.
Director Resources
Fairness Opinions: Debevoise & Plimpton has prepared a Client Update on the rules approved by the SEC relating to the regulation of fairness opinions. Click here for a copy.
VC-Backed Board Governance: The Working Group on Director Accountability and Board Effectiveness, a member association of venture capitalists, CEOs, and industry thought leaders, has released their expanded white paper. The paper, entitled A Simple Guide to the Basic Responsibilities of VC-Backed Company Directors, focuses on establishing standards in venture-backed company board education. The white paper contains new material related to the process for annual CEO review, the logistics associated with individual director and board performance evaluation, and mapping the venture-backed company’s stage of development to its needs for both corporate governance and internal controls process. The Working Group chairman is Pascal N. Levensohn, founder and managing partner of Levensohn Venture Partners and author of several past articles in Directors & Boards. A Simple Guide… and two other white papers are freely available at http://www.levp.com/news/whitepapers.shtml. For more information, contact Pascal Levensohn at pascal@levp.com.
D&O Protection: Willis Group Holdings, the global insurance broker, has unveiled a powerful analytical tool to determine proper D&O protection, bringing more science to the art of directors and officers liability insurance. The proprietary analytical tool that will “scientifically determine the optimal D&O program structure for clients,” said Ann Longmore, executive vice president of Willis’ Executive Risks Practice. Current and prospective clients interested in obtaining more information can contact Alexis Scott at Alexis.Scott@Willis.com.
Compensation Checklists: In response to requests from clients, DolmatConnell & Partners has developed a Compensation Committee Quarterly Checklist outlining key tasks to be completed throughout the year. In addition, for companies approaching an IPO, the firm has included an IPO Compensation Committee Checklist.
Author Notes
Barney Kelley has joined McCreight & Company Inc. as an associate partner. He brings over 25 years of strategy development and implementation experience as an executive, business founder, and consultant. He has over 15 years of experience operating throughout the Pacific Rim, with special focus in China, Korea, and India.
Executive Jet. Management (EJM), a leading provider of worldwide jet charter and aircraft management services, promoted Gary Gennari to the newly created position of senior vice president, business development. He previously served as vice president, sales for the past six years and was responsible for EJM’s charter sales in the New York Metro area. EJM is a wholly owned subsidiary of NetJets Inc., a Berkshire Hathaway company. For its 10th consecutive year, EJM earned the "Best Charter Service" award from Professional Pilot magazine subscribers.
The New York office of the law firm of Edwards Angell Palmer & Dodge hosted a meeting of the board of directors of the Global Fairness Initiative (GFI) last month. GFI, a nonprofit organization, was founded by GFI board president Karen Tramontano in 2001 on the premise that economic globalization can and should work to improve the lives of impoverished and marginalized populations around the world by creating jobs and economic opportunities. GFI was recently featured in former U.S. President Bill Clinton's new book, Giving: How Each of Us Can Save the World. Todd J. Peterson, an EAPD partner who focuses in emerging markets, provides pro bono services as the board's legal counsel and adviser. GFI is one of several similar organizations EAPD works with.
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2007, MLR Holdings LLC.