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Directors & Boards
Robert H. Rock
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James Kristie
Editor
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From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News |
Time in
Service
An ode to tenure — the long and the short of it.
As I write this, Leo Apotheker has just been handed his walking papers
by the Hewlett-Packard board. His 11 months at the helm of HP must
surely bring down the overall average when the next study of CEO tenure
is done.
Tenure is on my mind right now. Last month I completed my 30th year as
editor of Directors & Boards.
Here is a bit of research I did a few weeks ago, just as I was
finishing
my third decade at the journal.
There are various findings of average CEO tenure, but seven years seems
to be what researchers generally come up with, and for CEOs who step
into a company in a troubled situation the average can be as few as
three years. Average tenure for a not-for-profit organization CEO can
be 10 years. For a college or university president, about eight years.
For an NFL head coach or the manager of a Major League Baseball team,
it is four seasons (less for hockey or basketball coaches). For a
corporate director, about 9-10 years on a board.
I haven’t come up with a reliable tenure stat for magazine editors, but
it is safe to say that if they are lucky (not even factoring in good),
many editors have the kind of tenure that CEOs have — five or six years
being a good run. Case in point: the Harvard
Business Review, where there have been eight editors of that
august journal during my tenure here.
Here are some fun facts. With awe and admiration, I note a rare few who
have logged three decades at the top of their magazine mastheads:
- Two of my idols: In the business magazine category, Jim Michaels was editor of Forbes for 38 years, from 1961-1999; and in the general magazine category, William Shawn was editor of The New Yorker for 35 years, from 1952-1987.
- George Plimpton, editor of the Paris Review, has a tenure record that likely will never be equaled, having co-founded and edited the literary journal from 1953 until his death in 2003.
- William F. Buckley Jr. founded the National Review and was its editor for 35 years, from 1955 to 1990.
- Paige Rense Noland was editor of Architectural Digest for 35 years, from 1975 until her retirement in 2010.
- Helen Gurley Brown
was editor of Cosmopolitan
for 31 years, from 1965-1996.
And
that is about it in the modern-day journal/magazine era. I come to the
office these days wondering if I am the longest-tenured magazine editor
now working in the industry. I know of only one long-tenured active
contemporary: Anna Wintour, editor of Vogue
for 23 years. There may be others, but certainly not many.
What is the secret to being a long-tenured editor? My one-word answer
to that is "Publisher." You don't get to enjoy a lengthy run as editor
unless you have the backing of the publisher.
I have been blessed to have the equally long-tenured father and son
ownership team of Milton and Robert Rock, who purchased Directors & Boards right before
I came aboard in 1981 and who have had the confidence in me all these
years to produce this "journal of thought leadership in corporate
governance," as our tagline goes. Simply put, Milt and Bob have been
the most supportive publishers that any editor could hope to have.
Just as I now complete my 30th year, Directors
& Boards is marking its 35th year of publication. We have a
special 35th anniversary edition coming in November. You won’t want to
miss that. Subscribe here: https://www.directorsandboards.com/html/subscribe.html.
As always, I welcome your comments at jkristie@directorsandboards.com.
Jim
Kristie is the editor and
associate publisher of Directors
& Boards.
A Respectful Approach To Director AssessmentCan individual board member development be conducted without awkwardness, tension, and the potential for upsetting boardroom decorum? Yes.
By Peter G. Spanberger
Boards are hesitant to venture into individual board member assessment and development.
Individual board members sometimes have the attitude that they are doing the organization a favor by serving on the board. A typical response to suggestions about individual board member development involves resistance based on the assumption that when someone signed up for board service they didn’t sign up for self-analysis.
Thus, self-reflection and development doesn’t occur, even when needed.
Is it possible to create a process for individual board member development while minimizing the associated risks?
Psychologists sometimes “work in the derivative”: This involves talking with a client about feelings, behavior, relationships, etc., but the focus is on another individual or on an abstraction of an individual. This is quite effective in having the client feel safe and comfortable enough to examine sensitive materials in a detached and nonpersonal way. The individual thus learns without self-disclosure or potential embarrassment. “I have a friend who...” nicely captures the concept. Working in the derivative can be a way to engage in individual board member development while minimizing or eliminating the aforementioned risks.
How To Start
The first step would be to present data about the most functional and dysfunctional attributes manifested by a board To read more, click the link below
[Click
Here to Read
the Entire Article]
iPads Take Over the Boardroom
In nearly every board meeting I attend multiple iPads are unfurled.
By David Hornik
I don't know about the rest of the country, but Sand Hill Road has clearly embraced the iPad.
There was a time when every VC on Sand Hill proudly carried the latest, greatest Palm Pilot. No self-respecting VC would be caught without one. And for good reason. Suddenly VCs could carry their calendars with them (no need to print out a pesky piece of paper) and have their contacts at their fingertips.
It was a huge improvement over the status quo and increased the efficiency of VCing greatly. (I'm sure there is no such word as "VCing" but I think there should be. If I were to define "VCing" it would be the act of being a VC.) Plus, it just looked cool when you pulled out your Palm Pilot at a board meeting. It said to everyone at the meeting, "Hey, I'm on top of all this tech crap and I have the tools necessary to be a world class VC, so check me out."
Fast forward a decade and that tool of choice for the VC world is the iPad.
Since its launch, the iPad has taken over the boardroom. I have not attended a single board meeting since the day the iPad shipped in which at least one iPad wasn't present. To read more, click the link below.
[Click Here to Read the Entire Article]
Christopher C. DucaPresident and CEO
Navigators Management Company, Inc.
Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. This past month we asked for ideas on improving the effectiveness of the annual meeting of shareholders. Here is a selection of responses. If you'd like to participate in this section in the future, please email Scott Chase.
You are celebrating your tenth anniversary of providing directors’ and officers’ liability (D&O) coverage solutions. How has the climate for director service changed over the last decade?
Over the past ten years, board governance has adapted to the accelerated rate of change driven by globalization, interconnectiveness, and perfect competition market forces. There has been greater stock market volatility and shareholder returns are historically lagging. Regulatory enforcement activism continues to be on the rise, which means there continues to be more investigations and litigation filed by the states attorney generals, Department of Justice and the Securities and Exchange Commission.
In what ways is director service more personally and professionally risky today than it was ten years ago?
Early in the decade, director liability increased significantly through four “Acts”. The four Acts each contributed to heightened regulation. To read more, click the link below.
[Click Here to Read the Entire Article]
Back to the Top
The following is an excerpt from our analysis of the results of Directors & Boards' most recent survey on CEO and director compensation. Complete results will appear in our Q3 edition, which will be in the mail soon.
More than a few of the respondents to our most recent survey on CEO and director compensation indicated that the issue of executive compensation was being kept alive by “class warfare rhetoric from Washington,” the fact that “every day, in no matter what media, there is a story on executive pay.” and that it is “a popular political and media issue,” just to pull a few sample responses.
We would argue, however, that the way things look from the outside is what matters when it comes to media, governmental and activist scrutiny, and the optics on executive compensation will continue to fan the flames of this controversy.
The following brief analysis is based on a comparison with our last compensation survey, which we published 18 months ago. While the economy is currently wobbling, the last year and a half have certainly been better in terms of revenues for many companies than the dark days of 2008 and 2009. In fact, directors reported that 2010 revenues were up a healthy 23% over 2009, from an average of $2.25 billion to $2.76 billion.
Here’s where the troubling averages emerge. During the same period, total CEO compensation—cash, bonus, benefits, long term incentives and perquisites—increased 38%, from $1.65 million to $2.34 million, outpacing reported revenue growth (we did not ask about profit growth). Some of this may be explained, as several directors reported, by the fact that CEO compensation was catching up after being flat or down in 2008 and 2009. But while CEO compensation may have caught up, the average reported total compensation of the company’s workers decreased 3% in the last 18 months. The average CEO in our survey now earns 46 times the average worker for his or her company, up from 38 times last year.
Granted, these are averages, and averages tend to hide the impact of outliers (celebrity CEOs, certain industries that were hit harder by economic factors with consequent pressure on worker wages, and so on.) These averages also don’t tend to deal with realized compensation. As one director noted: “This pinpoints a fundamental flaw in compensation reporting. The executives of a company should be judged based on their realized compensation during a year, rather than being judged on the present value of their compensation at a given time.”
That comment is borne out by some of our findings: The percent of a CEO’s compensation that was cash dropped from 65.2 % to 61.8% from 2009 to 2010, indicating a heavier reliance on longer term performance-based standards in calculating total compensation. And a third of directors reported that they reduced or withheld bonuses from the CEO and other senior executives during the past year. Not everyone fits the average.
CEO compensation is a messy, highly visible and easy target, and the lesson we draw from this year’s survey is clear: directors should not expect a sophisticated analysis of reality on the part of politicians or the general media. And they will continue to need to deal with being second-guessed and regulated.
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The Diverse
Director DataSource Is Open for Business
3D has been launched by GovernanceMetrics International (GMI). GMI developed 3D to support investor, corporate, and market demands for a broader, international pool of boardroom candidates.
The DataSource was conceived by the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). The two pension organizations began work on the Diverse Director DataSource two years ago. GMI, an independent provider of global corporate governance ratings and research, was commissioned to develop the database earlier this year. It is now owned and maintained by GMI.
3D is promising to be an important new resource for boards — providing shareowners, nominating committees, and search firms a new talent pool of skilled individuals with fresh ideas, differing backgrounds, and skill sets to advance a company’s business strategy and help create long-term sustainable growth.
The term “diverse” refers to the range of attributes, experiences, perspectives and skill sets that can contribute to sustainable value creation by corporate boards of directors. Core attributes that make up a diverse board address accounting and finance skills; international markets, business or management experience; industry knowledge; customer-base experience or perspective; crisis response, leadership and strategic planning expertise; as well as the perspective of historically underrepresented groups on the board, including women and minorities.
Candidates with the skills and experience to serve on a corporate board can submit their profiles at http://www.GMI3D.com. For any comments or questions on 3D, contact Ashley Taylor at Ashley_Taylor@calpers.ca.gov.
“This is a milestone in the development of 3D,” says Anne Simpson, CalPERS senior portfolio manager, head of corporate governance. “We’re inviting people to now submit their information so that GMI can build this powerful resource for supporting board quality through improving diversity. 3D is an innovative resource that opens the door to finding candidates whose fresh ideas and new perspectives can help companies generate lasting, sustainable value and provide a check against the kind of ‘group think’ that played a significant role in the financial crisis.”
Director Resources
Say on Pay: The Council of Institutional Investors has released a report, “Say on Pay: Identifying Investor Concerns,” which analyzes the reasons that investors voted against say on pay at the 37 companies where the proposal failed to win majority support. The authors are Robin Ferracone and Dayna Harris of Farient Advisors, an independent executive compensation firm. Click here for a copy of the report.
BDO Board Survey: Dodd-Frank's executive compensation mandates seem to have taken a toll on corporate directors. When asked a variety of topics they would like their board to spend more or less time on, 71 percent say they do not want to spend more time on executive compensation. No other topic elicited such a negative response. That’s just one of the findings of The 2011 BDO Board Survey, which examines the opinions of more than 100 corporate directors of public company boards regarding financial reporting and corporate governance issues. The survey was conducted in August 2011. For a copy, click here.
Board Information Security: Corporate boards are vulnerable to hacking and information theft, says a new Thomson Reuters survey. Board member information is a "weak link" in chain of information security. The findings are particularly noteworthy in light of recent news stories about the handling of board communications involving executive succession decisions at companies including Yahoo and Apple. The survey found that information provided to members of corporate boards of directors is often in unencrypted email accounts and computers, or otherwise provided in forms that are easily lost, misplaced or stolen. A detailed report on the survey's findings on security vulnerabilities involving board-level information can be accessed here.
Director Compensation: Compensation Advisory Partners has reviewed current director compensation programs for each of the public Fortune 100 companies, generally considered trend-setting organizations. For its summary report, click here.
Succession: The Conference Board has released its 2011 CEO Succession Report, the latest addition to the portfolio of governance research created by The Conference Board to assist the board of directors as well as corporate officers with legal, compliance, or investor relations duties. To access a copy of the report, click here.
Shareholder Activism: At a forum on shareholder activism on September 21, the Manhattan Institute released Proxy Monitor 2011: A Report on Corporate Governance and Shareholder Activism, which explores the fight that America’s largest corporations have been waging against shareholder activists over the past few years, a battle recently intensified by the passage of Dodd-Frank. This new report by James Copland, director of the Center for Legal Policy, reveals that activist groups, including labor unions, are exploiting the shareholder proposal process to exert influence over corporate management and to pursue policy goals in an end run around the legislative process. Launched in January 2011, ProxyMonitor.org is a project of the Manhattan Institute’s Center for Legal Policy and is designed to shed light on shareholder activity. For a copy of the report, click here.
Global Governance: Executive search firm Boyden has released a new installment of its “Changing of the Board” series, entitled “A Director’s Eye from Europe,” which reveals that European boards need to adopt more strategic, operational and independent roles to ensure deeper engagement and oversight. More information on the research can be found here.
Author Notes
Bruce Sherman of Integral Advisors LLC has joined his firm with Shields Meneley Partners. “Our combined capabilities provide a unique and integrated suite of transition and advisory services for boards of directors, C-level executives and business owners,” Sherman says. Sherman co-authored the article, “Emergency Succession Planning Checklist,” published in the Second Quarter 2011 edition of Directors & Boards. For a copy, click here.
Patricia Q. Connolly, director of the Center for Corporate Governance at Drexel University’s LeBow College of Business, has been appointed a member of Girard College’s board of managers. Girard College is a boarding school for academically capable students, grades 1 through 12, from families with limited financial resources that are headed by a single parent or guardian. All Girard students receive full scholarships to take part in the school’s strong academic program and to live safely on its enclosed 43-acre campus in Philadelphia.
The Business Law Section of the American Bar Association (ABA) has appointed John H. Stout of Fredrikson & Byron as chair of its 2,400-plus member Corporate Governance Committee. Stout has been a vice chair of the committee since 2008, and will serve a three-year term as chair, until August 2014. The committee is responsible for monitoring developments in corporate governance and promoting dialogue regarding corporate governance within the ABA and with interested individuals and organizations domestically and internationally. As chair of Fredrikson & Byron’s Corporate Governance and Investigations Group, Stout advises senior management, boards, and board committees on a variety of governance matters, including investigations, risk and compliance, board and committee leadership and performance, officer and director protection, management employment and termination agreements, and financial transactions.
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2011, MLR Holdings LLC.