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Directors & Boards
Robert H. Rock,
Publisher
James Kristie,
Editor
Martin D. Porter,
Associate Editor
Lisa
Cody,
Chief Financial Officer
David Shaw,
Publishing Director
Scott Chase,
Advertising Sales
1845 Walnut Street
Suite 900
Philadelphia, PA 19103
+1 (215) 567-3200
The Directors & Boards e-Briefing is produced by GRID Media LLC.
From Jim Kristie | Article of the
Month | Columnist
Reader Profile |
Research | News | Forum
‘Adult Supervision’
As I write this, Google has
just started trading in the public markets. It’s incredible to think
about all the trees that were felled to feed the media’s obsessive
coverage of this company and its initial public offering process.
In all of the articles that you
have read about the Google IPO, is there one word that sticks with you
that seems to have been repeated over and over again? For me, it’s
“missteps.” No need to recount such missteps here. Suffice to say that
it seems as if every article about the company’s road to the IPO
referenced mistakes, bloopers, rough edges, and youthful naivete that
configured into this transaction.
Because of such missteps,
another repeated assertion was that this company needed some “adult
supervision.” A curious phrase (and one we heard a lot during the
bubble era), but it’s an apt one that intentionally or unintentionally
fingered a weakness that may have hurt the company--in its board
composition.
Google has a nine-member board,
all of whose members are drawn from impressive technology and venture
capital backgrounds. Fair enough. But one can’t help but wonder if
having a board member or two from a different background would have
helped smooth over some of the prominent rough edges. Say, a
(non-high-tech) Fortune 500 company CEO and CFO wise to the ways of
Wall Street, stock issuance, shareholder relations, and
post-Sarbanes-Oxley governance and reporting standards--and with the
scars to show for their wisdom and experience.
Would that have provided an
injection of adult supervision that would have allowed Google to
sidestep at least a few of its famed missteps? I think so. What do you
think? Please email
me with your comments.
*****
By the way, if you're not a subscriber to Directors & Boards, I invite you to join the growing list of
top directors and corporate governance professionals who receive our
quarterly print edition. Each issue is packed with more of
the kind of content you see in our e-Briefing--we save our best stuff
for subscribers! And I have a
special offer for you. If you subscribe (or renew your
subscription) during September, I'll send you a free copy of our new
book, The Art of Corporate Governance (a $150 value). Please join
us today! To subscribe, click here.
To renew, click here.
To learn more about The Art of Coporate Governance, click here.
Thanks!
Jim Kristie is the editor and associate publisher of Directors & Boards.
Why is corporate America still unprepared?
By Anne Sceia Klein
Twenty-five years after the Three Mile Island nuclear disaster, it
appears that most American business organizations still remain largely
unprepared to deal with catastrophic occurrences and other crises.
A professional colleague attending a conference of 160 major business
executives earlier this year asked how many of them had a crisis
management plan in place. Only one executive raised his hand. And that
plan, as it turned out, covered only operations.
Imagine! Of 160 companies represented in that room, not a single
organization had any sort of crisis communication plan in place, ready
to deal with employees, shareholders, customers, the media, and the
public, and to protect the company image and reputation. It was almost
as if none of the major crises of the past 25 years (and the lessons
they taught) had ever occurred.
This is no surprise to those of us who earn our income managing issues
and crisis communication. All too frequently we are not consulted until
damage control is needed or when the crisis has reached unmanageable or
barely salvageable proportions. By then, as anyone who follows business
news knows, it is often too late. [Read
the
Full Article]
The Danger of Overqualified Directors
They looked impressive in
the prospectus, but they didn’t know what was happening on our street.
My superstar board wiped out the shareholders. But as chairman and CEO, blame me.
The startup value of our business was barely over $1 million. Within a year, new investors priced it up to $8 million. Year three hit $12 million, then $60 million, and by our fifth year a couple of blue-chip outfits asked to wire $20 million to us, unsolicited but accepted, for a mere 8% of our stock. Not bad.
Investment bankers swooped in, suggesting it was time for the IPO. No surprise there. (My barber always believes I need a haircut. The only differences between barbers and investment bankers is the amount, and that my barber doesn’t wear designer suspenders.)
We picked three top-bracket underwriters who agreed to split the deal. World class directors seemed appropriate, so the early investors dropped off the board, allowing us to recruit fancier resumes. This, of course, also let those early investors sell shares after the IPO, without that being called insider trading.
But one early investor, with little else to do, pleaded to stay on the board. I agreed. That was mistake number one. [Read the Full Article]
Founder and Principal
The Dilenschneider Group
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.
We are just getting started. The new Congress will take stock of what they see as corporate America's abuses of the “rule of law” around the world and see it as their responsibility to change things. Expect pushback on some of the more restrictive provisions of Sarbanes-Oxley from certain sectors of corporate America. But that is not likely to make much headway. Public and investor sentiment has not recovered from the egregious abuses at Enron, MCI and many others. The fraud; deceptive bookkeeping; the failure of major accounting firms to live up to their responsibilities to effectively monitor corporate books; conflicts of interest among corporate officers, board members and accounting firms and suppliers; weak corporate governance; and the outright corruption some of those scandals have exposed are top of mind and won't be brushed away easily.
The fact is that we have the fairest, most productive private sector in the world. But it is not good enough. Americans expect more. [Read the Full Article]
More Pay For A Tougher Job
13% Raise for
Directors Reflects New Demands, Longer Hours; 47% Pay Boost for Audit
Chairs
Board compensation grew 13% to nearly $176,000 in 2003, as
leading corporations moved to adapt director pay programs to a
radically changed boardroom environment. The increase
follows two straight years in which board pay at the Top 200 U.S.
industrial and service companies was nearly flat, according to a new
study by compensation consultants Pearl Meyer & Partners.Compensation for committee service saw the biggest jump, swelling on average by approximately 35% to over $23,000, including a 47% rise in audit chair fees and retainers and a 24% pay increase for compensation committee heads. In a significant shift, the use of full value shares surpassed stock options for the first time since equity became an integral part of director compensation programs a decade ago.
Shift in Pay Patterns
The percentage of pay delivered in equity–-full value shares and stock options-– declined for the second straight year, from 60% to 57% of total board remuneration. Average equity values increased 7% to over $99,000, while cash compensation rose 21% to $75,000, including a 17% increase in average cash retainers to $45,000.
Following a similar shift in the use of equity incentives for top executives, fewer companies granted stock options to directors–-59% of the Top 200 companies compared to 70% one year earlier. The change in equity use reflects a consensus among governance activists that full value incentives better promote a long-term perspective on corporate performance. Stock option values were down over 5% to about $49,000, due in part to the market slump in the first half of 2003, while full value awards rose 23% to more than $50,000.
Close to half of the Top 200 boards in 2003 provided premiums for service on specific committees–most commonly audit and compensation–based on the additional time and responsibility involved. Audit committees met an average of nine times in 2003–-twice as often as five years earlier–-due largely to new requirements.
Financial and Healthcare Firms Remain Pay Leaders
The securities industry ranked first in board pay at nearly $307,000-–roughly 75% more than the average Top 200 director–-and also reported the largest stock awards at over $234,000 and second highest committee fees at over $28,000. Diversified financial companies ranked second in total pay, averaging $258,000, followed by healthcare at $255,000. While those three industries also led in use of board equity, healthcare’s cash retainer was the lowest among the 24 industries studied at $35,000, and the securities sector provided the second lowest board meeting fees at $2,500 annually. The energy/utilities, food/drug store chains and transportation/delivery sectors reported the lowest levels of board compensation, averaging $124,000, $127,000 and $136,000 respectively and ranked at the bottom in equity use.
For more information, email michele.morse@pearlmeyer.com or call 212-644-2300. Pearl Meyer & Partners’ Director Compensation Report will be available this fall at www.pearlmeyer.com or by contacting the firm.
September
15-16, 2004
On Board Bootcamp Seminar is a program designed to be an "insider's
guide" to getting on a corporate board and succeeding as a director. It
is co-directed by Susan Stautberg, president of PartnerCom Corp., which
creates and manages advisory boards, and Carolyn Chin, chairman and CEO
of Cebiz, a consulting and investment management firm. The program will
be held in New York.
October
6-8, 2004
INSEAD hosts its third International Directors' Forum in Fontainebleau,
France. This unique event brings together a select group of Chairmen
and Board Members from across Europe and the world who seek to improve
their Board's effectiveness, deepen their understanding of how other
top Boards operate, and exchange views on the implications of the
changing corporate governance context. The program is ISS-accredited.
Information on the event can be found at
October 14-15, 2004
The Practicing Law Institute and the American Management Association
host the Second Annual Directors' Institute on Corporate Governance --
themed, "What Board Members Need to Know to Be Effective Today and
Tomorrow." Weil Gotshal's Ira Millstein is chairing the conference,
with corporate directors Betsy Atkins and Richard Koppes as co-chairs.
Sessions will be held at the Crowne Plaza Manhattan Hotel. To register,
visit
October
17-19, 2004
The National Association of Corporate Directors (NACD) presents its
2004 Annual Corporate Governance Conference at the Renaissance
Mayflower Hotel in Washington, DC. To register, visit
October 21-22, 2004
The International Corporate Governance Network, in conjunction with the
Weinberg Center for Corporate Governance at the University of Delaware,
conducts a program on "U.S. Corporate Governance Reforms: A Global
Perspective." Panels will discuss such topics as: "Can Institutions
Really Act as Owners?"; "Can Directors Really Represent Shareholders?";
and, "Executive Remuneration -- the Intractable Governance Dilemma?"
The conference will be held at the Hotel duPont in Wilmington, Del. For
more information and to register, visit
BoardSource, formerly the National Center for Nonprofit Boards,
presents its Leadership Forum, themed "Challenge Your Board Practices."
Discussions will include: how effective are boards?; what is the future
of nonprofit leadership?; what does it mean to lead?; and, do your
board committees have "static cling"? Register at
The Directors' Education Institute at Duke University is an intensive two-day program developed by the Duke Global Capital Markets Center with the support of the New York Stock Exchange. With participation from leading executives, corporate directors, policymakers, and experts from the legal and financial services industries, along with academic authorities from the Fuqua School of Business and Duke Law School, the program will teach participants how to develop a framework for making informed board decisions and exercising sound business judgment. For additional information, visit
What's New
at Directors & Boards
Directors & Boards and the National Association of Corporate Directors (NACD) are collaborating on a special publishing project this Fall. This special Boardroom Briefing will focus on the future of the annual meeting, and will be distributed to nearly 20,000 directors, CEOs, CxOs and top corporate governance professionals.
Boardroom Briefing: The Future of the Annual Meeting promises to be one of the most talked-about publications of 2004. It features research on annual meetings conducted by Directors & Boards and the NACD, and contributions from Norman R. Augustine, Ken West, Dr. Gail Schoettler, Louis Thompson, Wade Meyercord, Raymond S. Troubh and a host of others.
If you market to directors and corporate governance professionals, there are a few advertising slots left. But the deadline is fast approaching. Contact Scott Chase at 301-879-1613, or by email at scottchase@verizon.net.
The Art of Corporate Governance
Directors & Boards'
new book, "The Art of Corporate Governance," is now available for
purchase. The book features 10 of the finest articles published
in
the journal from the past 20 years and focuses on the role of
directorship. Authors include Norman Augustine, Chuck Ames,
William Miller III, Robert K. Mueller and Murray Weidenbaum. For
more information and to buy a copy of the book, click here.Director's Guide to D&O Insurance
Directors & Boards Fourth Quarter issue (available to print subscribers only) features our Directors Guide to D&O insurance. The Directors Guide surveys the current state of the D&O insurance market (it has softened, but what does that mean to you?), and offers a punchlist of critical questions you should be asking of your broker and risk management team.
I also read your article on Compliance Software. While useful, I think most boards including my own (PAYX) made these decisions long ago. One of the next key decisions for the board to consider next is how to comply with the licenses associated with Open Source software. This may sound too narrow for a Board to focus on but given the ramifications for being out of compliance, it is definitely going to be on the agenda after we have all had our first pass at 404. The audit and legal firms are just beginning to gear up to deal with this issue.
Best wishes for continued success
with the publication.
Managing Director
Flagship Ventures
Everything that you do is first class. I took the liberty of forwarding the recently received e-Briefing that arrived in the last day or two to my Board. I hope that that is OK by you. I have a feeling that it will lead to some additional subscriptions. I hope so!
Richard E. Bauer
Chairman & CEO
The Philanthropic Companies
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Directors & Boards e-Briefing is a monthly service of Directors & Boards. All contents copyright 2004, MLR Holdings LLC.