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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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Scott Chase
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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
How to Get on a Board
What better person to offer helpful guidance than someone who just won
a Lifetime Achievement Award — Norman R. Augustine.
Congratulations to Norm Augustine on receiving the B.
Kenneth West Lifetime Achievement Award presented by the National
Association of Corporate Directors (NACD) at its annual conference last
month. The award is "in recognition of his remarkable career and his
dedication to the improvement of corporate governance practices."
Norm, the retired chairman and CEO of Lockheed Martin Corp., is a
cherished colleague of both the NACD and Directors & Boards. He is a
board member of the NACD and a member of the editorial advisory board
for Directors & Boards.
What better perches from which to exert the considerable force of his
intellect and personality to advance the best practices of board
governance? I've had the pleasure to publish several articles Norm has
written for Directors & Boards
over the past two decades, and each one has been a gem — chock full of
wisdom on corporate life and leadership.
I regularly draw on Norm’s wisdom to help executives puzzle through the
process of how to get on a board. This is the most frequent query run
by me in my position as editor of Directors
& Boards. Even executives with impressive resumes are
mystified and frustrated with the protocol of becoming a candidate for
a board seat. It can be like trying to join a secret society.
Several years ago I asked Norm — who, by his own count, is a veteran of
500-plus board meetings of Fortune 100 companies — to tee up some
advice for board applicants. That article I share with those who come
to me for advice. Here are three of Norm’s pointers:
- “The first step in ‘getting on a board’ is to ask why you want to be on a board. If the answer is for self-aggrandizement or prestige, the reputational risks today far outweigh any such benefits. Similarly, if it is for financial reward, there are easier, less risky ways to make money. If it is because you have a ‘cause’ to promote, you are clearly not a good board candidate because your role as a director will not be to represent a single interest but to represent the interests of shareholders as a whole.”
- “The most effective avenue to board service is to have made such noteworthy contributions in your own career that you are routinely noticed by nominating committee members. … As is almost always the case, the best way to be noticed, whether seeking a promotion in management or a board seat, is to focus on carrying out your own regular responsibilities in a laudable fashion and not to divert valuable time and effort to being noticed.”
- “Simply letting as many people as possible know of your interest — i.e., networking — is still by far the best approach. Involvement in professional associations and on charitable boards can be valuable in this regard. Targeting smaller companies that may better fit your experience level is also a wise idea, as is seeking a seat on a foreign board that may want to add a U.S. member but is having difficulty finding a suitable candidate because of the travel demands.”
At the awarding of the Lifetime Achievement honor, several of Norm's
peers lauded his personal qualities and professional accomplishments.
Procter & Gamble Chairman A.G. Lafley, for one, said, "Boards look
to Norm for wise counsel and outstanding judgment." Is there any higher
tribute that could be paid?
Lifetime achievement awards, while marvelous to receive, come with a
tinge of finality. Recipients are rightfully ambivalent about being
recognized with such an honor. So while we extend our congratulations
to someone who has considerably brightened boardrooms — and our pages —
with his brilliance, I'm sure my NACD colleagues join me in a follow-on
wish that Norm Augustine's wisdom and wit will reign powerfully for
years to come.
If you’d like a copy of “How to Get on a Board,” our Directors & Boards article that
includes six helpful advisories written by veteran board leaders,
including Norm’s contribution, email me at jkristie@directorsandboards.com
and I’ll happily share an electronic copy of it with you.
Jim
Kristie is the editor and
associate publisher of Directors
& Boards.
Think Before You Tweet What every corporate executive should consider before using Twitter.
By George A. Stamboulidis and Alberto Rodriguez
It seems as though the whole world is abuzz, or shall we say “a-tweet,” about the potential commercial applications for Twitter — the website that encourages individuals and businesses to post messages, known as “tweets,” of 140 characters or less for the world to see.
Companies who have adopted Twitter, such as JetBlue, Dell, Pepsi, Home Depot and Bank of America have been harnessing the power of Twitter to engage customers in a number of different ways — from answering their questions to sending out alerts on products, services, and special offers. These companies literally have thousands of individuals constantly receiving their messages and are, conversely, actively monitoring Twitter for tweets relating to their products and services.
A bit surprisingly, CEOs and other top corporate executives have also been using Twitter as a means to engage customers, promote their companies, and as a forum for just about any topic of their daily life. Click here for Douglas MacMillan and Rebecca Reisner’s Business Week article, “CEOs Who Twitter.”
Richard Branson's Twitter Café
In fact, Twitter encourages business users to think about their “Twitter account as a friendly information booth or coffee bar” — see http://business.twitter.com/twitter101/starting. For example, Virgin Group Chairman Richard Branson says that Twitter helps him communicate what he does during his days which are filled with service launches, product announcements, parties, events, and consumer opportunities. To read more, click the link below.
[Click
Here to Read
the Entire Article]
I’m on Twitter
The former chairman and CEO of Medtronic says you should be, too.
By Bill George
Recently, someone asked me: "Would you recommend to a current CEO that he or she join Twitter?" At the time, my jury was still out. Now, six weeks in, I have an opinion.
I would strongly recommend a sitting CEO utilize Twitter.
Twitter makes you the spoke of a (potentially) very, very large wheel. The caveat? You must keep spinning, or the wheel goes flat.
Twitter has been a great communication tool for me, but I’ve come to realize that it requires as much output as I receive input. And that output needs to be original, opinionated, and reflective of a unique personality and viewpoint; otherwise it’s just fluff.
Across the past six weeks, in 140-character bursts I’ve heard pundits, politicians, renowned bloggers, and steeped authorities weigh in with answers to questions I had never even considered (and those I’ve pored over many times). As is the expectation, I’ve joined that dialogue, adding my expertise where I can and jumpstarting new conversations where possible. To read more, click the link below.
[Click Here to Read the Entire Article]
Phil Johnston
President & CEO
The Center for Board Evaluations
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 has the pressure to meet short-term earnings expectations impacted the corporate decision-making of public companies?
Ability to consider business decisions with a view to the long-term is the premier reason private ownership captures the high ground. All public company C-suite executives live and die by quarterly earnings. That was my experience as well when I was CEO of two public companies. The mantra intones, “What have you done for me lately?” It is the tyranny of the short term; it terrorizes the minds of public company chief executives, especially in the world of earnings guidance. That sort of angst leads to some serious questions about how publics become hog-tied when compared to their cousins in the private sector, particularly in view of the recent economic meltdown.
The CEOs of public companies, especially financial institutions, are focused on the short term as reported in annual 10K and quarterly 10Q filings with the SEC. Execs have traditionally been compensated with stock options designed to bet the ranch on short term results. A big run up in the price of my company’s stock, I win; a big fall off in price, I don’t lose anything. The tyranny of the short term, as investors have so painfully learned, has left many of them holding an empty bag. Ignoring the long-term in favor of immediate gains was the root cause of the 2008 collapse of Wall Street, pure and simple – the great unwinding of unprecedented over-leveraging. Private companies, in contrast, do not face the stress of answering to analysts’ expectations.
What advantages do private companies have over public companies in terms of earnings expectations?
The value proposition of long-term thinking afforded private companies is easily embraced. Shareholders are rewarded by management’s long view and efforts to pay lower taxes. The ultimate absurdity is that public company CEOs punish shareholders by paying more state and federal taxes in their efforts to improve EPS (and dump personal stock options.) Private companies are able to filter out the short-term noise to the pecuniary benefit of investors. To read more, click the link below.
[Click Here to Read the Entire Article]
U.S. multinationals to face greater compliance challenges with growth of indirect taxes
A critical need for more revenue is causing many governments worldwide to turn increasingly to indirect taxes such as Value-Added Tax (VAT) as a source of funds, according to KPMG International’s latest annual survey of worldwide tax rates affecting businesses.
Findings from KPMG’s 2009 Corporate and Indirect Tax Rate Survey indicate that many countries increased their indirect tax rates -- particularly their VAT or Goods and Services Tax (GST) -- for 2009.
The survey also revealed that the long-term slide in tax rates on company profits came to a halt in many countries in 2009, with 86 percent of the 116 countries studied holding their rates at 2008 levels -- such as the United States at 40 percent -- or in some cases increasing them.
The United States is the only G20 country without a federal VAT or GST and has one of the world’s highest statutory corporate income tax rates.
Indirect Taxes Contribute More Worldwide
In Europe, indirect tax rates rose from 19.5 percent for 2008 to 19.8 percent for 2009 and in Latin America from 15.9 percent in 2008 to 16.2 percent for 2009, according to the KPMG survey.
The KPMG survey also indicated that among Asia-Pacific countries there was a marginal drop in the indirect tax rate from 10.9 percent in 2008 to 10.8 percent in 2009, primarily due to a three percent VAT/GST cut in Sri Lanka.
More than 150 countries now have indirect tax systems and many governments that already have these systems are expanding or considering expanding the list of goods and services subject to VAT.
A Halt to Corporate Rate Declines
The KPMG survey shows that in Latin America, the average corporate tax rate this year was unchanged at 26.9 percent, the first time there has been no change in average rates since 2004.
In Europe, average rates stayed at 23.2 percent, the first time in 13 years that they have failed to fall year-on-year, the KPMG survey revealed.
Only in the Asia Pacific region has the average rate this year matched the cuts of previous years, falling from 28.4 percent in 2008 to 27.5 percent in 2009, according to the KPMG survey.
About the Survey
KPMG International’s Corporate and Indirect Tax Rate Survey -- conducted since 1993 -- now covers 116 countries, including the 30 member countries of the OECD and the 27 EU countries. This 2009 survey compares corporate income tax rates as of January 1, 2009 with their equivalent each year back to 2000. The survey also includes information on VAT or GST in 115 countries, going back six years. Tax professionals from across KPMG’s global network of member firms contributed to the survey.
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Two key data points were released in October on the advancement of women to corporate boards:
• The Forum of Executive Women, a network of 300 of the most influential women leaders in the Philadelphia metropolitan region, released its Ninth Annual Women on Boards study, which showed that the number of women in board seats held steady at 10% — 88 of 868 board seats —for the fourth consecutive year. The study is based on an analysis of 2008 year-end SEC filings by the largest 100 public companies by revenue in the region and is available online at http://www.ForumofExecutiveWomen.com.
• A more robust data finding came out of the Directors & Boards Directors Roster for the second quarter of 2009. This quarterly compilation of executives elected to boards showed that women made up 32% of new directors named to public boards in the April through June quarter. This is down slightly from the record-setting number of women named to boards in 2009’s first quarter, which totaled 38%, but is still strongly above a 15-year trend line that averaged on a percentage basis from the low single digits to the 20% range. The Directors Roster, sponsored by Heidrick & Struggles, is published in each edition of Directors & Boards. Click here for a copy of the Q2 2009 Roster.
In a related initiative, in order to provide a resource for corporations to find highly qualified prospective women board directors, Catalyst and the American Bar Association’s Business Law Section created the DirectWomen Board Institute. Each year the Institute brings together a class of exceptional women lawyers for a two-day program on current issues facing corporate directors. Since the launch two years ago, a number of DirectWomen alumnae have been nominated to boards. The 2009 DirectWomen Board Institute was held Oct. 29-30 at New York’s Waldorf-Astoria Hotel, culminating in the Sandra Day O’Connor Board Excellence Award Luncheon on Oct. 30.
Director Resources
Director Compensation: Frederic W. Cook & Co.'s latest report, “The 2009 Director Compensation Report: NASDAQ 100 vs. NYSE 100,” is posted on the firm’s website. The firm also has available on its website “The Top 250 Report: Prevalence of Long-Term and Stock-Based Grant Practices for Executives at the 250 Largest Companies.”
Director Comp II: For another set of numbers on director pay, check out the latest report from Towers Perrin.
Health Care Expenditures: Grant Thornton LLP has launched the Health Care Reform Resource Center to help organizations navigate the impact of health care reform changes being debated by Congress. Areas of focus include: tax planning and considerations; readiness needs assessment, gap analysis, solution selection; security implications and assessments; and program implementation assistance.
Board Risk Committees: The Risk and Insurance Management Society Inc. (RIMS) announced its strong support for the creation of “risk committees” for publicly traded companies. RIMS called upon Congress last month to incorporate this concept into its ongoing effort to craft legislation addressing the corporate governance lapses and business practices that played a major role in the recent market turmoil. RIMS argues that the current system-wide failure to embrace appropriate enterprise risk management practices was a major contributor to the current financial crisis. For more information, visit http://www.rims.org.
The Risk Executive: KPMG has released a new whitepaper, "The Business Case for a Risk Executive: Leading Efforts to Avoid Surprises, Maneuver through Challenges, and Add Value." The paper specifically looks at: 1) Why a Risk Executive? Defining the Role; 2) Enabling the Risk Executive: Determining Risk Governance Structure; and 3) Who is the Risk Executive? Identifying the Right Person. Click here to access a copy of the paper.
Mutual Fund Governance: As of year-end 2008, independent directors made up three-quarters of boards in almost 90% of fund complexes. Between 2000 and 2008, the number of complexes where independent directors hold 75% or more of board seats rose from 52% to 88%. This finding comes from a new report on fund governance practices by the Independent Directors Council and Investment Company Institute. This 20-page report is posted on the IDC website.
Compensation Planning: As organizations plan for 2010, they are making critical decisions about their workforce and compensation programs. Mercer has launched a new online resource center — Human Capital Planning 2010 — that features a wide range of resources for addressing the human capital challenges and opportunities ahead.
Stock Options: The DolmatConnell compensation consulting firm has issued a white paper on stock option exchanges to restore value to employee options. The firm felt there has been little guidance for senior management and board members on how to begin the process of deciding whether an option exchange is right for their company. Click here for a copy of the paper.
Author Notes
Bonnie W. Gwin has been tapped to lead the North American Board Practice at executive search and leadership advisory firm Heidrick & Struggles. During her more than 11 years with Heidrick & Struggles, she has held a number of leadership positions, including serving as president of the Americas division. In addition, she has served as global managing partner of the Technology Practice and managing partner of Heidrick’s North America Quality Council. “Bonnie has been way ahead of the curve in strategically expanding the composition of clients’ boards to reflect the global needs of boards today,” says John S. Wood, Heidrick & Struggles’ vice chairman and managing partner of its CEO and Board Practice.
Ilene Lang, president and CEO of Catalyst, is now blogging on The Huffington Post. She addressed women and leadership in this recent post.
Hanna Moukanas, a senior partner of Oliver Wyman based in Paris, is now global leader of the firm’s Delta organizational consulting business. Delta consults to CEOs and senior-level executives on the design and leadership of large-scale organizational change. He joined Oliver Wyman in 1995 through the acquisition of MID, a Paris-based strategy consulting boutique that he co-founded.
Barbara Krumsiek, president and CEO of investment firm Calvert, was selected as one of five business people to be inducted into the Washington Business Hall of Fame. The honor was spotlighted in the November issue of the Washingtonian. The five people were selected for their achievements “in building successful organizations that fill both business and community needs and have made this area a great place to do business.” Ms. Krumsiek was profiled three years ago in Directors & Boards in the “Directors to Watch” series spotlighting accomplished executives.
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2009, MLR Holdings LLC.